Dow Theory Investment: Dow Theory Update for February 4: Primary bear market signaled on January 27, 2022 for precious metals ETFs

Gold and Silver remain in a primary bull market when appraised with “shorter-term” Dow Theory.

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 bullish on November 11 2021, as was explained here.

Both ETFs have declined off their respective 11/17/21 (GLD) and 11/12/21 (SLV) bull market closing highs. The pullback qualifies as a secondary reaction, as explained here.

The final secondary reaction lows were made on 12/2/21 (GLD) and 12/9/21 (SLV). A rally ensued, which met the Volatility-Adjusted Minimum Movement (VAMM). Accordingly, the setup for a potential primary bear market signal was fulfilled, as explained here.

Neither gold nor silver has broken down below their secondary reaction lows. Hence, no bear market has been signaled, and the primary trend remains bullish.

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

I reported the existence of a secondary reaction against the primary bear market in my 11/13/21 post.

The primary bull market signal setup was completed 9/29/21 (GLD; sorry, there was a typo with the date in my previous post on precious metals) and 12/9/21 (SLV), as I explained here.

Here you have the updated charts (top SLV, bottom GLD). The purple rectangles display the secondary (bullish) reaction against the primary bear market. The orange rectangles show the pullback that set up both precious metals for a primary bull market signal. As of this writing, a breakup above the blue horizontal lines (sec. reaction closing highs) is not in sight.

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 bullish on 11/11/21, as was explained here.

The secondary trend is bearish (secondary reaction against the primary bull market), as was explained here.

The final lows of the secondary reaction were made on 12/15/21 for both SIL and GDX. SIL broke down below the lows of the previous primary bear market (9/29/21), unconfirmed by GDX. Absent confirmation, no primary bear market was signaled. Following the 12/15/21 lows, a rally set up both ETFs for a potential primary bear market signal.

The primary trend was signaled as bearish on 1/27/22. On 1/6/22, SIL closed at 33.84 and broke down below its 12/15/21 closing lows @ 34.37 (secondary reaction closing lows). On 1/27/22, GDX closed at 29.68 below its 12/15/21 closing lows at 29.70 and provided the needed confirmation for a Bear market signal. Both the primary and secondary trend is bearish.

The table below contains all the details:

Below are the updated charts (SIL, top; GDX, bottom). The brownish rectangles show the secondary bearish reaction against the then existing primary bull market. The purple rectangle displays the rally that followed the secondary reaction lows that set up both ETFs for a primary bear market signal. The red horizontal lines display the relevant levels to be broken down for a primary bear signal to be triggered:

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.

I reported the existence of a secondary reaction against the primary bear market in my 11/13/21 post.

In my 12/14/21 post, I explained that a potential primary bull market setup had been completed. On 12/15/22, SIL broke down below the last recorded primary bear market lows (9/29/21 @34.46), unconfirmed by GDX. Absent confirmation, the secondary reaction against the bear market remains in force, and the setup for a primary bull market signal has not been canceled. Below is the updated table:

Below are the updated charts (SIL, top; GDX, bottom). The purple rectangles display the secondary reaction against the primary bear market. The brownish rectangles show the pullback that set up both ETFs for a primary bull market signal. The red horizontal lines highlight the last recorded primary bear market lows. If jointly broken down, the primary trend would be reconfirmed as bearish, and the secondary reaction would be canceled. Until now only SIL broke down below the key level unconfirmed by GLD. Absent confirmation, nothing changes.

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.