Primary trends remain
bullish in precious metals and their ETF miners.
GOLD AND
SILVER
A) Market situation
if one is to appraise secondary reactions not bound by the three weeks dogma.
While it’s subject to
interpretation, I explained why I consider the primary trend bullish since
4/21/2021 here.
The secondary
trend is bearish (secondary reaction against the primary bull market) as was
explained here.
A setup for a
potential primary bear market signal has been completed, as was succinctly
explained here:
Well, now
let’s explain more in-depth the current setup.
Off the
6/22/2021 secondary reaction lows SIL rallied until 7/2/2021. GLD made its last
recorded secondary reaction lows on 6/29/2021. After that, a rally followed
until 7/15/2021. The table below gives you all the details:
As you can
see, only GLD rallied more than the volatility adjusted minimum movement
(VAMM)). However, as I explained profusely here, the setup for a primary bull or
bear signal needs not confirmation.
Following its
7/2/2021 rally highs, SLV declined sharply and on 7/16/2021 broke down below
its 6/22/2021 secondary reaction lows unconfirmed by GLD. Absent confirmation,
no primary bear market was signaled and the primary trend remains bullish.
Now only two outcomes are possible:
a) Either GLD
confirms SLV by breaking down below its 6/29/2021 secondary reaction lows, in
which case a primary bear market will be signaled.
b) or, both
SLV and GLD break topside their respective last recorded primary bull market
highs (5/17/2021 @26.19 for SLV, and 6/2/2021 @178.77 for GDX) which would
reconfirm the primary bull market.
Below the
updated charts:
B) Market situation if one
sticks to the traditional interpretation demanding more than three weeks of
movement in order to declare a secondary reaction.
The
primary trend was signaled as bearish on 11/27/2020, as was explained here.
Off the 11/30/2020 bear
market lows, both SLV and GLD rallied for 24 trading days until 1/5/2021. So
the time requirement was more than
met. As to the extent requirement,
it was fully met. Both percentage-wise, as in terms of retracements of the
previous bear market swing, which started on 11/6/2020. Please spare me the
calculations as the chart patterns speak for themselves.
So the secondary trend is
bullish (secondary reaction against the primary bear market).
If we stick to a very
strict (or rather misguided) interpretation of the classical Dow Theory, the change
of the primary trend from bearish to bullish will occur if either one of the
two alternatives below materializes:
1. The first one entails the breakup of the last secondary reaction
closing highs (1/5/2021). SLV broke them up on 2/1/2021, unconfirmed by
GLD. So, once GLD broke up its 1/5/2021 secondary reaction highs, it’d be
indisputable that the primary trend has turned bullish.
2. The second one entails
the breakup of the highs of the last
completed secondary reaction (the first one of the current bear market). I
have written profusely (i.e., here and here) about the importance of
the highs/lows of the last completed secondary reaction (not the current one,
but the previous one). The closing highs of such a reaction were made on
11/6/2020 for both SLV and GLD. On 12/7/2020, SLV broke up above its closing
highs, unconfirmed by GLD. Once GLD confirmed, the primary trend would be
bullish.
Below you have the updated
charts:
GOLD AND
SILVER MINERS ETFs
A) Market situation if one appraises secondary reactions
not bound by the three weeks dogma.
The primary trend is bullish since May 7th, 2021, as
explained here.
The secondary
trend is bearish, as I explained in my
post of June 21st, 2021.
Off the
7/20/2021 secondary reaction lows SIL rallied until 7/29/2021. GDX made its
last recorded secondary reaction lows on 7/23/2021. After that, a rally
followed until 8/3/2021. The table below gives you all the details:
As you can
see, only SIL rallied more than the volatility adjusted minimum movement
(VAMM). However, as I explained profusely
here, the setup for a primary bull or
bear signal needs not confirmation.
So, the setup
for a potential primary bear signal has been completed.
Now we only two outcomes are possible:
a) Either
both SIL & GDX break down below their respective secondary reaction lows (7/20/2021
@39.54 for SIL, and 7/23/2021 @33.15 for GDX), in which case a primary bear
market will be signaled.
b) or, both
SIL and GDX break topside their respective last recorded primary bull market
highs (6/2/2021 @49.40 for SIL, and 5/17/2021 @39.68 for GDX) which would
reconfirm the primary bull market.
Below the
updated charts. By the way, the small grey rectangles inside the orange
rectangles display rallies that did not met the extent requirement to set up
SIL and GDX for a primary bear signal. The read horizontal lines on the right side of the charts display the relevant price levels to be broken down:
B) Market situation if one
sticks to the traditional interpretation demanding more than three weeks of
movement in order to declare a secondary reaction.
The primary
trend is bullish since May 7th, 2021, as explained here.
SIL made its last primary
bull market closing high on 6/2/2021. GDX did so on 5/17/2021. Off these highs,
SIL declined until 7/19/2021 and GDX until 7/23/2021. The pullback amply met the time and extent requirement for a secondary reaction. Following those lows,
there has been a rally that exceeded the MAVM (for SIL, and that’s enough).
Thus, the setup for a potential primary bear market signal has been completed.
The table below summarizes the current price action:
The charts below display the current situation. The orange rectangles display the current secondary reaction. The blue rectangles on the right side of the charts show the rally that set up SIL and GDX for a potential primary bear market signal. The red horizontal lines (right side of the charts) show the relevant price levels (secondary reaction lows) to be jointly violated for a primary bear market signal:
Overview:
The spreadsheet below
displays the primary trend in the pairs SLV/GLD and SIL/GDX when we appraise
them with either the “shorter-term” or longer-term interpretation of the Dow
Theory. Red color displays a primary bear market (cash), and blue displays a
primary bull market.
US INTEREST RATES
The
bull market I described in my post of June 9th, 2021 remains in good
health.The secondary trend remains bullish too (no secondary reaction).
US STOCKS
The Dow Transportation is
seriously diverging from the Industrials. Below you have the charts displaying
the current situation. Please mind that divergence is more serious than lack of
confirmation. In our August 1st Letter at thedowtheory.com, we have dealt in-depth with
the issue of divergence.
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