First of all my apologies for posting this review so
late. However, facts are facts. My belated analysis of gold and silver performance does not change what happened in 2015.
Truth be said: This blog takes quite a toll on my free
time. If time were in unlimited supply I’d like to post more studies (yes,
there are many things I’d like to write about) and cover more markets under the
prism of the Dow Theory but to do this I’d need to dispense with all other
occupations (something I cannot do). Well, the rant is over, and let’s get
started
GOLD AND SILVER
GLD:
2015 began with an ongoing bear market which had been
which has been signaled by this blogger truly yours on December 20th,
2012 (as explained here).
On October 12th, 2015 a very dubious
primary bull market signal was signaled. In real time, I wrote that it was
perfectly legitimate to ignore the signal, as the secondary reaction whose
closing highs had been just broken up was more than dubious (time requirement
very dubiously met).
By the way, my warnings concerning the dubious nature
of the primary bull market signal were quite clear, since I minced no words:
“On a closer look, I have seen that SLV did not even manage to rally for at
least 10 calendar days. According to Schannep, at least two indices should rally for 10 calendar days,
irrespective of the average time of trading days. While all this is not carved
in stone, and Rhea himself stressed the difficulty in defining secondary
reactions, I feel that maybe the latest
closing highs we have seen may not be indicative of a primary bull market, but
rather constitute the real secondary reaction highs. Those willing to jump
the gun, may consider the primary trend as bullish (especially given that the
ETFs miners, which tend to lead, are already on a primary bull market of their
own). Nonetheless, those more
conservative may rightfully consider that the last recorded highs determine the
real secondary reaction, and from
this point we should wait for a pullback of at least 3% (in volatility-adjusted
terms) on either SLV or GLD. After such a pullback the joint violation of the
October 12 closing highs would entail a primary bull market.”
(bold letters added)
On November 17th, 2015, the last recorded
primary bear market lows were violated, which implied a reconfirmation of the
primary bear market (for those who interpreted that a “bull” had never existed)
or a new primary bear market signal had been signaled (for those that
considered that a primary bull market had been signaled). More about it here
All in all, 2015 ended under the grips of the bear.
Those
who decided to stay the whole year on the sidelines avoided thus a loss of
-11.53%
On
the other hand, those that, in spite of my warnings concerning the dubious
nature of the signal, went long on October 12th, 2015, underwent a
loss of -8.05% (entry at 111.31 and exit at 102.34).
Please mind that even for those that went long and
lost -8.05% on the trade that those with a buy and hold strategy would have
lost -11.53%. So even accounting for the whipsaw, the Dow Theory managed to
outperform buy and hold in 2015 (as it did in 2013 and 2014).
Furthermore, we have to bear in mind that during 2013
and 2014 we were also on the sidelines, hence avoiding a whopping -28.83% loss
for that year, and an additional loss of -3.746% during 2014.
Thus, I am quite dumbfounded at some recent criticism
recently thrown which literally says that the:
“[f]requency of inaccurate calls for gold, silver,
HAO, GLD and SLV suggests that the Dow Theory being applied is inaccurate”
I feel that being on the sidelines since the end of
2012 all through the beginning of 2016 proves several things:
a)
When there is a real trend (in this case bearish) there is not so much “frequency”
of calls.
b)
Besides such calls (only one, at most two) have been very accurate.
That being said, it is true that anything can happen
on any given Dow Theory signal. One has to keep a long term perspective. To expect positive results on any given trade or in any given year is a very false assumption, as I explained here.
Here you have the 2015 chart for GLD:
 |
| Another year of bear market action: 2015 |
SLV:
As to silver (here SLV), which I trade in tandem with
paper gold (GLD), we had the same Dow Theory signals (of course). For those seeing a
secondary reaction against the primary bear market and acting upon the breakup
of the secondary reaction closing highs, there was a whipsaw, as the primary
bull market was quickly reversed when the last recorded primary bear market
closing highs were jointly broken by SLV and GLD. For more details, please read my comments concerning GLD above.
The year began with SLV at 14.96 and closed at 13.19.
Hence, a decline of -11.83%.
Those who decided to stay the whole year on the
sidelines avoided thus a loss of –11.83 %
On the other hand, those that, in spite of my warnings
concerning the dubious nature of the signal, went long on October 12th,
2015, underwent a loss of -10.44% (entry at 15.13 and exit at 13.55 on Nov 17, 2015).
Please mind that even for those that went long and
lost –10.44 % on the trade that those with a buy and hold strategy would have
lost –11.83 %. So even accounting for the whipsaw, the Dow Theory managed to
outperform buy and hold in 2015 (as it did in 2013 and 2014).
Furthermore, we have to bear in mind that during 2013
and 2014 we were also on the sidelines, hence avoiding a whopping -37.47% loss
for that year, and an additional loss of -21.68% % during 2014.
Thus, you can see that the Dow Theory (even allowing
for a very dubious whipsaw) did a good job at riding (by being out of the
market) the bearish trend that was signaled at the end of 2012.
Here you have SLV’s chart for 2015:
 |
| More bearish action in 2015 |
I hope to post soon my 2015 review for SIL and GDX
(gold and silver miners ETFs). Hopefully, it won’t take too long, or, at least,
it will take less time than my gold and silver review for 2015.
Sincerely,
The Dow Theorist
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