the dow~richard russell comments

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    ...Love his comments on the perception of the US...!!! Probably the same could be said about Australians for voting the cockroach back in...


    January 25, 2005 -- I've been saying that this market sees something ahead (maybe a number of "things") that it doesn't like. I know HOW this market is acting (which is badly), but unfortunately I don't know WHY it is acting the way it is.

    One item that bothers me is the action of the retail group. As you know, consumer buying represents roughly 70 percent of the entire US Gross Domestic Product. In fact, it is said that the whole world now depends on the buying of US consumers.

    Yesterday, out of 30 retail stocks that I monitor daily, 29 of the 30 retail stocks were lower. The daily chart below shows the Retail Holders, and here we see the Retail Holders in a formation that appears to be breaking down. This can hardly be a "healthy" development for the US economy. And it could easily be one of the items that the stock market is concerned with.



    One of the stars of the retail business is Neiman Marcus. Even when other retailers are having a hard time, Neiman tends to do well. The reason is that Neiman caters to the luxury trade, and the "luxury" crowd are least affected by a sluggish or even a declining economy.

    Yet here is Neiman, carving out a "head-and-shoulders top" pattern, and only a fraction above breaking support at 64.20. The stock declined 2.06 yesterday to close at 65.80.




    Most investors spend 85 percent of their time trying to figure out WHY the market is doing what it's doing . Investors would be far better off if they would spend their time dealing with WHAT the market is doing rather than why. The market is always dealing with the future. Therefore, when I talk about the economy, it usually amounts merely to my personal perceptions and my own conclusions. But when I talk about the market I'm talking about actual chart patterns, volume, trends, advances and declines.

    One phenomenon I want to talk about is the sudden collapse of well-known and widely-followed stocks. This is action that is characteristic of a bear market. For instance, Starbucks was over 64 on December 30. Yesterday the stock was down 1.77 to 53.91. Ebay was 118 on December 31. The stock crashed on Jan. 13 to close at 83.33. But yesterday Ebay was down another 3.68 to a new low of 82.37. Yahoo broke sharply to a new low yesterday. Google was down 7.56 yesterday. K-Mart was plunged 5.37 yesterday.

    On the last two sites I stated that the stock market was oversold, but that oversold market can become "more oversold." Each day recently, the market has opened higher, and each day the "bottom-fishers" have jumped in hoping to catch the lows. Up to today the bottom-fishers have been "taken," but today may be the "lucky day" when the bottom fishers catch beginning of a rally. A rally? Why not? After all, every decline must stop somewhere, and today just may be "that lucky day."

    One phenomenon I notice is that although the stock market has been down for three consecutive weeks, new lows have been reluctant to expand to any great extent. For instance, yesterday there were only 30 new lows on the NYSE and a 104 combined new lows on all three exchanges (NYSE, Amex, Nasdaq). Thus, selling pressure up to now has been limited, despite the decline in the major averages. This, I believe, is the biggest technical "plus" in the market picture, so far.

    I'm writing this just 40 minutes after today's market opening, and the market has opened higher with the Dow already up by 104 points. Today's opening appears to have more "oomph" than usual, but after three consecutive weeks down and four consecutive down-days the market is entitled to at least a good bounce. And this morning we're getting it -- with the help, of course, with frantic short covering.

    TODAY'S MARKET ACTION -- My PTI was up 4 to 5561 in what must be called a very strange day. Moving average was 5532, so my PTI remains in its bullish mode.

    The Dow was up 92.95 to 10451.56. Two movers in the Dow today -- JNJ up 2.23 and CAT up 2.38.

    March crude was up .83 to 49.64.

    Transports were up 73.47 to 3550.25.

    Utilities were down 2.53 to 331.79.

    Breadth was strangely almost FLAT. there were 1701 advances and 1635 declines. Up volume was 55.1% of up + down volume, but as I said, it was a weird day with the Dow up 93 and breadth hardly up at all.

    There were 82 new highs and 18 new lows. My 5-day high-low differentials declined from yesterday's plus 386 to today's plus 323, but note that the differentials have not turned negative.

    Total NYSE volume was 1.61 billion shares.

    S&P was up 4.66 to 1168.41.

    Nasdaq was up 11,25 ti 2019.95 on 1.98 billion shares.

