I am writing on
June 5th, 2019 before the close. So things might change by then. The charts shown have been produced at the close of June 4th, 2019
US STOCKS
The primary trend as per
Schannep’s Dow Theory is bullish since
March 1st, 2019 when both the Industrials and the
S&P 500 closed at +19% from the 12/24/2018 bear market closing lows.
However, “capitulation” suggested
the opening of a partial commitment to stocks on the very day of the market
bottom (12/24/2018). More about that partial commitment here.
And more about
“capitulation” in general in the following links:
While today’s scarce time
has been devoted to precious metals (read below), I feel that a setup for a
primary bear market has been just completed on June 4th, 2019 for US
stocks. However, tomorrow I’d like to look more at the charts with more peace to give a
final assessment.
GOLD AND SILVER
The primary trend is
bullish since 12/24/2018 as explained here. No changes. We finally got a secondary
reaction on 4/16/2019 when GLD violated its 03/07/2019 closing lows (and
confirmed SLV which had done so some days ago). More about the entrails of such
a secondary reaction here and here.
On 05/28/2019 SLV made a
lower low which was unconfirmed by GLD. From that date SLV has rallied by
3.19%. GLD made its last low on 05/02/2019. From that date GLD has rallied by
4.34%. Oddly enough, both SLV and GLD’s daily volatility (30 days average) has
been smaller than that of our benchmark the S&P 500. Hence, the
volatility-adjusted minimum movement for SLV stands at 2.31% and that of GLD at
1.86%. When the volatility-adjusted minimum movement stands below 3%, I stick
to one of the tenets of the Dow Theory that requires a minimum movement of 3%.
More about volatility-adjusted readings here.
Here you have
the spreadsheet displaying the calculations
Hence, SLV and
GLD have completed a primary bear market setup. From this point two things can
happen. Either the last recorded secondary reaction lows (shown with read lines
in the charts below) are jointly violated in which case we will get a primary
bear market signal or the last recorded primary bull market closing highs get
jointly broken up (shown with light blue lines in the charts below) in which
case the primary bull market will be reconfirmed.
 |
| Blue rectangles display the rally against the secondary reaction. Setup for primary bear market completed |
Now we have to
wait and see.
GOLD AND SILVER MINERS ETFs
The primary trend is
bullish since 12/18/2018 as explained here. No changes.
The secondary trend is
bearish (secondary reaction) since 4/18/2019 when GDX violated its previous
03/06/2019 closing lows (and confirmed SLV which had done so several days
before), as was explained here. and here
On 05/22/2019, SIL made
lower lows which were unconfirmed by
GDX, hence suggesting that the secondary reaction may be nearing its end. From
that date SIL has rallied by 8.9%. From 05/02/2019 (last recorded lows) GLD has
rallied by 11.99%. Both ETFs have amply exceeded the volatility-adjusted
minimum movement (see spreadsheet below) and hence the setup for a primary bear
market has been completed.
From this point
two things can happen. Either the last recorded secondary reaction lows (shown
with read lines in the charts below) are jointly violated in which case we will
get a primary bear market signal or the last recorded primary bull market
closing highs get jointly broken up (shown with light blue lines in the charts
below) in which case the primary bull market will be reconfirmed.
 |
| Blue rectangles display the rally against the secondary reaction. Setup for primary bear market completed |
As with GDL and SLV, we
have to wait and see further developments.
Sincerely,
The Dow Theorist
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