Trends unchanged for stocks
I am writing
before the close.
US STOCKS
Recent declines did not
fulfill the “time” requirement for a secondary reaction. I don’t even bother to
calculate the “extent” requirement.
GOLD AND SILVER
The secondary
trend turned bearish (secondary reaction against the primary bull market) on August
31, 2016. This day GLD violated its July 20th, 2016 closing low, and
hence finally fulfilled the “time requirement”.
As to the extent
requirement, even without performing volatility adjustments, I can see it has
been amply met. Thus, on 7/8/2016 GLD made its closing high of 130.52, and on 8/31/2016,
it made a closing low of 124.78. Hence, GLD has declined -12.63% which is much
more, even accounting for GLD’s (normally) larger volatility than the SPY.
SLV declined for
16 trading days from its 8/2/2016 closing high of 19.6 to a closing low of
17.62 on 8/24/2016, that is -10.10%.
Furthermore, if
we look at both ETFs from a “classical/Rhea” Dow Theory perspective, we see
that they have retraced more than 1/3 of the previous bull market swing (that
is the price advance made of the lows of the previously completed secondary
reaction until the closing highs).
Depending on the
way SLV and GLD close, it is likely that the rally that started on 8/24 (SLV)
and 8/31 (GLD) will set up both precious metals for a primary bear market
signal. As I always insist: A setup is not the actual signal.
Here you have an updated chart:
 |
| Orange rectangles display the seconary reaction against the primary bull market |
GOLD AND SILVER MINERS ETFs
GDX and SIL are under a
secondary reaction.
As to the time requirement,
SIL has declined for 11 trading days. GDX has declined for 21 trading days. If
I applied the “Rhea/Classical” strictly, the time requirement for a secondary
reaction has not been met (no three full weeks for both indices). However, if I
apply Schannep’s rules for determining a secondary reaction to SIL and GDX, we
can see that both ETFs have rallied by more than 2 calendar weeks (well, SIL
exactly two calendar weeks), and the average number of declining days amounts
to more than 8 trading days.
GDX has
declined by -18.61% and SIL has declined -19.54%. I don’t need to perform
volatility adjustments, as we are talking of big declines. Furthermore, even
under a classical Dow Theory standpoint, we are very near confirmed
retracements of ca. 1/3 of the previous bull market swing.
Thus, I feel that we can
consider the existence of a secondary reaction.
Now we have to monitor the
ongoing rally that started three trading days ago. Depending on how it closes
today, it has all the looks of a primary bear market setup.
Here you have an
updated chart.
 |
| Blue rectangles on the right side of the chart displays the current seconary reaction |
Sincerely,
The Dow Theorist
I've found a typo: GLD declined from its closing high of 130.52 to its closing low of 124.78 just -4.40%. SLV's calculations are correct. The volatility-adjusted minimum threshold for GLD stood at the most recent closing lows at 5.16%. volatility-adjusted minimum threshold for SLV stood at the most recent closing lows at 10.75%. Thus, for both ETFs the current daily volatility reading is by a hair below their respective minimum volatility thresholds. On the other hand, from a "classical" Dow Theory perspective, the decline has retraced 1/3 of the previous advance, and the time requirement has been met, even under classical Dow Theory standards. My judgment call is to consider the existence of a secondary reaction, in spitel of the relatively modest decline underwent by gold.
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