the dow~ richard russell comments

  1. 374 Posts.
    Hi Ridgey, I presume this is what you meant? I would have posted earlier but in deference to carls who asked me not to post RR any more I was hesitant...
    Cheers,


    January 27, 2003 -- What did I learn over the weekend? Well, I learned that a team of great young football players can run circles around a team of great old football players. How about this -- The Tampa Bay defense alone scored three touchdowns, which was actually more than the two offensive touchdowns recorded by the Raiders..

    What else did I learn? Well, I was more convinced than ever that the Wall Street Journal and Barron's and CNBC are all just part of the cheerleading team that have helped to keep investors holding stocks in what has become the worst and costliest bear market since the 1930s.

    I was more convinced than ever that the Economist and the Financial Times dislike gold and love the central bank system with its junk "legal tender" currency. Last week as gold climbed, the Financial Times headlined it, "Gold Strengthens Further on Speculative Buying." Now how the hell does the Financial Times know it was "speculative buying." When the stock market rallies does the Financial Times label it "speculative buying." Give me a break.

    Meanwhile, Wall Street's analysts continue their antics of misleading the public. In todays' Wall Street Journal (front page of section C) -- Analysts: Still Coming Up Rosy. Over-optimism on Growth Rates Is Rampant, and Estimates Help Buoy Market's Valuations."

    So what is it, a conspiracy to mislead the public? I really don't think so. I believe it's a wish by analysts to please their bosses and perhaps to retain their jobs. And most probably it's a real belief that we've seen the worst in the economy, and that by the "second half" of 2003 "things will be coming up roses."

    Remember, the great majority of today's analysts have never seen a real, primary bear market. Most of these analysts have never seen stocks "on the bargain table," selling at 6, 8 and 10 times earnings while yielding 6%, 8% and 10%. Most of these analysts have become so used to the rising market of the '80s and '90s that they can't believe that stocks can sink four years in a row.

    Furthermore, today's analysts can't even envision what stocks looks like when they are at true bear market bottom and on the "bargain table." For example, in 1974 I bought the stocks of Exxon and Texaco, both yielding 10% -- and I gulped as I bought them. Dividends were well covered, so I figured this way -- in three years I'll have received 30% worth of dividends. Even if these stocks go down 30% from here (and they were already bargain-priced) I'll break even. How can I not buy them? That's what it was like in late-1974. That's what it's like at a true bear market bottom.

    Tomorrow Bush gives his State of the Union Speech. I don't know whether Bush is right or wrong on Iraq. He says he has evidence that Saddam is hiding weapons of mass destruction. OK, he's the President, and I know he wouldn't lie to us. So it seems almost an accomplished fact that we're going to war. Even that lackey, Colin Powell, states that Iraq isn't cooperating and that we are on the verge of war.

    So let's face it, Congress has handed over to Bush the power to declare war -- and Bush is hell-bent (right or wrong) for "regime change." There's one thing that bothers me (well, actually there are a lot of things), but what bothers me is that in a primary bear market "whatever can go wrong -- will go wrong."

    What could go wrong with an all-out US attack on Iraq? Maybe nothing. Maybe the real problems will simply come afterwards. Maybe the real problem will be the multi-billions it will cost us to police and "reform" Iraq, following what "should be" a quick victory for the US.

    Prior to today, the Dow has been down six out of seven days. If today is down, it will be seven out of eight days. Thus, the downside is getting a bit lop-sided, but during the market got lop-sided on the upside. So what's fair on the upside can be fair on the downside, right? Well, it seems so.

    I write quite a bit about market fundamentals, but so does everyone else. Hey, you can read "all about it" in your daily newspaper, but I like to write about the news -- it's so interesting and often even fascinating. As far as the markets or your investments are concerned, the news isn't worth much of anything. All news is history or simply editorial opinion -- and you should never forget that.

    The market is very seldom surprised by news, and on those rare occasions when it is surprised by news -- we get either a panic on the downside or an upside explosion. Probably 90% of all news have been discounted by the stock market. Any time you think you know something that the market doesn't know, be very careful. In the great majority of times, you'll be wrong.

    What is interesting is the market's REACTION to the news. It's the market's reaction that tells us whether the news has been discounted or not.

