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 26th, 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 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
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