Thursday, May 18, 2023

Dow Theory Update for May 18th: Secondary reaction for GLD and SLV signaled today

SIL and GDX in a secondary reaction against the bull market

Executive Summary:

1. The primary trend for gold and silver is bullish, and the secondary one is bearish.

2. The primary trend for SIL and GDX was signaled as bullish on 4/4/23. SIL and GDX are under a secondary bearish reaction against the still-existing primary bull market. I will produce a new post with all the details in the next few days.

General Remarks:

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


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.

The secondary trend was also bullish, as explained HERE.

On 5/4/23, GLD and SLV made their last closing highs. After that, both ETFs dropped for 10 trading days. So, the time requirement for a secondary reaction has been met. As to the extent requirement, it has also been fulfilled as GLD and SLV have amply exceeded the Volatility-Adjusted Minimum Movement (more about the VAMM HERE). 

The Table below shows the most recent developments. 

So, now we have the following options:

1) The most likely outcome is that we will get a >=2 days rally sooner or later, which exceeds the VAMM, thereby setting up both ETFs for a potential primary bear market signal.

2) if the two ETFs continue falling with no intervening rally, the joint penetration of the lows of the last completed (finalized) secondary reaction (2/24/23 at 168.35 for GLD and 3/8/23at 18.40 for SLV) would signal a new primary bear market.

The charts below (top SLV, down GLD) display the most recent price action. On the left, we can see the previous secondary reaction which was successfully canceled by higher confirmed highs. The red horizontal lines highlight the secondary reaction lows which constitute our current stop-loss. The grey small rectangles show a pullback that did not meet the time requirement and did not qualify as a secondary reaction. Finally, the brown rectangles on the right show the most recent drop.  


Therefore, the primary trend is bullish, and the secondary trend is bearish. My next post will deal with the gold and silver miners (GDX & SIL), which started to sag some days before GLD and SLV (not a good omen).

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, so there is no secondary reaction and, accordingly, the secondary trend remains bullish.


Manuel Blay

Editor of

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