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Dow Theory Update For January 10: Sitting Tight With US Stocks In Spite Of Temptations

Summary

Primary and Secondary Trends unchanged.

I haven’t posted for a while. Christmas and time in short supply account for it. However, nothing has changed since my last post. All trends, primary and secondary remain well entrenched.

The only issue is to have the courage to ride the bull with stocks. One might feel tempted to sell down a bit. However, in real time, nobody knows when this primary bull market will end.

US Stocks

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

The primary trend was reconfirmed on July 3rd, 2017 as was explained here

 US Stocks continue making higher closing highs, which implies that no secondary reaction is in sight.

The only issue now is to have the courage to ride the bull with stocks. One might feel tempted to sell down a bit, as one gets a dizzy feeling, and the more overstretched the market is, the higher the likelihood of a reversal. However, in real time, nobody knows when this primary bull market will end. What if there is a final thrust of an additional 20% and we get a "normal" bear market signal at only -8% from the top? Maybe the top has been made as of this writing (technically, it seems not) or maybe we have some extra months of fireworks to go. In real time nobody knows. What we know, though, is that in the long run (that is irrespective of the outcome of any given trade) we are better served by sticking to the Dow Theory, which implies not selling until we get an indication that the primary trend (not to be confused with a reaction) has changed. For the time being, no such an indication can be discerned on the charts.

Here you have an updated chart:

The charts display more than six months of market action. Not even a secondary reaction

GOLD AND SILVER

The primary trend was declared bearish on July 7th, 2017, as explained here and here


The secondary trend is bullish, as was profusely explained here.

The pullback that got started on September 8th, 2017 has unambiguously setup SLV and GLD for a primary bull market. A quite different issue is whether the signal will be ever given.  An in-depth explanation here. Please mind that a “setup” is not the actual signal. SLV made lower lows (of no technical significance under the Dow Theory, though, since it was not confirmed by GLD). For the time being, the primary bear market lows have not been jointly revisited and hence the primary bear market has not been reconfirmed. The longer the non-confirmation persists, the more likely that the primary bear market could be nearing its end. However, we wait until we get a real signal.

Here you have an updated chart. The blue horizontal lines display the closing highs of the secondary reaction which are the relevant levels to be broken up for a primary bull market signal to be given.

The last rally doesn't suffice to change neither the primary nor the secondary trend

GOLD AND SILVER MINERS EFTs

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

The secondary trend is bullish as explained here

For the same reasons given when analyzing SLV and GLD, no primary bull market has been signaled for SIL and GDX, as explained here. GDX did not better its secondary reaction closing highs by a hair, but it failed to do so. Furthermore, SIL was very far from its secondary reaction closing highs.

On 11/10/2017 SIL violated its primary bear market closing lows (red arrow on the right side of the chart). GDX has not confirmed. Lack of confirmation implies that the primary bear market has not been reconfirmed, and, as with GLD and SLV,  the longer it takes for GDX to confirm the higher the likelihood that the primary bear market may be nearing its end.

Therefore, the current situation remains unchanged. We have a primary bear market signaled on 10/04/2016 (more than one year old, another candle to light). There is an ongoing secondary reaction against the primary bear market and a setup for a primary bull market.

Here you have an updated chart that displays all price action since the September 2016 (thus you can see the primary bear market signal of October 2016, the secondary reaction and the pullback –orange rectangles- that setup the miners for a primary bull market).

Too soon too declare a new bull market. The bear persists, albeit might be showing signs of fatigue

Sincerely,

The Dow Theorist