GOLD 0.51% $1,391.7 gold futures

more from richard russell

  1. 3,360 Posts.
    I apologize to Chuck for 'stealing' this off the general thread on HC and reposting it over here, but there are some more interesting comments from Richard on gold that I thought many may have missed with it being on the general thread.

    Members' Area - Richard's Latest Remarks

    November 21, 2008 -- I've been studying the stock market since the mid-1940s. In all those 62 years, I've never seen a market like this one. Yesterday was another 90% down-day, the tenth since September. I sat through the horrific 1973-74 bear market. There were "only" four 90% down-days during that bear market.

    This bear market is downright brutal. The rapidity and intensity of the selling has been literally mind-blowing. My only conclusion is that this bear market must be discounting some kind of God-awful situation that we are heading into. I'd rather not guess what this bear market is discounting, but is must be historic. Is rising gold providing us with hints?

    Yesterday the Dow closed down 444.90 to close at 7552.29. This is just 82 points above the halfway level of the 1982 to 2007 bull market. If the Dow closes below 7470, the 50% Principle will come into play. Based on the 50% Principle, if the Dow closes decisively below 7470, the Dow could decline to test its 1982 low of 776.92. That thought is so gruesome that I hesitated to mention it.

    Yesterday there were 1894 new lows on the NYSE. A total of 3271 issues were traded. This means that 57.7% of all the stocks traded yesterday broke to new lows. This doesn't match the 92.6% of October 10, but it's still a ghastly number.

    People ask me, "What's the market doing?" I answer, "It's telling us in the most direct way it can that there is major trouble ahead. What kind of trouble? I have no idea."

    Yesterday, both the Dow and the Transports simultaneously plunged to new lows for the move. This is the most decisive kind of bearish signal under Dow Theory. Added to the bearishness of the action is the fact that NYSE volume surged to 10.2 billion. I might also note that the VIX closed at 80.86, one of the highest closings in history. At 80.86, puts become prohibitively expensive. Which means that there is a dearth of downside insurance built into this market. All in all, I'd have to describe the market action in 2008, so far, as "the decline from hell." Nobody that I know of has come out of this market unscathed. I used to say that in a bear market "Everybody loses, and the winner is the one who loses the least."

    The hedge funds have been murdered in 2008. I understand that the total value of hedge funds at the beginning of this year was $1.7 trillion. The latest total value figure is below $1 trillion. The losses have been almost unimaginable.

    Even the famous "Oracle of Omaha" has not been unscathed. Last December 10 Berkshire Hathaway sold at a high of $151,650. Yesterday Buffet's baby sold down $6,500 to close at $77,500. Almost cut in half from its high. Yet a few weeks ago, Buffett announced to the world, "I'm buying stocks here." The bear spares no one.

    I've been warning that the last two generations in America are the only two generations in US history that have never experience "hard times." My guess is that before the next two years are out, the last two generations of Americans are fated to go through their "Baptism of fire."

    As subscribers know, I am very skeptical regarding fiat money. Fiat money is, to my mind, along with the Federal Reserve, the greatest fraud ever perpetrated on the American people. The dollar is at the base of the US economy. If the base is a lie, then where is our economy? My suggestion -- watch gold and watch the bonds. The bond market is much larger and far more sophisticated than the stock market. If the bonds suspect that we are seeing the early death of fiat money (the dollar), then there's going to be hell to pay. There will also be a surge in interest rates as bonds are jettisoned. Therefore, watch gold. I happen to believe the gold has been manipulated by interests who wish to hide all signs of inflation.

    Gold is in a primary bull market. The primary trend is more powerful than the Fed, the US Treasury, the Congress and all of Washington taken together.

    People who believe in gold are disparagingly referred to as "gold-bugs." What about those who believe in Federal Reserve Notes, why don't we call them "dollar-bugs"?

    Below, a daily chart going back two year of gold relative strength compared with the S&P. This trend implies gold accumulation; it shows gold outperforming the S&P, a bullish indication. Note the acceleration in relative strength over the last few weeks. Relative strength trends tend to last a long time.

    GLD, the proxy for gold, is breaking out of its consolidation pattern. RSI is trending up, and MACD is turning bullish. The blue histograms are in positive territory and heading higher. The upside breakout for was 775. Mission accomplished.

    I just talked to Leon, my coin dealer. Says Leon, "I have nothing in gold coins, nothing. I can get kilo bars from Switzerland with fairly quick delivery." I asked Leon what the premium was, he said "28 over spot." He added, "That's the cheapest gold around."

