the dow~richard russell comments

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    Posting this today because of excellent comments on the the US in Iraq, great Fisk article and comments on gold.

    August 20, 2003 -- Unintended consequences, indeed. One of the reason that, supposedly, we attacked Iraq was because Iraq was not only a repository of weapons of mass destruction, but Iraq was a hot-bed and a school for terrorists. Evidently, wrong on both counts. But now thousands of anti-US fighters from bordering nations are sneaking into Iraq and indulging in sabotage, suicide bombing and terrorist acts. Damned if Iraq hasn't become a terrorist nation.

    The US is now committed in Iraq. There's no way we're going to leave. The Iraqi populace is becoming demoralized by what they see as US incompetency. As the comic, Oliver Hardy put it, "A fine mess you've got us into." How do we solve the "mess," assuming it's solvable? More US troops and more money.

    As I see it, the US is absolutely certain to remain in Iraq. Iraq is now the military and defense center for US forces in the Mideast. The US military in Iraq will be used as the ultimate threat to any Mideast nation that seeks to cut off oil from America. The US military in the Mideast will be seen by the Muslim nations as an "insult" and the ally of hated Israel. Frankly, I don't see any pleasant way out of the Mideast mess. The US-Iraq situation is becoming literally the long-feared "clash of civilizations."

    And it's going to be a source of endless, massive US spending -- both military and otherwise.

    Speaking of money and spending, figures released today show that the federal government's budget deficit for July rose to $54.24 billion, up from $21.22 billion in June. For the ten months of fiscal 2003, the budget deficit was more than double the deficit of $145.47 billion at the same point a year ago. That's progress, dear subscribers -- but progress in the wrong direction.

    In the meantime, the Fed is running wild, generating a giant ocean of dollars in its frantic effort to thwart the natural forces of world deflation and negative pricing power. US deficits and the Fed's dollar-creation machine are filling up the world's coffers with dollars. And these dollars, ironically, are going to work building up even more productive facilities in the competitive, low-wage nations.

    Up to recently, American jobs have "migrated" to China and other nations which can turn out goods at prices far below anything that can be produced here in the US. Today, a full page article in the Financial Times is headlined, "Service Industries Go Global: Skilled White-Collar Jobs Are Starting to Migrate To Lower-Cost Centers Overseas." Countries named in the article are China, Singapore, India, South Africa, Malaysia and Australia.

    First manufacturing, now service. We've got a global economy now, and the wage differentials are brutal. And screwing around with the various currencies won't solve the problem.

    AS subscribers know, I had a lot of reservations about the confirmed breakout yesterday of the two Dow Averages, the Industrials and the Transports. For one thing, volume on the breakout was very thin. And the technicals behind the market were hardly encouraging.

    We've been seeing very heavy insider trading. The VIX had sunk into the "too complacent" area under 20. Lowry's Buying Power had dropped to a three-month low. My Big Money Breadth Index and my Most Active Stock Index were well off their highs, and daily new highs on the Big Board were running well below where they were at the June 17 highs. Finally, the sentiment background could hardly be called promising for stocks, since bullish advisors have outnumbered bearish advisors for months on end.

    Commodity traders know that markets spend probably two-thirds of their time in trading ranges. So question -- what's the market going to do? Whether you're in a bull or bear market, a trading range is usually the best bet.

    For that matter, since early-June the stock market has been in a trading range.You don't believe it? Check it out --on June 16 the S&P 500 closed at 1010.74. Yesterday, two months later, the S&P closed at 1002,36. So with all the talk and all the analysis and all the forecasts, the S&P has gone nowhere since early-June. Just a trading range. And maybe that's what the many weeks of low VIX figures have really been telling us.

    Since my subscribers and I have been mainly dealing with the bull market in gold, let's talk a bit more about what's happening in the world of real money.

    I use a number of guides in gauging the bull market. The first is the very long-term moving averages, the 20-month and the 40-month MAs. It take a lot for the 20-months to cross above or below the 40-months moving average. After being in the bearish position ever since January 1987, on May 2002 the 20-month MA of gold finally crossed bullishly above the 40-month MA. Since then both MAs have been rising, with the 20-month MA accelerating to the upside. Today the 20-month MA stands at 328.90.

