Dow Theory Update for January 17: Silver and Gold miners ETFs under secondary (bullish) reaction

Trends for stocks unchanged

US STOCKS

The primary and secondary trend is bullish since November 21^st, 2016, as explained here and here.

The Industrials made on December 20^th, 2016 a higher closing high unconfirmed by the Transports and SPY. Furthermore, since that date, the Industrials have been unable to make higher highs.

No secondary (bearish) reaction against the current primary bull market is in sight on the charts in spite of today's declines.

GOLD AND SILVER

The primary and secondary?? trend is bearish, as was explained here and here. The primary bear market was signaled on September 30rd, 2016. Depending on the way one appraises secondary reactions (time requirement) one could even say that the secondary trend has turned bullish (more below).

After what can be considered a secondary (bullish) reaction against the primary bear market (the rally retraced more than 1/3 of the previous decline on a confirmed basis), newer lows (breaking down below the last recorded primary bear market closing lows)  re-confirmed the primary bear market on November 14^th, 2016.

If the current rally persists for just one more day for SLV (which is tantamount to 15 trading days), gold and silver will change their secondary trend to bullish (secondary reaction against the primary bear market). If we apply the classical Dow Theory, GLD and SLV have retraced CA. 50% of the current primary bear market swing (measured from the highs of the last completed secondary reaction, which is displayed by blue rectangles on the left side). However, the time requirement (let's say three weeks) has not been met by SLV.

I consider three weeks of rallying  (December 23^rd for SLV and December 15^th for GLD) coupled with an advance off the lows which has retraced 50% of the current primary bear market swing (which is to be counted from the closing highs of the last recorded secondary reaction, that is November 2^nd for SLV and November 4^th for GLD) enough time and enough retracement under the Rhea/classical Dow Theory for a secondary reaction to exist. Just one more day of rallying for SLV would make me even more sure about the existence of the secondary reaction.

Given the generous price advance off the primary bear market closing lows, I feel it is not necessary to perform volatility adjustments in order to confirm the existence of a secondary reaction. SLV has advanced +9.18% and GDX has advanced +7.92%. Both price advances more than double the 3% minimum threshold for stock indices.

Here you have an updated chart. 

Secondary reaction in sight? Or are we already under a secondary reaction?

GOLD AND SILVER MINERS ETFs

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

After what can be considered a secondary (bullish) reaction against the primary bear market (the rally retraced almost 1/3 of the previous decline on a confirmed basis), newer lows (breaking down below the last recorded primary bear market closing lows)  re-confirmed the primary bear market on November 13^th, 2016

Today, we can declare SIL and GDX under a secondary (bullish) reaction against the primary bear market.

SIL has rallied for 15 trading days (closing lows made on December 22^nd). GDX has rallied for 20 days (closing lows made on December 15^th). SIL has rallied +21.85% and GDX has rallied + 23.01%.

Furthermore, both SIL and GDX have retraced ca. 60% of the current primary bear market swing.

While given the generous amount of time and retracement involved it is not necessary to perform volatility adjustments (more about them here and here) in order to declare the existence of the secondary reaction. However, just for the sake of curiosity I did the calculations and found that both SIL and GDX have exceeded the minimum volatility adjusted movement (which stands at 21.37% for SIL and 16.7% for GDX, based on a 30 trading days volatility reading versus the SPY)

All in all, the secondary trend has changed from bearish to bullish for SIL and GDX. Please mind that the primary trend has not changed and remains bearish.

For a primary bull market to be signaled either the closing highs of the last completed secondary reaction are jointly violated (November 9^th for SIL and November 3^rd for GDX) or there is a confirmed pullback followed by a rally that breaks up the current secondary reaction closing highs. So we will watch together these market and see what happens.

Here you have an updated chart

A clear text-book like secondary reaction against the primary bear market

Sincerely,

The Dow Theorist