Dow Theory Update for June 27: Primary bear market signaled for GDX & SIL on 6/23/22

Gold and Silver remain in a primary bull market

GOLD AND SILVER MINERS ETFs

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

In my 6/16/22 post, I explained that on 6/14/22, GDX had broken downside, its 5/12/22 secondary reaction low (pullback) unconfirmed by SIL. On 6/23/22, SIL confirmed by breaking down below its 5/12/22 secondary reaction closing lows, thereby providing confirmation and signaling a primary bear market.

Precious metals and their miners ETFs are very prone to false breakouts. Given that, at least for the time being, GLD and SLV have not confirmed and remain in a primary bull market, I wouldn’t be surprised to see a whipsaw. It is good to remember that despite being choppier, the Dow Theory vastly outperformed buy and hold when applied to GDX & SIL, as explained here. 

The Table below contains all the price action that led to the current primary bear market signal:

 

 

The charts below display the current situation. The red horizontal lines highlight the secondary reaction closing lows whose breakdown signaled the primary bear market. 

 

 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.

 

SIL had made several lower lows unconfirmed by GDX.  On 6/14/22, GDX made lower lows, and confirmed SIL. Therefore, the primary bear market has been reconfirmed.

Now both the primary and secondary trend is bearish.

GOLD AND SILVER 

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 I explained here. Despite the current pullback, the trend remains bullish.

The technical situation I discussed in my 6/16/22 post has not changed. So the secondary trend is bearish (secondary reaction).

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 bullish on 3/1/22, as was explained here.

The technical situation I discussed in my 6/16/22 post has not changed. So the secondary trend is bearish (secondary reaction).

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. The red color displays a primary bear market, and the blue displays a primary bull market.

 

Sincerely,

Manuel Blay

Editor of thedowtheory.com

Can the Dow Theory be applied to Sectors? Answer: YES (II).

 Healthcare sector (XLV)

Can the Dow Theory for the 21^st Century (DT21C) be successfully applied to the healthcare sector (XLV)? Yes, and it works great. In a future post, I will explain why the Dow Theory works with sectors and what sectors stand to profit most from the Dow Theory. Today, I applied the Dow Theory to XLV (Health Care Select Sector SPDR ETF). The results are amazing:

1) The Dow Theory increased total profits by 51.46%

2) Maximum drawdown was cut by 40.14%. On a close trade basis, it was cut by 80.63% 

If you want to see the outperformance when applied to XRT (retail sector ETF):

http://www.dowtheoryinvestment.com/2022/06/can-dow-theory-be-applied-to-sectors.html

 

 More to follow soon.

Sincerely,

Manuel Blay

Editor of thedowtheory.com

 

Dow Theory Update for June 16: Update on the trends for precious metals and their miners ETFs (GDX & SIL)

I am publishing this post before the close. Therefore, things might change. Readers, do your own homework

GOLD AND SILVER 

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 I explained here. Despite the current pullback, the trend remains bullish.

The secondary trend is bearish (secondary reaction against the bullish trend -Step #2-), and the setup for a primary bear market signal has been completed (Step #3), as I explained here. I explained the formation of a setup for a potential bear market signal in my June 6^th 2022 post.

 On 6/14/22, GLD broke down below the 5/13/22 closing lows unconfirmed by SLV (Step #4). So no primary bear market was signaled. If or when SLV closes down below its 5/12/22 secondary reaction closing lows, a primary bear market will be signaled. 

The Table below summarizes the key events from the last bull market highs (Step 1) to the current breakdown (Step 4):

 

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 bullish on 3/1/22, as was explained here.

 In my June 6^th 2022 post I explained the development of a secondary reaction and the setup for a potential primary bear market signal. On 6/14/22, GLD broke down below its 5/12/22 secondary reaction closing lows unconfirmed by SLV. Absent confirmation by SLV no primary bear market has been signaled, and the primary bull market remains in force. 

The Table below summarizes the key events from the last bull market highs (Step 1) to the current breakdown (Step 4):

 

In this specific instance both the "long" and "short-term" Dow Theory are in gear. It happens every now and then. 

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 3/10/22, as I explained here. Despite the current pullback, the trend remains bullish.

Please read my post of May 26^th, 2022, and June 6^th, 2022, for an accurate rendering of the current situation (namely, secondary reaction (Step #3) and set up for a potential primary bear market signal (Step #4) completed).

 On 6/14/22, GDX broke down below its 5/12/22 secondary reaction closing lows unconfirmed by SIL (Step #4). Absent confirmation by SIL no primary bear market has been signaled, and the primary bull market remains in force. 

The Table below summarizes the key events from the last bull market highs (Step 1) to the current breakdown (Step 4):

 

 

 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.

Currently, there is a secondary (bullish) reaction against the primary bear market, as was explained here. Recent lower lows by GDX have not changed my previous analysis, so the secondary (bullish) reaction against the primary bear market remains in force. If SIL confirmed by breaching its 1/28/22 closing lows, then the primary bear market would be reconfirmed and the secondary (bullish) reaction terminated.

