Dow Theory Update for February 19: US stocks flirting with new cyclical bull market

Precious metals continue in uncorrected bull market

I am writing before the close. So things might change after the close. I am being encouraged to write more. Regrettably, I am busy in many endeavors and I cannot blog as often as I would like to. This having said, I’ll try to do my best. One future post (or saga) would be an in-depth explanation of Schannep’s “capitulation” indicator. I have written about it, here. But there is much more to be written so that even those that are skeptical will feel confident to catch a falling knife.

 

US STOCKS

The primary trend as per Schannep’s Dow Theory is bearish. The secondary trend (secondary reaction against the primary bear market) is bullish, as explained here.

One of the rules of Schannep’s Dow Theory states that cyclical bull market will be signaled if both the Industrials and the S&P 500 rally more than 19% off the primary bear market lows. In this case, the relevant levels to be attained are 25,932.62 for the Industrials and 2,797.81 for the S&P 500. Please mind that I have written “cyclical bull market” and not “primary bull market”. Cyclical bull markets tend to last more time on average than primary bull markets. Thus, a cyclical bull market may engulf two or three primary bull markets. As I have just written, a cyclical bull market is signaled when both the Industrials and the S&P 500 rally more than 19%. Conversely, a cyclical bear market is signaled when both the both the Industrials and the S&P 500 decline more than 16%. More about cyclical bull markets here and here

 

When a cyclical bull market is signaled, we should heed the signal even though we have not got the typical primary bull market setup consisting of (a) secondary reaction; (b) pullback and (c) breakout above the secondary reaction closing highs.

GOLD AND SILVER

The primary and secondary trend is bullish as explained here. No changes. The most recent pullback did not fulfil the time requirement for a secondary reaction. Hence, no secondary reaction. As of this writing, SLV is making higher highs and GLD is just about to make them. 

 

Here you have an updated chart:

Unabated primary bull market

GOLD AND SILVER MINERS ETFs

The primary and secondary trend is bullish as explained here. No changes. 

The most recent pullback did not fulfil the time requirement for a secondary reaction. Hence, no secondary reaction. As of this writing both SIL and GDX are making higher confirmed highs which is bullish.

Here you have an updated chart

Another unabated primary bull market

 

Sincerely,

The Dow Theorist