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Dow Theory Update For May 17: US Stocks Refuse To Confirm Neither Bull Nor Bear Signal

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

End result: No change of primary trend.

US STOCKS

The primary trend is bullish since November 21st, 2016, as explained here and here.

The secondary trend is bearish (secondary reaction against the primary bull market). The secondary reaction was signaled on April 13th, as explained here.

As per Schannep's Dow Theory in order to complete a primary bear market setup, at least one index should rally more than 3% off the secondary reaction closing lows. The Transports and the S&P 500 have done so. The Transports secondary reaction closing lows were made on April 13th, 2017 (closing price 8874.56). On April 24th the Transports closed at 9282.99, which is a rally of +4.60%, thus exceeding the minimum 3% requirement.

The S&P 500 secondary reaction closing lows were made on April 13th, 2017 (closing price 2328.95). On May 10th, the S&P 500 closed at 2399.63, breaking out above its last recorded primary bull market closing high of March 1st, which amounts to a rally of 3.03% (which is more than 3%). The SPY, likewise, bettered its March 1st closing highs on May 15th, 2017 (blue upward arrow on the bottom chart).

By the way, the S&P 500 higher closing high has not been confirmed by neither the Industrials nor the Transports. Please mind that the SPY is not "confirming" the S&P 500, as we are talking of the same index. Hence, the S&P 500 higher highs have not been confirmed.

Thus, we cannot declare the secondary reaction as extinguished. Furthermore, the longer the lack of confirmation by the Transports and Industrials persists, the more suspect the current rally off the April 13th, 2017 closing lows becomes.

Today, May 17th, the Transports have violated their April 13th, 2017 secondary reaction closing lows (red downward arrow in the middle chart). Under the "Rhea/classical" Dow Theory, for a primary bear market signal to exist, it is necessary that the Industrials confirm. They have not done so. Please mind that under the "Classical/Rhea" Dow Theory as interpreted by Schannep, there is a secondary reaction going on, and hence, a primary bear market signal would be signaled if the Industrials were to violate the April 13th secondary reaction lows (even if the S&P 500 were not going to do so). However, strict "classical" Dow Theorists might not see a secondary reaction yet, as was explained here.

Here you have an updated chart:

The primary trend remains bullish until reversed

Under Schannep's Dow Theory, for a primary bear market to be signaled, we need the S&P 500 to confirm, namely, to violate its April 13th secondary reaction closing lows. As the S&P 500 has not done so, the primary trend remains bullish. Why under Schannep's Dow Theory should the S&P 500 always be part and parcel of any signal? The answer here

Bottom line: We are seeing lack of confirmation when it comes to higher highs, which negates the end of the current secondary reaction. On the other hand, we have just seen today lack of confirmation when it comes to lower lows, which negates the primary bear market signal. However, until a signal is reversed by a new one, the trend remains unchanged, and hence the primary trend remains bullish.

GOLD AND SILVER

The primary trend turned bullish on April 12th, 2017 as explained here

The secondary trend is bearish, as explained in depth here.

GOLD AND SILVER MINERS EFTs

The primary trend is bearish, as was explained here and here.

The secondary trend is bullish as explained here

As was explained here, SIL and GDX have set up for a primary bull market signal.

Sincerely,

The Dow Theorist