The Table below summarizes the key events from the last bear market lows (Step 1) to the current breakdown (Step 4):

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. The red color displays a primary bear market, and the blue displays a primary bull market.

Sincerely,

Manuel Blay

Editor of thedowtheory.com

Dow Theory Update for June 15: Primary bear market for U.S. bonds reconfirmed on 6/13/22

Later today or tomorrow follows an update for precious metals and their ETF miners

US INTEREST RATES

 General Remarks:

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

 TLT is the iShares 20 years + Treasury bond ETF. More about it here

 IEF is the iShares 7-10 years Treasury bond ETF. More about it here.

Thus, TLT tracks longer-term US bonds, whereas IEF tracks middle-term US bonds. A bull market in bonds entails lower interest rates. A bear market in bonds represents higher interest rates.

A) Market situation if one appraises secondary reactions not bound by the three weeks and 1/3 retracement dogma.

The primary trend was signaled as bearish on 1/5/22, as I explained here.

As I explained here, the secondary trend was signaled as bullish (secondary reaction) on 5/25/22. A pullback set up both ETFs for a potential primary bull signal, as explained here. However, the pullback continued lower, and the 5/6/22 closing lows were breached. On 6/10/22, IEF broke downside its 5/6/22 bear market lows. On 6/13/22, TLT provided confirmation. Such a confirmation implies:  

1. The setup for a potential Buy signal has been canceled.

2. The secondary (bullish) reaction against the bear market has been terminated. 

3. The primary bear market has been reconfirmed. So, the odds favor lower prices. 

4. The primary and secondary trends are bearish.

The Table below summarizes the key events from the previous bear market lows (Step 1) to the current breakdown (Step 4):

Below are the updated charts:

B) Market situation if one sticks to the traditional interpretation demanding more than three weeks and 1/3 confirmed retracement to declare a secondary reaction.

The primary trend was signaled as bearish on 9/28/21. A more aggressive and legitimate interpretation would have signaled the bear market on 9/24/21. The explanations here.

In my 12/3/21 post, I wrote that the rallies that had until then developed did not qualify as a secondary reaction. The situation has not changed, as the current rally has not fulfilled the time requirement. Newer lower lows on 6/10/22 by IEF and 6/13/22 by TLT increases the probability for lower prices.

 

Sincerely,

Manuel Blay

Editor of thedowtheory.com

Can the Dow Theory be applied to Sectors? Answer: YES

Can the Dow Theory be successfully applied to sectors? Yes, and it works great. In most cases, there is even more outperformance and drawdown reduction versus Buy and Hold than when applied to Indexes. In a future post, I will explain why the Dow Theory works with sectors and what sectors stand to profit most from the Dow Theory. In the meantime, as an appetizer, I applied the Dow Theory to XRT (retail sector ETF). The results are astounding:

1) The Dow Theory increased total profits by 164.37%

2) Maximum drawdown was cut by 52.6%. On a close trade basis, it was cut by 69.89%

 More will follow soon.

Sincerely,

Manuel Blay

Editor of thedowtheory.com

 

Dow Theory Update for June 6: Setup for a potential primary bull market in U.S. bonds completed

 Update on the trends for precious metals.

 

US INTEREST RATES

 

General Remarks:

 

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

 

TLT is the iShares 20 years + Treasury bond ETF. More about it here

 

IEF is the iShares 7-10 years Treasury bond ETF. More about it here.

 

Thus, TLT tracks longer-term US bonds, whereas IEF tracks middle-term US bonds. A bull market in bonds entails lower interest rates. A bear market in bonds represents higher interest rates.

 A) Market situation if one appraises secondary reactions not bound by the three weeks and 1/3 retracement dogma.

The primary trend was signaled as bearish on 1/5/22, as I explained here.

As I explained here, the secondary trend was signaled as bullish (secondary reaction) on 5/25/22.

 

The last secondary reaction closing highs were made on 5/25/22 (TLT) and 5/27/22 (IEF) – Step #2 on the table below- . After those highs, a pullback (Step #3) set up both ETFs for a primary bull market signal on 6/1/22. Following that date, the pullback continued lower.

 

 

 

So now we have two options:

 

a) Either TLT and IEF break up above the secondary reaction highs (Step #2), which would signal a primary bull market.

 

b) Or both TLT and IEF break down below the last recorded primary bear market lows (Step #1), which would reconfirm the ongoing bear market & cancel the current secondary reaction.

 

We sit and wait. 

 

Below the updated charts. The purple rectangles display the secondary reaction against the primary bear market. The brownish rectangles show the current pullback that set up both ETFs for a primary bull market signal. The darkest one highlights the date when the setup for a bull market signal was first completed. The blue horizontal lines show the relevant levels to be broken topside for a new bull market. The red ones show the price levels to be breached for a reconfirmation of the bear market.

 

 B) Market situation if one sticks to the traditional interpretation demanding more than three weeks and 1/3 confirmed retracement to declare a secondary reaction.

 

The primary trend was signaled as bearish on 9/28/21. A more aggressive and legitimate interpretation would have signaled the bear market on 9/24/21. The explanations here.