    My Big Money Breadth Index was up 10 to 750.

    Mar. Dollar Index was up .80 to 84.07. Mar. euro was down .94 to 129.72 and looking as though it has topped out. Mar. yen was down 1.48 to 96.27.

    Bonds were whacked. Mar. 30 year T-bond was down 25/32nds to 119.38 to yield 4.67%. Mar. 10 year T-note was down 13/32nds to 111.30 to yield 4.20%.

    Feb. gold was down 5.00 to 422.10. Mar. silver was down 17 to 6.68. April platinum was down 8.30 to 863.90.

    Gold advance-decline line was down 20 to 1383.

    XAU was down 2.52 to 91.76. HUI was down 6.70 to 201.09.

    ABX down .68, ASA down .77, GG down .49, NEM down .58, PAAS down .30.

    Gold still moving opposite the dollar, and the dollar broke out to a new high today.

    STOCKS -- My Most Active Stocks Index was up 5 to 400.

    The 5 most active stocks on the NYSE were -- LU down .08, EMC down .36, PFE up .33, BEV up 2.39, GE up .44.

    VIX was down .59 to 14.08.

    McClellan Oscillator was up 15 to minus 122.

    CONCLUSION -- I said the market was oversold on Friday, and I said it again on Monday. Today we got the bounce with very little upside breadth. I would think the rally should last at least a few more days.

    Now this is important. Yesterdays lows were as follows --

    Dow Industrials -- 10368,61

    Dow Transports -- 3454.78.

    Following this rally, the Averages will probably come down to test yesterday's lows. If one or both lows hold, that's a big plus. But if both of those lows are violated, particularly on expanding volume -- it's trouble, Big Time.

    That'll do it for today.

    But see you tomorrow,

    Russell
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    President Bush has already asked for an "outside the budget" $20 billion to take care of the wars in Afghanistan and Iraq. Now the word is that Bush is preparing to ask for $80 billion to further carry on the wars.

    To make matters worse, our so-called coalition partners, one by one, are exiting Iraq. Which brings up the question -- how in the devil is the US going to get out of Iraq? One possibility is that after next week's election, the new Iraqi powers will ask the US to get out of Iraq. Will Bush do it? Probably not.

    In today's Financial Times there appears an article headlined, "How America Became the World's Dispensable Nation." The piece begins, "In a second inaugural address tinged with evangelical zeal, George Bush declared, 'Today America speaks to the world.' The peoples of the world, however, do not seem to be listening. A new world order is indeed emerging -- but its architecture is being drafted in Asia and Europe, at meetings in which Americans have not been invited."

    Russell Comment -- Sad but true. In four years President Bush has turned the US into what the world considers a dangerous loose cannon, a nation led by a faith-based president who is intent on going his own way no matter what. Up to the recent Presidential election, the rest of the world feared and disliked Bush, but loved the American people. But when Americans voted Bush in for a second term, the world couldn't believe it and now has turned against Americans in general.

    I hear from subscribers all over the world that Americans are not popular. When my kids travel overseas, they are advised to avoid any articles of clothing or travel-bags that identify them as Americans. Sad but true, but that's what it's come to.
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    The world's central banks are diversifying out of US dollars. Said Nick Carver, an assistant editor of Central Banking Publications, Ltd, "The overwhelming trend we've seen is increasing exposure to the euro. Central banks have started to take the euro more seriously."

    At the end of 2003 total holdings of dollars at central banks was 63.8 percent. Said Martin Barth, a currency strategist at Citigroup, central banks maybe trim the proportion of reserves held in dollars to about 60 percent in coming years.
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    On a lighter subject, everybody's in the perfume business. Britney, Paris, Jessica, J.Lo, Celine, Antonio Banderas, and now the Donald. And soon to a perfume counter near you will be fragrances a la the Olsen twins, Cindy Crawford and P. Diddy along with Andy Roddick and Maria Sharapova.

    The perfume racket is becoming almost as big as the wrist watch racket. And the mark-ups may even be bigger, if that's possible.

    Actually, I'm working on my own fragrance which I'm going to call, "Dow Theory Number 5." I'll be selling it from a blanket that will be stretched out just to the right of the entrance to the New York Stock Exchange.


 
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