Bitcoin soars, gold rallies, but silver and gold and silver miners refuse to confirm
Overview: Despite the rally that gold has experienced in the last few days that brought gold to higher highs, the primary trend remains bearish because silver has refused to confirm. If/when SLV surpasses its 12/1/23 high, the primary trend would shift to bullish. As of this writing, SLV has not confirmed. So, the trend assessment given in this POST has not changed.
Bitcoin (not covered here, as it is reserved for Subscribers) reached my second price target on 3/4/24. Such a display of strength from Bitcoin and, to a lesser extent, gold in such a short time has two implications:
A) Either something “systemic” is approaching, in which case, silver, and the miners should also trend higher soon (and silver confirms gold’s higher highs). A general “melt-up” scenario.
B) Or, we are just seeing a blow-off top preceding another pullback.
Since the principle of confirmation has always served me well. I wait until SLV confirms GLD to consider that the primary trend has shifted from bearish to bullish. HERE and HERE you have two recent examples of how the principle of confirmation “saved my skin”.
The gold and silver miners ETFs made recently lower lows that also had a bearish implication. More details below.
General Remarks:
In this post, I extensively elaborate on the rationale behind employing two alternative definitions to evaluate secondary reactions.
SIL refers to the Silver Miners ETF. More information about SIL can be found HERE.
GDX refers to the Gold Miners ETF. More information about GDX can be found HERE.
Clarification: All references below to days and prices refer to trading days and closing prices.
GOLD AND SILVER MINERS ETFs
A) Market situation if one appraises secondary reactions not bound by the three weeks dogma.
The primary trend for GDX and SIL was signaled as bullish on 12/27/23, as I explained HERE.
Following the 12/27/23 highs, GDX and SIL both GDX and SIL plummeted sharply. From 1/18/24 to 2/1/24 there was a modest bounce that did not meet the extent requirement to set up both ETFs for a primary bear market signal. Absent the setup, a primary bear market signal is given is the two ETFs jointly break the last recorded primary bear market lows. Such lows are the 10/04/23 lows.
On 2/13/24, GDX pierced its 10/4/23 lows, unconfirmed by SIL. On 2/28/24, SIL violated its 10/4/23 closing lows and confirmed GDX. Accordingly, on 2/28/24, a primary bear market was signaled.
The primary and secondary trends are now bearish.
Following the 2/28/24 lows, there has been a rally until 3/4/24. Such a rally does not fulfill the time requirement for a secondary reaction. We need at least ten trading days (or slightly less if the rally is gargantuan). Therefore, the current bounce does not suffice to change the secondary trend from bearish to bullish.
So, now we are looking forward to a >= 10-day rally that also meets the extent requirement to consider the existence of a secondary reaction against the primary bear market. The extent requirement is based on the volatility of GDX and SIL and changes slightly every day. Currently, GDX should rally at least 6% and SIL 6.28%. After such a rally unfolds, a >= 2-day pullback that also satisfies the extent requirement would set up both ETFs for a potential primary bull market signal. We are far from that at this moment.
The accompanying charts illustrate recent developments. The red lines denote the 10/4/23 bear market lows that have recently been breached, while the blue lines represent the last recorded bull market highs, which currently serve as crucial levels to surpass for a new primary bull market signal to materialize.
B) Market situation if one sticks to the traditional interpretation demanding at least three weeks of movement to declare a secondary reaction.
I explained HERE, the primary trend was signaled as bullish on 12/27/23.
In this specific instance, the trend appraisal using the “long-term” version of the Dow Theory yields the same results as the “short-term” one. So, what I explained above applies fully to this section. The primary and secondary trends are bearish.
Sincerely,
Manuel Blay
Editor of thedowtheory.com
