Thursday, June 6, 2019

Dow Theory Update for June 6th: Setup for primary bear market completed in US stocks

Primary trend for US stocks remains bullish

 I am publishing on June 6th before the open, what I wrote after the close of June 5th


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:

The secondary trend turned bearish on May 9, 2019 as explained here. and here

Yesterday I wrote that I was discerning a primary bear market setup in US stocks. Today, I had more time to look at it, and, yes, yesterday a primary bear market setup for US stocks had been completed. Both the Industrials and Transports had rallied for 2 days and the Transports, by a hair, had exceed the minimum movement threshold of 3% (not so the Industrials and S&P 500). Yesterday, the S&P 500 had only rallied by one day, hence not reaching the minimum 2 days requirement. However, as per Schannep’s Dow Theory to complete the setup  only 2 days of rally following the secondary reaction lows on just two indices is necessary (which had been accomplished by the Industrials and the Transports). On the other hand, the +3% rally need occur only in just one index. No need of confirmation for that rally. This aspect has been explained in depth in this post.

If we take a look at today’s action (close of June 5th, 2019), we can even more clearly conclude that stocks have setup for a primary bear market signal. The Industrials and Transports have rallied for 3 days, whereas the S&P 500 have rallied 2 days. The Transports have rallied +4.44% , whereas the Industrials and the S&P 500 stand at 2.9% (please remember that we don’t need confirmation for this rally). Here you have the spreadsheet containing the calculations.

The spreadsheet below displays the decline underwent by each index from the primary bull market highs to the secondary reaction lows. A full-fledged secondary reaction decline.

Here you have one chart displaying market action since the 12/24/2018 primary bear market lows, which includes capitulation day, the subsequent signaling of a cyclical bull market, the top, and the secondary reaction (red oranges).

Big picture of the full primary bull market swing

The chart below is a close up of the current secondary reaction (red rectangles) and the rally (blue rectangles) that ensued which has setup US stocks for a primary bear market. If the blue horizontal lines got jointly broken up, the primary bull market would be reconfirmed and we will declare the ongoing secondary reaction as extinguished. If the red horizontal lines got jointly violated, a primary bull market would be signaled. So now we just have a binary outcome: Either reconfirmation of the bull market or new primary bear market. 

The ongoing secondary reaction and subsequent rally that setup US stocks for primary bear market


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.

Furthermore, currently SLV and GLD setup for a primary bear market signal as was explained here.


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

Furthermore, currently SIL and GDX setup for a primary bear market signal as was explained here.

The Dow Theorist

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