Gold and Silver miners ETFs have also set up from a potential primary bull market signal
GOLD AND SILVER
A) Market situation if one appraises secondary reactions not bound by the three weeks dogma.
As I explained here, the primary and secondary trend was signaled as bearish on 6/30/22.
Following the 7/20/22 closing lows for GLD and 7/25/2022 for SLV, a strong rally followed until 8/12/22. Such a rally qualifies as a secondary reaction as the time and extent requirement for a secondary reaction has been met. GLD rallied for 17 trading days and SLV for 14 days. Percentage-wise, both ETFs amply exceeded the Volatility-Adjusted Minimum Movement (more explanations about VAMM here).
After the 8/12/22 closing highs, a deep pullback ensued. Such a pullback (2 or more days) sets up both precious metals for a primary bull market signal. The extent requirement for the pullback has also been met as it exceeded in at least one index the VAMM.
The Table below contains all the details concerning the secondary reaction (rally) and the pullback that set up both precious metals for a potential primary bull market signal.
Therefore, now we are confronted with two alternatives:
a) Either the 8/12/22 closing highs are jointly broken topside by GLD and SLV, which will signal a new primary bull market;
b) or the 7/20 (GLD) and 7/25 (SLV) closings lows are broken downside, which will reconfirm the primary bear market.
In the meantime, we wait and observe.
Below you have the updated charts. The blue rectangles highlight the secondary reaction against the primary bear market. The brownish rectangles show the pullback that set up GLD and SLV for a potential primary bull market signal. The blue horizontal lines highlight the secondary reaction closing highs, which are the relevant levels to be broken up.
While not strictly Dow Theory, there is a decent probability for a nice rally in the weeks ahead. The decline from the last recorded high (3/8/22 for GLD & SLV) to the final bottom until 7/20/22 (GLD) and 7/25/22 (SLV) has been substantial and near Capitulation levels. You may surely know that, when it comes to stock indexes, we have a flawless Capitulation indicator that identifies many bear market bottoms. As for precious metals, I am toying with such a Capitulation indicator, but I am not finished yet. However, my preliminary studies show that the most recent drop in precious metals resulted quite often in the past in significant rallies. I don’t want to be more precise, as my Capitulation indicator for precious metals is not ready yet.
B)
Market situation if one sticks to the traditional interpretation demanding at
least three weeks of movement to declare a secondary reaction.
As I explained here, the primary and secondary trend was signaled as bearish on 6/30/22.
The rally that started off the 7/20/22 closing lows for GLD and 7/25/2022 for SLV did not reach at least 15 trading days on both ETFs, so we cannot talk of a secondary reaction. Therefore, the primary and secondary trends remain bearish.
Sincerely,
Manuel Blay
Editor of thedowtheory.com
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