Friday, March 2, 2018

Dow Theory Update for March 2: A primary bear market signal for US stocks may be signaled soon

Please mind: No signal yet, but keep your eyes glued on the charts

I am writing before the close, so please check the charts after the close


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

The primary trend was reconfirmed on July 3rd, 2017 as was explained here

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

After the secondary reaction closing lows the Industrials, Transports and S&P 500 have rallied more than 3%. So unambiguously the setup for a primary bear market signal has been completed.

If the 2/8/2018 closing lows (Industrials and S&P 500) and 2/9/2018 (Transports) were jointly violated (the S&P 500 must necessarily violate its own secondary reaction closing lows as explained here), a primary bear market signal would be flashed. Thus, the S&P 500 together with either (or both) the Industrials and the Transports must violate their secondary reaction closing lows so that a primary bear market is signaled. The red horizontal lines are the significant levels to be violated.

Here you have an updated chart:

Secondary reaction (orange rectangle) followed by rally (blue rectangle) set up stocks for primary bear market signal

Please mind that the cyclical bull market that got started on 2011 is statistically very old which is headwind for the current primary bull market. However, we live and die by the actual signal, and hence we patiently ride the trend until the Dow Theory tells us to shift gears.


In spite of all the turbulences that seem to afflict markets. The precious metals have not even changed their secondary trends.

The primary trend was declared bearish on July 7th, 2017, as explained here and here
The secondary trend is bullish, as was profusely explained here.

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. GLD has broken up above the secondary reaction closing highs (on 1/24/2018, 2/14/2018, and 2/15/2018) unconfirmed by SLV. Thus, no primary bull market has been signaled and the primary trend remains unchanged.

Here you have an updated chart:

GLD broke above the secondary reaction highs unconfirmed by SLV. Nothing accomplished


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

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, and, as with GLD and SLV,  the longer it takes for GDX to confirm the higher the likelihood that the primary bear market may be nearing its end.

Therefore, the current situation remains unchanged. We have a primary bear market signaled on 10/04/2016 (more than one year old, another candle to light). There is an ongoing secondary reaction against the primary bear market and a setup for a primary bull market.

Here you have an updated chart:
Trends unchanged in SIL and GDX

The Dow Theorist

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