Dow Theory Update For December 14: Precious Metals Under A Secondary Reaction Against The Primary Bull Market
Summary
- US bonds and US stock indexes remain in a primary bull market.
GOLD AND SILVER
In this post, I provided a thorough explanation concerning the rationale behind my use of two alternative definitions to appraise secondary reactions.
A) Market situation if one appraises secondary reactions not bound by the three weeks dogma.
The primary trend was signaled as bullish on November 11th 2021, as was explained here.
On 12/02/21, GLD dropped for 10 trading days (off its 11/17/21 closing highs). SLV has declined since 11/12/21 until 12/9/21 for 18 trading days. So I consider the time requirement for a secondary reaction has been met. As to the extent requirement, the decline amply exceeds the Volatility-adjusted Minimum Movement (VAMM), as you can see in the table below.
Our stop-loss remains at the last recorded primary bear market closing lows (9/29/21 @161.32, and 19.95 for GLD and SLV respectively). A confirmed breakdown of such lows would signal a primary bear market.
Below are the updated charts. The orange rectangles display the ongoing secondary reaction. The grey rectangles display small rallies that did not reach the VAMM and hence lacked amplitude to set up GLD and SLV for a potential primary bear market signal.
B) Market situation if one sticks to the traditional interpretation demanding at least three weeks of movement to declare a secondary reaction.
The primary trend was signaled as bearish on 11/27/2020, as was explained here.
The primary bear market was reaffirmed on 9/17/2021, as was explained here
I reported the existence of a secondary reaction against the primary bear market in my 11/13/21 post.
The secondary reaction progressed until 11/17/21 for GLD and 11/12/21 for SLV. A big pullback ensued and, accordingly, the setup for a potential primary bull market has been signaled. If the 11/12 and 11/17/21 closing highs (SLV and GLD) were jointly broken up, a primary bull market would be signaled. If the 9/29/21 closing lows were jointly broken down, the primary bear market would be reconfirmed. Please find all the details in the table below.
GOLD AND SILVER MINERS ETFs
A) Market situation if one appraises secondary reactions not bound by the three weeks dogma.
The primary trend was signaled as bullish on 11/11/21, as was explained here.
As of this writing, SIL has dropped for 21 trading days (off its 11/12/21 closing highs) and GDX for 20 trading days (off its 11/15/21 closing highs). So the time requirement for a secondary reaction is more than met. Likewise, the extent requirement has been met, as you can see in the Table below.
Below are the updated charts. The orange rectangles display the ongoing secondary reaction. The grey rectangles on the right side of the charts show small rallies that did not reach the VAMM and hence lacked amplitude to set up GLD and SLV for a potential primary bear market signal.
B) Market situation if one sticks to the traditional interpretation demanding at least three weeks of movement to declare a secondary reaction.
The primary trend was signaled as bearish on 8/9/2021, as was explained here.
I reported about the existence of a secondary reaction against the primary bear market in the 11/13/21 post.
The secondary reaction progressed until 11/15/21 for GDX and 11/12/21 for SIL. A big pullback ensued and, accordingly, the setup for a potential primary bull market has been signaled. If the 11/12 and 11/15/21 closing highs (SIL and GDX were jointly broken up, a primary bull market would be signaled. If the 9/29/21 closing lows were jointly broken down, the primary bear market would be reconfirmed. Please find all the details in the table below.
The spreadsheet below displays the primary trend in the pairs SLV/GLD and SIL/GDX when we appraise them with either the “shorter-term” or longer-term interpretation of the Dow Theory. Red color displays a primary bear market, and blue displays a primary bull market.
Manuel Blay
Co-Editor of thedowtheory.com
Analyst's Disclosure: I/we have a beneficial long position in the shares of GDX, GDXJ, GLD, SIL, SLV either through stock ownership, options, or other derivatives.
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