Setup for primary bear market completed for precious metals and their ETF miners
US STOCKS
The primary and secondary trend turned bullish on October 25th,
2019, as was explained here
Stocks were under a primary bear market (more about it
here). Such a primary bear market did not have long legs and no sooner had been
signaled, a secondary reaction against the primary bear market started. That secondary
reaction finished on 09/13/2019 for the Industrials, on 09/11/2019 for the
Transports, and on 09/12/2019 for the S&P 500 (blue rectangles in the
middle of the charts). From those dates a pullback got started. The first index
to decline more than 3% was the Transports (orange rectangle, after the blue
rectangle of the middle chart) on 09/20/2019 followed by the other two indices.
Hence, on 09/20/2019 the setup for a primary bull market had been completed.
On Thursday 24th, 2019 the S&P 500
broke up above its secondary reaction closing highs. The Transports confirmed
on Friday 25th, 2019, and hence a primary bull market was signaled
(under Schannep’s Dow Theory we need the S&P 500 and either the Industrials
or the Transports confirming so that we get a signal). As of this writing the Industrials
have not confirmed yet. However, under Schannep’s Dow Theory we just require
two indices confirming each other (and the S&P 500 always present). We don’t
need three indices confirming. Hence, unambiguously there is a primary bull
market under Schannep’s Dow Theory.
Here you have charts of the Industrials (top),
Transports (middle) and the S&P 500 (bottom) which depict the developments
since 07/16/2019 to date. The orange rectangles on the left side of the charts
show the secondary reaction that got started against the then existing primary
bull market. The red arrows display the violation of the secondary reaction
lows and primary bear market signal. Thereafter follow the blue rectangles (secondary
reaction against the primary bear market) followed by the blue arrow on the
right side which signal the primary bull market.
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| Primary bull market for US stocks signaled on 10/25/2019 (blue horizontal lines broken up by 2 indices) |
It goes without saying that the last primary bear market
signal has been a whipsaw, as the re-entry (current primary bull market signal
of October 25th) has been at a higher price than the exit, which is
not normal (but can happen). More specifically, the entry price for the S&P
500 (close of October 25th, 2019 day where the Transports confirmed)
was 3022.55 whereas the “exit” price due to the primary bear market signal of
08/14/2019 was 2840.6, which implies that our entry price has been 6.41% higher
than our exit. This is performance lost, even if the current signal ends up
being a winner. As I have repeatedly written, the Dow Theory outperformance is
due to just one variable: The further decline following a primary bear market
signal. Absent such a further decline, even if we can remain profitable, we
will not outperform buy and hold. For an in-depth study of this issue, please
go here.
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 09/04/2019 SLV and GLD made its last recorded
primary bull market closing highs. From that date both ETFs declined and the
secondary trend turned bearish (secondary reaction against the primary bull
market) as explained in-depth here.
From the 09/30/2019 closing lows there has been a
rally which has had enough magnitude to setup SLV and GLD for a primary bear
market signal. On 10/25/2019 (last date when I performed a measurement), SLV
had rallied 6.09% and GLD 2.29% (high made on 10/09/2019). SLV exceeded the
minimum volatility-adjusted movement which stood at 4.90% on 10/25/2019. GLD, on
the other hand, was below the minimum volatility, as you can see from the
spreadsheet below. However, it merely suffices one index to rally above the minimum
volatility to set up the ETFs for a primary bear market. Furthermore, with date
10/31/2019 the rally has made higher highs, and, thus, there is no doubt about
the setup.
Please mind that a setup for a primary bear market
signal does not imply that we are under a primary bear market. The secondary
reaction closing lows (red horizontal lines) have to be jointly violated for a
signal to be given.
Here you have updated charts
GOLD AND SILVER
MINERS ETFs
The primary trend is bullish since 12/18/2018 as
explained here. No changes.
On 09/04/2019 SIL and GDX made its last recorded
primary bull market closing highs. From that date both ETFs declined and the
secondary trend turned bearish
(secondary reaction against the primary bull market) as explained
in-depth here.
From the 10/15/2019 closing lows there has been a
rally which has had enough magnitude to setup SIL and GDX for a primary bear
market signal. On 10/25/2019 (last date when I performed a measurement), SIL
had rallied 8.37 % and GDX 5.92 %. SIL exceeded the minimum volatility-adjusted
movement which stood at 7.37% on 10/25/2019. GDX, on the other hand, was below
the minimum volatility, as you can see from the spreadsheet below. However, it
merely suffices one index to rally above the minimum volatility to set up the
ETFs for a primary bear market. Furthermore, with date 10/31/2019 the rally has
made higher highs, and, thus, there is no doubt about the setup.
Please mind that a setup for a primary bear market
signal does not imply that we are under a primary bear market. The secondary
reaction closing lows (red horizontal lines) have to be jointly violated for a
signal to be given.
Here you have updated charts
Sincerely,
The Dow Theorist