    We've seen a good deal of bear market deterioration so far this month. Last week the Dow and the Transports broke below and closed below their December lows. Based on past case history, this is bearish action. Anytime during the first quarter, if the Dow closed below its December low it's bearish action. If this occurs in January it's particularly bearish action. And if this occurs during a primary bear market (as now) it's even more bearish.

    The big picture now is whether the Averages will close below the October 9 bear market lows. This would be an act that no bull, no optimist, no Wall Street analysts, would want to see. Even the usual cheerleaders would understand what a break below the October lows would mean. Thus, the October 9 lows are crucial. A violation of those lows would mean that a new bear market leg was in progress and that the worst has not yet been discounted.

    To refresh your memories, the October 9 closing low for the Dow was 7286.27.

    The October 9 closing low for the Transports was 2013.02.

    The Utility Average has held up better than the other two; however the October 10 closing low for the Utility Average was 167.15. By the way, today the D-J Utility Average finally broke below its 50-day MA -- the latter stands at 210.

    The Utility Average only came to being in 1929, well after the great Dow Theorists had finished their seminal works. Therefore, neither Dow nor Hamilton nor Rhea paid much attention to the action of the Utility Average, George Schaefer did take the action of the Utility Average seriously, and so do I.

    The Utilities have always been the "conservative average," the high-dividend-yield Average, the Average width stocks suitable "for widows and orphans." The highly-leveraged utility stocks are sensitive to money rates, regulations and the demand for energy. Thus, they are good barometers of the healthy or non-health of the economy. Historically, the Utility Average has often led the rest of the market, sometimes by as long as a year.

    At any rate, I thought that today's decline by the Utility Average below its 50-day MA was a negative event for the market. However, the Utility Average has not yet closed below its December low which was 198.37.

    Big Picture -- The 20-day moving average of the Dow continues its relentless decline. Today, the 200-day MA of the Dow stands at a new bear market low of 8846. The faster-moving 50-day MA stands at 8580 today. Both moving averages are in clear bearish declining trends. The Dow is well below both MAs, and on my system of "reading" the moving averages the Dow is in its bear mode.

    I still don't have the feeling that Wall Street or the analysts or the investing public understand what a major, liquidating bear market is. They just don't have the experience, and it's my sense that they can't believe what's happening.

    Nevertheless, it appears to me that this market is on the way down to "test" the October lows. Furthermore, we may be close to a series of 90% down-days. Upside/downside volume will tell us the story at each session's close, but whether we get the actual 90% down-days I'll have to get from the Lowry's service, usually on the following day.

    Foreign selling has to be a factor here. Foreigners holding US securities are now being hit by that dreaded "double whammy -- declining prices for their securities with these SAME securities being denominated in declining dollars. With foreigners holding upwards of three trillion in US assets, we can be sure that selling is now coming from overseas.


    I received this point & figure chart this morning. Note the subscribers comment. He may well be right, but this is early in the gold bull market so then again, he may be wrong. However, the relentless surge out of this huge base is why so many people have taken early profits and are now OUT of gold. It's hard, very hard, to ride the bull -- and ironically the bigger the bull, the harder it is to ride him (ah yes, it's so easy and logical to grab a fast profit).

    TODAY'S MARKET ACTION -- In a word -- Brutal.

    My PTI was down the full 8 to 5218 with the declining moving average at 5242. PTI is strongly bearish.

    When was the last time we saw the Dow down triple-digits five out of six sessions? I can't remember the last time. Dow broke below 8000 today on "light and polite" volume. Low volume like this in a bear market tells me that the market is declining but nobody is getting out.

    The Dow was down 141.45 to 7989.56. No movers in the Dow today.

    Feb. crude was down .99 to 32.29.

    Transports were down 19.32 to 2144.01.

    Utilities were down a large 7.40 to 203.36, a nasty break below their 50-day MA.

    There were 732 advances and 2575 declines. Up volume was 155 million and down volume was 1.275 billion. Dow volume was a LARGE 89% of up + down volume. I think we could be getting close to a 90% down-day.

    There were 58 new highs and 118 new lows. My High/Low Index has reversed to the downside, it was down 60 to minus 7020.

    Total NYSE volume was 1.44 billion shares.

    S&P was down 13.93 to 847.48 and below its December low closing.

    Nasdaq was down 16.86 to 1325.28 -- and today it closed below its December low on 1.42 billion shares.