    For the nearer-term picture, I turn to the 50-day and 200-day MAs. The 200-day MA is in a rising trend and stands today at 348.50. Above the 200-day MA we see the 50-day MA, which stands today at 355.10. The 50-day has been declining since the end of July, but over the last few days the 50-day MA of gold has bullishly turned higher.

    However, gold appears overbought on both my stochastic charts and on the MACD. Thus, gold-investors may have to sit tight and wait awhile until gold works off its present overbought position.

    The other item is that since October 2000 the gold shares (HUI) have been outperforming gold on a relative strength basis. Thus the gold shares may have gotten ahead of themselves. If this is the case, there may be a period of transition which ends with the metal beginning to outperform the shares.

    As I see it, this bull market is gold is going to be a long one, and like all markets it's not in a hurry -- it's going to develop at its own pace. Along the way subscribers will have to deal with periods where little or nothing is happening, at which time I'll be receiving e-mail complaining about this or that or the other thing. At the same time, the gold bull market will be providing us with many periods where it will appear brilliant on our part to step out and capture some profits.

    This is the reason why I've said that the hardest thing to do in investing is to take a basic bull position in the item and then to ride that position all the way to the top of the bull market, adding to your stock position during periods of correction.

    And get ready, because all the way up in the bull market you'll be bombarded with a thousand reasons to "get out and take your profits." You'll experience instance after instance where you'll doubt that the bull trend is still in force. Wall Street experts will explain in detail why it's impossible for the "supposed bull market" to continue. All this you will have to ignore if you want to take full advantage of the gold bull market.

    At this time, gold is faced with a higher dollar, and the obvious question is -- "Why should I buy or hold gold when the Dollar is rising, and when gold pays no interest while the dollar does pay interest?"

    Of course, the answer is that we're not holding gold on the basis of any near-term movements in dollars or gold. We're holding gold because the big picture is of a nation (USA) that is generating negative current account balances month after month besides producing horrendous budget deficits. And all the while this nation (USA) is playing policeman to the world, thereby running up mind-numbing, really uncontrollable expenses at the same time.

    TODAY'S MARKET ACTION -- This session ended as sort of a standoff -- and on low volume at that.

    My PTI was down 6 to 5308. The moving average stands at 5287, so the PTI remains in its bullish mode.

    The Dow was down 31.39 to 9397.51. There was one mover in the Dow today, HPQ down 2.31 to 19.80. (a mover is a stock that closes up or down 2 points or more).

    Sept. crude was up .25 to 30.95,

    Transports were down 2.05 to 2661.90.

    Utilities were up 3.05 to 239.08 -- this is where the yields are and remember, the operative word is INCOME.

    There were 1716 advances and 1490 declines. Down volume was 52% of up + down volume, a stand-off day.

    There were 233 new highs and 17 new lows. My High-Low Index was up 216 to 8947.

    Total NYSE volume was a shrinking 1.17 billion shares.

    S&P was down 2.05 to 1000.30.

    Nasdaq was down .57 to 1760.54 on a contracting 1.47 billion shares.

    My Big Money Breadth Index was down 8 to 695 -- this Index was actually higher during most of June.

    Sept. Dollar Index was up .07 to 97.56. Sept. euro was down .26 at 111.10. Sept. yen was up .22 at 84.77.

    German DAX was down 3 to 3501. Sept. Nikkei was up 5 to 10260.

    Bonds were lower. Sept. long T-bond was down 21 ticks to 106.22 to yield 5.28%. Sept. bellwether 10 year T-note was down 20 ticks to 111.12 to yield 4.44%.

    Dec. gold was up 4.00 to 367.00. This is above the July 28 peak of 366.70. The next target is to close above the August 28 peak (Dec. gold) of 367.50 -- so just another half dollar higher will do it. Gold action is good.

