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Dow Theory Update For May 19: Stocks Plummet, And Trends Remain Unchanged

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

Dow Theory Update for May 19: Stocks plummet, and Trends remain unchanged

Lower Minor Low Made April 15 By SLV Remains Unconfirmed By GLD

US Stocks

The SPY and Industrials closed down. Yesterday, the Transports made a higher closing high which was not confirmed by either the SPY or Industrials. Confirmation should follow soon, so that we don't consider the last rally suspect. Today's action makes such a confirmation a little bit more difficult. Let's observe the markets.

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

The primary trend was reconfirmed as bullish on October 17th, 2013, and November 13th, 2013 and March 7th, 2014, for the reasons given here, here and here.

So the current primary bull market signal has survived three secondary reactions.

The secondary trend is bullish too, as explained here and here.

Gold and Silver

SLV, and GLD closed up. For the reasons I explained here, and more recently here the primary trend remains bearish.

On April 15, 2014 SLV violated a minor low (red horizontal line, blue arrow). However, GLD refused to confirm, since no close violated its minor lows. If we couple this non-confirmation (which might be indicative of the downward movement being temporarily exhausted) and extreme coiling (which under Dow Theory is a "line") we can say:

For the intermediate trend (not for the primary one, since the lower lows non confirmed are not primary bear market lows, but merely a pullback within the context of a bullish secondary reaction against the primary bear market) it is likely to turn bullish (don't forget that we are within a bullish secondary reaction). In other words, such minor non confirmation increases the odds for the resumption of the bullish secondary reaction.

Here you have an updated chart.

GLD refuses so confirm SLV's lower lows. PM's ready to resume secondary bullish trend within primary bear market?

For the primary trend to turn bullish, SLV and GLD should jointly break above the secondary (bullish) reaction highs. As a reminder, the secondary reaction closing highs were made on August 27th, 2013. From such highs the market declined without jointly violating the June 27th, 2013 primary bear market lows.

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.

On a statistical basis the primary bear market for GLD and SLV is getting old. More than one year since the bear market signal was flashed has elapsed. However, I am extremely skeptical as to the predictive power of statistics. I prefer price action to guide me, and the Dow Theory tells me that the primary trend remains bearish until reversed.

Furthermore, the June 27, 2013 lows remain untouched. The longer this situation lasts, the higher the odds that something might be changing. But I wait for the verdict of price action.

As to the gold and silver miners ETFs, SIL closed and GDX closed down.

I profusely explained that SIL and GDX set up for a primary bull market signal. You can find all the relevant information from a Dow Theory standpoint here.

Please mind that a setup is not the real thing. So the primary trend has not turned bullish yet (or maybe "never").

The secondary trend is bullish, as explained here. In spite of short term bullish accomplishments, SIL and GDX are not in a primary bull market.

The primary trend for SIL and GDX remains, nonetheless, bearish, as was profusely explained here and here.

The secondary trend is bullish, as explained here. In spite of short term bullish accomplishments, SIL and GDX are not in a primary bull market.

The primary trend for SIL and GDX remains, nonetheless, bearish, as was profusely explained here and here.

General note for both GLD/SLV and GDX/SIL: The "coiling" not only persists but is becoming even more extreme. More about the "coiling" here and here.

P.S.: It is very likely that, unless something very significant occurs, I will not be able to post until Friday.

Sincerely,

The Dow Theorist