    This from the Nov. 20 Financial Times -- "GOLD COINS AND BAR SALES HIT 10-YEAR HIGH. Sales of gold coins and bars have reached their highest level for more than a decade in the third quarter as investors sought a haven from turmoil in the financial markets following the collapse of Lehman Brothers, the US investment bank.

    The industry-sponsored WGC said consumers spent more than 6.5bn buying 232.1 tonnes of gold coins and bars in the third quarter of 2008, and increase of 121 percent in volume over the same period a year ago, and the strongest three-month period since the mid-1990s.

    The third quarter saw media reports that mints round the world had run out of gold coins as Lehman's collapse sparked concerns among investors about the health of the world's financial system.

    Germany and Switzerland experienced a surge in demand.... with net retail investment up 533 percent and 500 percent compared with the same period a year ago.

    Russell Comment -- What did we used to say back in the '70s? Now I remember, it was -- "There's no fever like gold fever."

    Notes and Quotes -- Russell advice for Obama -- Keep the two Clintons arm-distance from you and your administration. Hillary is too damn ambitious (don't trust her), and Bill is a slime-ball through and through.

    Auto comment from columnist Mark Gilbert -- "No wonder the US car makers are in meltdown and begging to be plugged into the Treasury's life-support machines.

    "Don't be misled, though - the something that is rotten in the auto industry has nothing to do with the credit crunch, and everything to do with years of mismanagement, shoddy products and bad choices.

    "Consider the credit-rating histories of GM and Ford. For both companies, the rot started all the way back in August 2001, when Standard&Poor's put the A grades they enjoyed for a decade on review for downgrade. In October of that year they each suffered a two-level cut to BBB+ that left them just three moves away from junk status.
    So far in 2008, a record $40 billion has been redeemed from poorly performing hedge funds. The funds along with some mutual funds have been forced to sell stocks (and GLD) in order to raise money for redemptions.
    Forget oil, the future for transportation is electricity. Oil is for lubrication, it's too expensive to burn. And we haven't got enough of it. This from the Nov. 21 Financial Times: "Government and business leaders in the San Francisco Bay area laid out plans yesterday for a new infrastructure capable of supporting a vast fleet of electric cars. Local officials described the move a part of an attempt to put the regions, including silicon valley, at the forefront of electric vehicle development in the US.

    The plans also mark the first venture into the US of a private group run by Shai Agassi, an Israeli-born entrepreneur. Known as Better Place, MR Agassi's company has already reached agreements in Israel, Denmark, and Australia this year to build networks of plug-in points and battery-changing stations to act as the "refueling" infrastructure for electric cars."
    Russell Comment -- this is one smart Israeli.
    TODAY'S MARKET ACTION -- My PTI was up 7 to 5848. The moving average is 5894. The PTI is bearish by 46 points.

    The Dow was up 494.10 to 8046.40.

    Nov. crude was up 0.51 to 49.83.

    Transports were up 133.80 to 3122.80.

    Utilities were up 30.60 to 366.30.

    There were 2027 advances on the NYSE and 1161 declines.

    There were 2 new highs and 1245 new lows.

    Total NYSE volume was 10.5 billion shares.

    S&P was up 47.59 to 800.03.

    NASDAQ was up 68.20 to 1384.30.

    My Big Money Breadth Index was up 8 to 688.

    Dollar Index was down 0.28 to 88.01. Euro was up 0.73 to 125.73. Yen was down 1.26 to 104.35. Currency prices as of 1 PM Pacific Time.

    Bonds: Yield on the 10 year T-note was 3.167%. Yield on the long T-bond was 3.663%. Yield of the 91 day T-bill was 0.01%.

    CRB Commodity Index was up 2.14 to 344.02.

    Dec. gold was up 50.80 to 799.90. Dec. silver was up 0.59 to 9.62. Jan. platinum was up 35.60 to 825.70. Metal prices as of 1 PM Pacific Time.

    GDX was up 4.83 to 23.03. HUI was up 45.84 to 212.85.

    ABX was up 6.45, AEM up 5.84, ASA up 6.15 and NEM up 5.79.

    My Most Active Stocks Index was up 7 to 67.

    The VIX was down 8.45 to 72.41.

    Late Notes -- Despite the 494 point rise in the Dow, the market's internals were poor. There were 2 highs and 1245 new lows. Meanwhile, Lowry's Buying Power Index is breaking to new lows while their Selling Pressure Index is registering new highs -- a lethal combination. My PTI rebounded up 7 points to 5848, still 46 points below its moving average -- bearish. After the 90% down days of Nov. 17 and 20, today is part of the expected rebound.

    The gold action was bullish and for a change they didn't sell it off. Gold closed near its high for the day. Are the gold bears finally throwing in the towel?

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