Dow Theory Update for February 16th: Secondary reaction for gold and silver signaled on 2/15/23

Executive summary:

 •   The gold and silver miners’ ETFs have been under a secondary reaction since 2/10/23 (more details HERE)

•   The current secondary reaction notwithstanding, the primary trend for gold and silver remains bullish. 

•    I forecasted such a secondary reaction some days ago. 

General Remarks:

In this post, I thoroughly explained the rationale behind my use of two alternative definitions to appraise secondary reactions.

GOLD AND SILVER

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

I explained HERE that gold and silver have been in a primary bull market since 12/1/22.

A few days ago, I spotted three technical developments that made the ongoing rally suspect and made a secondary (bearish) reaction against the primary bull market likely.

Well, yesterday, 2/15/23, we got the expected secondary reaction. From their respective 2/1/23 (GLD) and 1/13/23 (SLV) highs, Gold (GLD) and Silver (SLV) declined for 10 and 22 trading days, respectively. Hence, the time requirement for a secondary reaction has been met. As to the extent requirement, it has also been fulfilled as GLD, and SLV’s pullback amply exceeds the Volatility-Adjusted Minimum Movement (VAMM, more about it HERE).

The table below gives you all the relevant data.

Therefore, the primary trend is bullish, and the secondary one is bearish.

So, now we have the following options:

1. When or if we get a >=2 days rally exceeding the VAMM on at least one ETF, the setup for a potential primary bear market signal will be completed.  

 

2. If the rally continues until it takes out the 2/1/23 (GLD) and 1/13/23 (SLV) closing highs, the secondary reaction will be terminated, and the primary bull market will be reconfirmed.

3. If no rally such as we described in “1” above occurs and GLD and SLV continue lower and violate their 9/1/22 (SLV) and 9/26/22 (GLD) lows (red horizontal lines in the charts below), a primary bear market will be signaled. 

So, we must observe what happens in the coming days.

The charts below display the action that has unfolded since the primary bear market lows until now. The blue rectangles show the secondary (bullish) reaction against the then-existing primary bear market. The vertical dotted blue line highlights the day the primary bull market was signaled. The brown rectangles display the current secondary (bearish) reaction against the primary bull market. The red horizontal lines highlight the primary bear market lows, whose penetration would signal a new primary bear market (unlikely right now). 

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

I explained HERE that gold and silver have been in a primary bull market since 12/1/22.

The current pullback does not meet the time requirement (at least 15 trading days), so there is no secondary reaction. Accordingly, the primary and secondary trend is bullish.

Sincerely,

Manuel Blay

Editor of thedowtheory.com

 

 

Dow Theory Update for February 13: Secondary reaction for SIL and GDX signaled on February 10th 2023

The primary trend remains bullish

 

EXECUTIVE SUMMARY         

1. The secondary trend for SIL and GDX turned bearish (secondary reaction) against the primary bull market.

2. Gold and Silver remain some days away for a secondary reaction. Thus, the primary and secondary trends remain bullish (as was explained HERE)

General Remarks:

In this post, I thoroughly explained the rationale behind my use of two alternative definitions to appraise secondary reactions.

GOLD AND SILVER MINERS ETFs

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

I explained HERE that the primary trend was signaled as bullish on 11/10/22.

Following the 1/25/23 closing highs, SIL and GDX have declined for 12 trading days. Hence, the time requirement for a secondary reaction has been fulfilled. As to the extent requirement, as shown in the Table below, it has been also met, as the drop amply exceeds the Volatility-Adjusted Minimum Movement (VAMM, more about it HERE).

So, now have three possible options:

1. if SIL and GDX continue falling and jointly broke downside the 12/19/22 closing lows, a primary bear market would be signaled.

2. If a >=2 days rally that exceeds the VAMM occurs, the setup for a potential Bear market will be completed.

3. If, following the rally described above SIL and GDX continue higher and finally took out the 1/25/23 closing highs, the secondary reaction would be canceled, and the primary bull market would be reaffirmed.

The charts below highlight the price action since 11/10/22, the date when the primary bull market was signaled. As you can see, the secondary reaction (brown oranges in the middle) was successfully terminated by higher highs.  The brown rectangles on the right show the current pullback. The red horizontal lines display the current stop-loss. A joint penetration would signal a new primary bear market. 

 

Therefore, now we must wait and see what happens in the coming days.

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

HERE I explained that the primary bull market was signaled as bullish on 1/4/23.

The current pullback has not reached the extent requirement (at least 15 trading days). Accordingly, no secondary reaction has been signaled. The primary and secondary trend remains bullish.

Sincerely,

Manuel Blay

Editor of thedowtheory.com