Monday, August 9, 2021

Dow Theory Update for August 9: Primary bear market for GLD & SLV signaled on 8/6/21

 SIL & GDX remain in a primary bull market


I am writing before the close, if SIL and GDX broke down below their respective secondary reaction lows, a primary bear market would be signaled. So please do your own homework. For more info, go to my last post:



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 considered 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.


The setup for a primary bear market was completed in July 2021, as was explained here (short explanation) and here (longer explanation).

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. On 8/6/2021, GLD broke down below its 6/29/2021 closing lows (@164.83) and confirmed SLV. Accordingly, a primary bear market has been signaled.


Here you have the updated charts:


Anatomy of a primary bear market signal given on 8/6/2021

This trade has been a moderate losing trade. A 50% position on each precious metal would have resulted in a -5.45% loss, as you can see in the table below. The previous one was a nice winner of 16.36%

Please mind that we should not focus on the outcome of any given trade. One of the Dow Theory tenets is that it is not infallible (if it were, it would self-destruct, as all traders would immediately pile in). Thus, we have to wait for several trades to see a pattern of consistent profits. Of course, the more trades we generate (i.e., by trading several markets and with alternative definitions of secondary reactions), the less time our portfolio will be in a drawdown. Followers of this blog are surely acquainted with our long-term performance since 2012 when I started discerning “live” the trends using the Dow Theory. There has been consistent outperformance versus Buy and Hold and a pronounced drawdown reduction for all markets I have followed. The following link contains the analysis of the results of all signals. As you can see, there have been winners and losers in the past, but the aggregate effect is apparent: outperformance versus buy and hold and, more importantly, significant drawdown reduction.


B) Market situation if one sticks to the traditional interpretation demanding more than three weeks of movement in order to declare a secondary reaction.


Nothing has changed.


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.



Manuel Blay

Co-Editor of



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