Saturday, November 13, 2021

Dow Theory Update for November 13: Primary bull market signaled for gold, silver, and their ETF miners on November 11th

 

Secondary reaction against the primary bear market in US bonds

 

GOLD AND SILVER

 

In this post, I provided a thorough explanation concerning the rationale behind my use of two alternative definitions to appraise secondary reactions.

 

A) Market situation if one appraises secondary reactions not bound by the three weeks dogma.

 

The primary trend was signaled as bearish on 8/6/2021, as was explained here.

 

Starting off the 9/29/2021 bear market closing lows, a secondary reaction developed. The secondary reaction did not result in a setup for a primary bull market, as we did not get a pullback on at least one ETF exceeding the volatility-adjusted minimum movement (VAMM). More about VAMM here

 

 

Absent the “normal” setup, our alternative break-up point is the closing highs of the last (previous) completed secondary reaction. I refer to this post for a more in-depth explanation. A confirmed break-up of 09/03/21 closing highs @ 171.06 and 22.88 for GLD and SLV, respectively, entails a primary Bull market signal. GLD was the first to break up on 11/9/2021 (see blue horizontal  line on the bottom chart below). SLV confirmed on 11/11/2021. Hence, on 11/11/2021, a primary bull market was signaled. The secondary trend is bullish too. 

 


 

Here you have the updated charts. The blue horizontal lines show the closing highs of the last (previous) completed secondary reaction which in this case were the relevant price levels to be broken  topside for a primary bull market signal. The purple rectangles display the past and the current secondary bullish reactions. The grey rectangles display a pullback on both GLD & SLV which lacked enough extent to set up both ETFs for an  "ordinary" primary bull market signal.

 

 

 

 

B) Market situation if one sticks to the traditional interpretation demanding at least three weeks of movement to declare a secondary reaction.

 

The primary trend was signaled as bearish on 11/27/2020, as was explained here.

 

The primary bear market was reaffirmed on 9/17/2021, as was explained here

 

The rally off the 9/29/2021 closing lows until 11/12/2021 has lasted until now 32 trading days. Accordingly, the time requirement for a secondary reaction (at least 15 confirmed days) has been more than met (it was already met many days before). Percentage-wise the extent requirement was also met. The Table below displays the situation on 10/25/2021. You can see that by that date the time and extent requirement had been already fulfilled.

 

 

 

 

 

No pullback with enough extent has occurred, so we don’t have the setup for a primary bull market signal. As to the alternative Bull market signal, the highs of the last completed secondary reaction remain at a lofty level (see blue horizontal lines on the charts below). So no primary bull market signal for the time being. More info about this vital alternative way of signaling primary bull and bear markets here. Ignore it at your own peril. 

 


 

GOLD AND SILVER MINERS ETFs

 

A) Market situation if one appraises secondary reactions not bound by the three weeks dogma.

 

 The primary trend was signaled as bearish on 8/9/2021, as was explained here.

 

Starting off the 9/29/2021 bear market closing lows, a secondary reaction developed. The secondary reaction did not result in a setup for a primary bull market, as we did not get a pullback on at least one ETF exceeding the volatility-adjusted minimum movement (VAMM). More about VAMM here.

 

 

 

Absent the “normal” setup, our alternative break-up point is the closing highs of the last (previous) completed secondary reaction. I refer to this post for a more in-depth explanation. A confirmed break-up of 09/03/21 closing highs @ 33.28 and 41.28 for GDX and SIL, respectively (highs of the last completed secondary reaction for want of an earlier entry point), would signal a primary Bull market. On 10/25/21, GDX, by closing at 33.45, exceeded its respective closing high unconfirmed by SIL. On 11/11/21, SIL finally confirmed, signaling, accordingly, a primary bull market. The secondary trend is bullish too. 

  

 

Here you have the updated charts. 

 

 

 By the way, the junior miners, GDXJ and SILJ, signaled a primary bull market on 10/25/2021. Look at the charts below. Usually, multi-market confirmation raises the odds for a successful trade, as explained here:

  


B) Market situation if one sticks to the traditional interpretation demanding at least three weeks of movement to declare a secondary reaction.

 

The primary trend was signaled as bearish on 8/9/2021, as was explained here.

 

Off the 9/21/2021 closing lows until 11/12/2021, there was a rally that qualifies as a secondary reaction against the primary bear market. In this specific instance, the secondary reaction coincides with the one appraised when taking a shorter-term perspective (see above). As of this writing the setup for a primary bull market has not been completed since we did not get a pullback of enough magnitude on at least one ETF. In our specific instance, our alternative definition for a primary bull market are the closing highs of the last primary bull market (blue horizontal lines on the charts below). 


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, and blue displays a primary bull market.

 

 

Sincerely,

Manuel Blay

Co-Editor of thedowtheory.com


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