Thursday, October 20, 2016

Dow Theory Update for October 20: US stocks continue flirting with primary bear market signal

Trends unchanged

I am writing before the close so things might change after the close. So readers beware.


The primary trend is bullish as explained here and here

The secondary trend is bearish (secondary reaction against the primary bull market) as explained here

According to the “Rhea/Classical” Dow Theory no secondary reaction has been signaled yet, as explained here.

On September 30th, the Transports managed to rally more than 3% off its September 14th secondary reaction closing lows, and hence it set up US stocks for a primary bear market signal. Moreover, the Transports made higher closing highs (the primary bull market closing highs of September 8th were bettered) which was unconfirmed by the SPY and Industrials. The longer the lack of confirmation persists the more suspect the breakout.

Please mind that a setup for a primary bear market is not the actual signal. If the Transports breakout got finally confirmed, the primary bull market would be reconfirmed.

On October 13, 2016 the SPY violated its September 14 secondary reaction closing lows (red horizontal lines on the right side of the chart). However, until now, neither the Industrials nor the Transports have confirmed. Thus, no primary bear market has been signaled yet.

Thus, the market remains in a nowhere's land. The breakup of the Transports (which is bullish) remains unconfirmed, whereas the violation of the secondary reaction lows by the SPY (which is bearish) remains unconfirmed. Tie. 

Here you have an updated chart depicting the current situation:

Violation of secondary reaction lows by the SPY remains unconfirmed


The primary and secondary trend is bearish, as was explained here and here.


The primary and secondary trend is bearish, as was explained here and here.

General observation for US Stocks, gold and silver and their ETF miners

The trend, when appraised by the Dow Theory when using weekly bars, is bearish for all the above mentioned markets.

The Dow Theorist

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