No secondary reaction for stocks yet
US Stocks
The primary trend is bullish
since November 21st, 2016, as explained here and here. So we are nearing the first (and probably last) anniversary for this
signal.
On October 12th,
2017 the Transports stopped making higher closing highs whereas the Industrials
and the S&P 500 made their last closing highs on 11/08/2017. Since that
date the S&P 500 and the Transports have declined for five trading days. Hence,
it is too soon to declare the existence of a secondary reaction as the time requirement has not been met.
In my two previous posts I warned of two things:
Firstly, the current bull market swing has not been interrupted by a secondary
reaction for more than six months. This makes the current bull swing old;
secondly, the Transports have been diverging for a quite long time which quite
often implies an impending secondary reaction.
Furthermore, we are dealing with an statistically old
cyclical bull market which got started
in 2011.
All in all, while price action trumps all other
considerations, it is likely that the current bull swing (not to be mistaken
with primary bull market) might be coming to an end. Even the current cyclical bull market might be coming to an end (which may be good news for market timers, as we need a washout, and a new powerful cyclical bull market which on average contains two good and profitable Dow Theory primary bull markets)
Here you have an updated chart:
Transports divergence and old bull swing and old cyclical bull market make likely secondary reaction |
GOLD AND SILVER
The pullback that got started
on September 8th, 2017 has unambiguously setup SLV and GLD for a
primary bull market. A quite different issue is whether the signal will be ever
given. An in-depth explanation here. Please mind that a “setup” is not the actual signal. So, if the primary
bear market lows were jointly revisited the primary bear market would be
reconfirmed.
Here you have an updated
chart. The blue horizontal lines display the closing highs of the secondary
reaction which are the relevant levels to be broken up for a primary bull
market signal to be given.
GOLD AND SILVER MINERS EFTs
The secondary trend is bullish
as explained here
For the same reasons given
when analyzing SLV and GLD, no primary bull market has been signaled for SIL
and GDX, as explained here. GDX did not better its secondary reaction closing highs by a hair, but it
failed to do so. Furthermore, SIL was very far from its secondary reaction
closing highs.
On 11/10/2017 SIL violated its
primary bear market closing lows (red arrow on the right side of the chart).
GDX has not confirmed. Lack of confirmation implies that the primary bear
market has not been reconfirmed.
Therefore, the current
situation remains unchanged. We have a primary bear market signaled on
10/04/2016 (more than one year old). There is an ongoing secondary reaction
against the primary bear market and a setup for a primary bull market. Recent
action seems to suggest that it is more likely a reconfirmation of the primary
bear market than a breakup of the secondary reaction closing highs which would
be a primary bull market signal. All in all, given that “the trend is your friend” it seems that we still have a bear market
for some more time.
In September 2017 there was bullishnes around precious metals. I was skeptical because neither the precious metals nor their stocks where displaying primary bull markets. We were merely seeing a bullish secondary reaction within a primary bear market. Subsequent price action has confirmed that trends tend to last longer than one might expect. Technical truth is that all the precious metals universe is still in the grips of primary bear markets. Maybe we don't see precipitous declines, but neither have we seen real bullish action which is only discernible when secondary reaction highs are jointly broken up. This is why the Dow Theory is important as it gives us an objective framework to work with.
Here you have an updated chart
that displays all price action since the September 2016 (thus you can see the
primary bear market signal of October 2016, the secondary reaction and the
pullback –orange rectangles- that setup the miners for a primary bull market).
SIL violated its primary bear market lows (red arrow). GDX did not confirm |
Sincerely,
The Dow Theorist
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