Bitcoin soars, gold rallies, but silver and gold and silver miners refuse to confirm
Overview: Despite the rally that gold has
experienced in the last few days that brought gold to higher highs, the
primary trend remains bearish because silver has refused to confirm.
If/when SLV surpasses its 12/1/23 high, the primary trend would shift to
bullish. As of this writing, SLV has not confirmed. So, the trend
assessment given in this POST has not changed.
Bitcoin (not covered here, as it is reserved for Subscribers) reached
my second price target on 3/4/24. Such a display of strength from
Bitcoin and, to a lesser extent, gold in such a short time has two
implications:
A) Either something “systemic” is approaching, in which case, silver,
and the miners should also trend higher soon (and silver confirms
gold’s higher highs). A general “melt-up” scenario.
B) Or, we are just seeing a blow-off top preceding another pullback.
Since the principle of confirmation has always served me well. I wait
until SLV confirms GLD to consider that the primary trend has shifted
from bearish to bullish. HERE and HERE you have two recent examples of how the principle of confirmation “saved my skin”.
The gold and silver miners ETFs made recently lower lows that also had a bearish implication. More details below.
General Remarks:
In this post, I extensively elaborate on the rationale behind employing two alternative definitions to evaluate secondary reactions.
SIL refers to the Silver Miners ETF. More information about SIL can be found HERE.
GDX refers to the Gold Miners ETF. More information about GDX can be found HERE.
Clarification: All references below to days and prices refer to trading days and closing prices.
GOLD AND SILVER MINERS ETFs
A) Market situation if one appraises secondary reactions not bound by the three weeks dogma.
The primary trend for GDX and SIL was signaled as bullish on 12/27/23, as I explained HERE.
Following the 12/27/23 highs, GDX and SIL both GDX and SIL plummeted
sharply. From 1/18/24 to 2/1/24 there was a modest bounce that did not
meet the extent requirement to set up both ETFs for a primary bear
market signal. Absent the setup, a primary bear market signal is given
is the two ETFs jointly break the last recorded primary bear market
lows. Such lows are the 10/04/23 lows.
On 2/13/24, GDX pierced its 10/4/23 lows, unconfirmed by SIL.
On 2/28/24, SIL violated its 10/4/23 closing lows and confirmed GDX.
Accordingly, on 2/28/24, a primary bear market was signaled.
The primary and secondary trends are now bearish.
Following the 2/28/24 lows, there has been a rally until 3/4/24. Such
a rally does not fulfill the time requirement for a secondary reaction.
We need at least ten trading days (or slightly less if the rally is
gargantuan). Therefore, the current bounce does not suffice to change
the secondary trend from bearish to bullish.
So, now we are looking forward to a >= 10-day rally that also meets the extent requirement
to consider the existence of a secondary reaction against the primary
bear market. The extent requirement is based on the volatility of GDX
and SIL and changes slightly every day. Currently, GDX should rally at
least 6% and SIL 6.28%. After such a rally unfolds, a >= 2-day
pullback that also satisfies the extent requirement would set up both
ETFs for a potential primary bull market signal. We are far from that at
this moment.
The accompanying charts illustrate recent developments. The red lines
denote the 10/4/23 bear market lows that have recently been breached,
while the blue lines represent the last recorded bull market highs,
which currently serve as crucial levels to surpass for a new primary
bull market signal to materialize.
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, the primary trend was signaled as bullish on 12/27/23.
In this specific instance, the trend appraisal using the “long-term”
version of the Dow Theory yields the same results as the “short-term”
one. So, what I explained above applies fully to this section. The primary and secondary trends are bearish.
Sincerely,
Manuel Blay
Editor of thedowtheory.com
