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Dow Theory Update For January 21: Something Is Going On With Gold And Silver Miners

|Includes:DIA, GDX, GLD, IYT, SIL, SLV, SPDR S&P 500 Trust ETF (SPY)

Stocks are being subtly distributed or accumulated.

Let's get started with our Dow Theory commentary for today.

US stocks

The SPY, and the Transports closed up. The Industrials closed down. Another day goes by when stock indices diverge from each other, which normaly is a sign of distribution.

The primary trend is bullish, as explained here, and more in-depth here.

The primary trend was reconfirmed as bullish on October 17th and November 13th, for the reasons given here and here.

Gold and Silver

SLV, and GLD closed down. For the reasons I explained here, and more recently here, I feel the primary trend remains bearish. Here I analyzed the primary bear market signal given on December 20, 2012. The primary trend was reconfirmed bearish, as explained here. The secondary trend is bullish (secondary reaction against the primary bearish trend), as explained here.

As to the gold and silver miners ETFs, SIL and GDX closed strongly up for a fourth day in a row. I see uncommon strength in the gold and silver miners' ETFs. This is why, last Friday January 17th, and in accordance with the Dow Theory, the secondary trend was labeled as bullish, as explained here.

I see that the volume picture is clearly bullish (at least short term, let's say for some few weeks) for SIL as you can see on the chart below. In a text-book fashion volume has been unambiguously expanding on rallies and contracting on declines. Furthermore, today's volume has been the highest since November 20, 2013, which lends more credence to today's bullish action. Here you have a chart:

(click to enlarge)Click to enlarge
Will the bullish rally have long legs?
Click to enlarge

Thus, while nothing is carved in stone, and we are dealing merely with odds, I feel we are dealing with a legitimate secondary bullish trend.

However, don't get over excited, as the primary trend remains bearish, as was profusely explained here and here.

Sincerely,

The Dow Theory

Stocks: SPY, DIA, IYT, GLD, SLV, GDX, SIL