Dow Theory Update for March 14: Setup for a primary bear market signal for GLD and SLV completed on 3/13/23

 

Executive Summary:

1. The primary tend for gold and silver remains bullish.

2. However, the setup for a potential primary bear market signal was completed on 3/13/23

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 weeks ago, I spotted three technical developments that made the ongoing rally suspect and made a secondary (bearish) reaction against the primary bull market likely. On 2/15/23, we got the expected secondary reaction (as explained HERE).

 

Following the 2/24/23 (GLD) and 3/8/23 (SLV) lows, both metals rallied on a confirmed basis for >=2 days. Such a bounce has enough extent to set up both ETFs for a potential primary bear market signal, as the rally amply exceeds the Volatility-Adjusted Minimum Movement (VAMM, more about it HERE).

The Table below gives you all the relevant data.

 

 So, now we have two options:

a) if the rally continues until the 2/1/23 (GLD) and 1/13/23 (SLV) market highs are jointly broken topside, the secondary reaction will be canceled, and the primary bull market will be reconfirmed (Step #1 in the Table above).

b) if GLD and SLV start heading south and jointly violated their secondary reaction lows (Step #2 in the Table above), a primary bear market would be signaled.

The charts below display the current situation. The brown rectangles highlight the secondary reaction against the primary bull market. The violet rectangles show the most recent bounce that set up both precious metals for a potential primary bear market signal. The blue horizontal lines highlight the last recorded primary bull market highs. The red horizontal lines show the secondary reaction lows whose violation would signal a new 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.

I explained HERE that gold and silver have been in a primary bull market since 12/1/22. Finally, the pullback has met the time requirement for a secondary reaction as GLD declined for 16 trading days and SLV for 36 trading days. As you can see in the Table under section “A” above, the extent requirement has also been fulfilled, so there is a secondary reaction against the primary bull market. The following bounce (step #3 in the Table above) has also set up GLD and SLV for a potential primary bear market signal.

So, in this specific instance, the trend's long and short-term appraisals give the same verdict: the setup for a potential primary bear market has been completed.

Sincerely,

Manuel Blay

Editor of thedowtheory.com

Dow Theory Update for March 3rd: Primary bear market for GDX and SIL signaled on 2/22/23

 

EXECUTIVE SUMMARY         

1. The primary trend for SIL and GDX when using the “short term” version of the Dow Theory turned bearish (secondary reaction) on 2/22/23.

2. If we appraise the trend for SIL and GDX with the “long term” version of the Dow Theory, the primary trend remains bullish and the secondary one bearish.

3. Gold and Silver are in a secondary reaction against the primary bull market (as 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 on 2/13/2,3 SIL and GDX entered a secondary (bearish) reaction against the then-existing primary bull market. In that post, I wrote “if SIL and GDX continue falling and jointly broke downside the 12/19/22 closing lows, a primary bear market would be signaled". Well, the decline continued unabated, and on 2/21/23, SIL broke down below its 12/19/22 lows, and GDX confirmed on 2/22/23.

Accordingly, the primary and secondary trend for GDX and SIL is bearish now.

The charts below give you the most recent price action. 

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.

Following the 1/25/23 highs, GDX and SIL dropped for 21 days until 2/24/23. Accordingly, the time requirement for a secondary reaction was met. As to the extent requirement, GDX dropped 9.74% and SIL 7.11%, which amply exceeds the Volatility-Adjusted Minimum Movement (more explanations about VAMM here). The table below shows the relevant data:

 So, now there are three possible options:

1. if SIL and GDX continue falling and jointly broke downside the 9/26/22 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. On 3/2/23, the current rally has not reached the VAMM, so we have to wait.

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.

Below you have the updated charts. The brownish rectangles highlight the secondary reaction against the primary bull market. The red horizontal line shows the 9/26/22 primary bear market lows, whose penetration would signal a new primary bear market. 

 

Gold and Silver:

While not the object of this post, the primary trend for GLD and SLV is bullish, as explained HERE.

The table below gives a recap of the primary trend across the precious metals spectrum:

 

Sincerely,

Manuel Blay

Editor of thedowtheory.com