In my 12/3/21 post, I wrote that the rallies that had until then developed did not qualify as a secondary reaction. The situation has not changed, as the current rally has not fulfilled the time requirement.

GOLD AND SILVER 

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 I explained here. Despite the current pullback, the trend remains bullish.

The secondary trend is bearish (secondary reaction against the bullish trend), and the setup for a primary bear market signal has been completed, as I explained here.

Since that post, the technical situation has not changed. Below is the updated table displaying the technical situation:

 

From a Dow Theory perspective, there are three possible outcomes:

 

1) Either GLD and SLV jointly break up above their last 3/8/22 bull market highs (Step #1), in which case the primary bull market would be reconfirmed, and the secondary reaction terminated.

 

2) Or GLD and SLV jointly break down below their secondary reaction lows (Step #2) which would signal a primary bear market.

 

3) Or GLD breaks down below the lows of the last completed secondary reaction (12/2/21 @ 165.24), which would confirm SLV’s breakdown and signal a primary bear market.

 

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 bullish on 3/1/22, as was explained here.

Off the 3/8/22 closing highs, SLV declined until 5/12/22, and GLD fell until 5/13/22. The drop amply exceeds the time (15 days) and extent requirement for a secondary (bearish) reaction against the primary bull market. It also exceeds the Volatility-Adjusted Minimum Movement (VAMM) to qualify as a secondary reaction.

  The Table below displays the price action since the primary bull market highs:

 

On 5/10/22, SLV broke down below the 9/21/21 primary bear market lows unconfirmed by GLD. Absent confirmation, no primary bear market was signaled.

So now we have the following options:

 

1) Either GLD and SLV jointly break up above their last 3/8/22 bull market highs (Step #1), in which case the primary bull market would be reconfirmed and the secondary reaction terminated.

 

2) Or GLD and SLV jointly break down below their secondary reaction lows (Step #2) which would signal a primary bear market. 

 

3) Or GLD breaks down below the lows of the last primary bear market (9/29/21 @ 161.32), which would confirm SLV’s breakdown and signal a primary bear market too.

 

The charts below display the most recent price action. The brownish rectangles highlight the secondary (bearish) reaction against the primary bull market. The violet rectangles on the right side of the chart display the bounce that sets up GLD and SLV for a primary bear market signal. The red horizontal lines highlight the relevant price levels to be broken out for a bear signal to be signaled. The blue horizontal lights show the last primary bull market highs which have to be jointly broken topside to cancel the current secondary reaction. 

 

 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 3/10/22, as I explained here. Despite the current pullback, the trend remains bullish.

Please read my post of May 26^th, 2022, for an accurate rendering of the current situation (namely, secondary reaction and set up for a potential primary bear market signal completed). Since that post, the technical situation has not changed.

 

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.

Starting at the 1/28/22 closing lows, SIL rallied until 4/13/22 @39.54. GDX rallied until 4/18/22 @40.87. Such a rally amply exceeded the time (15 trading days) and extent requirement for a secondary reaction against the primary bear market. Following such highs, the ensuing pullback set up both ETFs for a primary bull market signal (>=2 days drop and Volatility-Adjusted Minimum Movement –VAMM- exceeded).

The Table below contains all the relevant data:

 

On 5/6/22, SIL broke down below its 1/28/22 bear market closing lows unconfirmed by GDX. This specific lack of confirmation has three consequences:

 

a) The primary bear market has not been reconfirmed (which is slightly bullish).

 

b) The secondary reaction (Step #2 on the Table) against the primary bear market has not been canceled.

c) The setup for a potential primary bull market signal remains in force. 

Please mind that on 3/1/22, GDX broke up above the highs of the last completed secondary reaction (pink horizontal lines on the charts below), unconfirmed by SIL. Thus, lacking confirmation, a primary bull market was not signaled.

 

So now we have the following options:

 1) SIL breaks up above the highs of the last completed secondary reaction (the 11/12/21 highs, pink horizontal line on the chart below), which would signal a primary bull market.

 

2) GDX and SIL break topside their secondary reaction closing highs (Step #2, blue horizontal line on the charts below), which would also signal a primary bull market.

 

3) GDX breaks down below its 1/28/22 closing lows (last primary bear market lows), which would confirm SIL’s breakdown and cancel the current secondary reaction and, with it, the setup for a primary bull market signal. 

 

The charts below display the current technical situation:

  

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. The red color displays a primary bear market, and the blue displays a primary bull market.

For those questioning whether all these charts actually work, I encourage them to read the following posts that prove with hard and fast data the marked drawdown reduction and outperformance achieved by the Dow Theory. 

For U.S. BONDS:

http://www.dowtheoryinvestment.com/2022/02/dow-theory-update-for-february-16-does.html

http://www.dowtheoryinvestment.com/2022/03/dow-theory-update-does-dow-theory-work.html

http://www.dowtheoryinvestment.com/2022/03/dow-theory-update-does-dow-theory-work_22.html

For Precious Metals and their ETF miners (GDX and SIL):

 http://www.dowtheoryinvestment.com/p/dow-theorys-performance-when-applied-to.html

Sincerely,

Manuel Blay

Editor of thedowtheory.com