    My Big Money Breadth Index was down a full 10 to a new bear market low of 664 -- and well below its October low. This Index implies that we will break the October lows.

    March Dollar Index was up .14 to 99.59. March euro was up .11 to 108.26, a new high. March yen was down .56 to 84.50.

    Bonds were weaker. The March 30 year T-bond was down 19 ticks to 111. 25 to yield 4.87%. March 10 year T-note was down 12 ticks to 114.09 to yield 3.95%. The weak dollar could be putting pressure on bonds.

    Feb. gold was up 1.00 to 369.40. March silver was down 5 to 4.83. April platinum was up 1.20 to 636.30. March palladium was down 2.65 to 266.35.

    Gold/Dollar Index ratio was up .70 to a new high of 371.10.

    XAU was down 2.62 to 79.58. HUI was down 3.82 to 148.09.

    Gold advance-decline line was down 19 to 1161.

    ABX down .77, AU down .98, DROOY down .10, GFI down .83, GG down .36, GLG down .42, GSS down .11,HMY don .49, NEM down .72, RGLD down .10.

    Seems like gold shares are definitely influenced by the collapse in almost all common stocks. Remember, the gold share made their big up-move long before the metal did. They may be marking time now while the metal moves higher. XAU and HUI still well above their rising 50-day moving averages.

    STOCKS -- My Most Active Stocks Index was down a large 13 to 158, and on the chart this Index is beginning to break down in a serious way.

    The 15 most active stocks on the NYSE (only one was up) were -- NT down .19, GE down .10, PFE down .28, C down .69, HD down .66, AOL down .41 to 13.70 (c'mon guys, get rid of that dud, AOL), AWE up .22, TXN down .30, TYC down .41, XOM down .76, Q down .42, T down .59, EMC down .04, HPQ down .48, NOK down .50.

    Few more -- WMT down .05, JNJ down 1.40, MOT down .41, IBM down .56 to 78.43, SGP down 1.26, JPM down .46,KSS down .125, TGT down .44, SBUX down .33 (and how longer will you pay $1.75 and up for coffee?), CSCO down .15, INTC up .03, MER down .60, AIG down .82, ED down 1.28, AEP down 1.70, SO down .42, EBAY down 1.59, KO down 1.04, CAT down .67, AA down .56, DIS down .35, DD down 1.46.

    VIX up 4.00 to 39.77 and option-writers become very nervous.

    McClellan Oscillator plunged to minus 238 and the stock market is now very oversold. Bull and bears should BOTH be very careful here.

    CONCLUSION -- Market is oversold and has been STAYING oversold, as often occurs in big bear markets. The Nasdaq joined the Dow and the S&P by closing below its December low today.

    Lowry's Buying Power at a six year low today, and the trend of Selling Pressure has turned up. All that's needed now is rising volume on the downside. I will be surprise if the market doesn't break below its October 9 bear market low before the first quarter is out. The amazing ignorance and arrogance of the Wall Street analysts and the nation's economists in continuing to forecast "better business" almost strains one's intelligence.

    Which is what I love about the market. The stock market cuts through the BS (and man, there's a lot of it) and "tells is like it is."

    In the meantime, the potential war on Iraq serves as the perfect excuse for the analysts and economists who have missed the boat. "I was right, but all bets are off if we attack Iraq." "Yeah right, and the Raider would have destroyed Tampa Bay except that it was too warm in San Diego yesterday."

    Unless you're renting and unless you have all your assets in krugerrands, at this point you're probably losing something somewhere along the line. But don't be too hard on yourself, that's what's supposed to happen in a bear market. However, the idea now is to lose as little as possible as this bear market moves along.

    Remember, he who loses the least will be declared the winner.

    Who will do the declaring? I will. I'm organizing a new group -- "Russell's Surly S.O.B. Survivors." We're all going to meet in San Diego on the day this bear market ends. We're going to spend the first day of the big meeting telling each other bear market war stories. On the second day we'll be deciding what stocks to buy. On the third day we'll work out in the morning, and in the afternoon we're going to binge on low-fat, soy-based hamburgers and special dietetic malteds. I mean, we're going to have one hell of a time. So save that date.

    I'm signing off to go out and get a little sun --

    Russell



 
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