    Sept. silver was up 2.7 to 5.02. Oct. platinum was up 2.60 to 702.40. Sept. palladium was up 6.35 to 187.35, so all four precious metal were UP today, a good sign.

    Gold/Dollar Index ratio was up 4.00 to 376.40.

    One share of the Dow buys 25.60 ounces of gold.

    Gold advance-decline line was up 18 to a new high of 1280.

    XAU was up 1.76 to a new high of 91.18. HUI was up 4.19 to a new high of 190.48.

    AU up .93, ABX up .86 on a big upside breakout, BGO up .01, DROOY up .04, GG up .24, GLG up .31, GSS up .05, KGC up .25, bellwether NEM up .67 to a new high of 39.58, RGLD up .71 to 24.44.

    And the "stealth bull market" in gold and gold shares continues. Shhhhh -- don't tell anyone, let's let 'em stay cheap -- because my subscribers are not through buying.

    STOCKS -- My Most Active Stock Index was down 3 to 230 (chart is on the home page).

    The 15 most active stocks on the NYSE were -- HPQ down 2.26, EMC up .56, PFE down .51, NT up .01, GE down .40, MOT down .19, NOK down .24, MU down .58, AOL down .25, AMD down .15, HD up .42, CPN up .10, MRK up 1.07, C down .29, JPM up .65.

    VIX was up .48 but still under 20 at 19.71.

    McClellan Oscillator will be posted shortly.

    CONCLUSION -- We're still getting that final upward "zutz" at the close. What is that -- somebody covering shorts, or is it Goldman buying S&P futures? Zutz-man, who are you? Reveal yourself. Come out of the closet. I'll find you yet, you sneaky devil.

    Market looks increasingly as though it's sleep-walking in a trading range. When that happens, it's a sign that no group has a strong opinion regarding the future. The bulls are boasting, the bears are growling, consumers are consuming, the Fed is inflating, and the government is spending. Where's all that leading us? The markets will tell us -- when they're ready.

    Is this a great country or what? Well, it certainly used to be. But what about the future? Ah, that's the question. In the old days you knew which was the great country. How? The great country was attracting gold from around the world. As simple as that, was it? Yes it was.

    That's all, folks.


    Russell Notes -- At last, a movie that I actually will pay money to see (and I will see it). And this after all the garbage and fantasy-junk films that have been released this year. The new film is called "Thirteen." It's about teen age girls and real life (a real life story)-- USA Today in today's paper gave it rare four stars. The NY Times also praised this film.

    Two new studies released today exploded the myth that heart attacks are a result of bad luck and bad genes. The study indicates that 90% of severe heart attacks are accompanied by one or more classic risks. The risks are smoking, diabetes, high cholesterol and high blood pressure.

    I was a heavy smoker during WW II. The Air Force gave us a carton of cigarettes every week when we were overseas and in combat, and most of us smoked ("Why not, you're probably not going to make it back anyway"). Finally, after months of trying to stop smoking during the mid-1970s, I finally did stop, and four days later I had a heart attack. The doc said "You should have quite smoking four years ago, not four days ago." I never smoked again.

    I also had high cholesterol (over 330). During the '80s I was a guinea pig for Mevacor -- this was before the FDA approved of the new statin drug. My cholesterol dropped to around 200. Ten years ago I started to work out in earnest. And now I believe the USA Today article -- quitting smoking and staying in shape and watching your cholesterol and blood pressure can go along way towards keeping you alive.

    The latest is that blood can be checked according to a panel of about 30 different items, not the usual and out-dated four -- cholesterol, HDL, LDL and triglycerides. Almost everything we know about hearts has been learned since the mid-1950s.

    A lot is known about hearts now, but most people ignore it. For instance, two-thirds of all Americans are either over-weight or actually obese. Why? They either don't know or don't give a damn or have just plain given up on life -- eating, in many cases, is their only pleasure.

    Saudis in Iraq 'preparing for a holy war'
    By Mark Huband in London Published: August 18 2003 19:45

    Increasing numbers of Saudi Arabian Islamists are crossing the border into
    Iraq in preparation for a jihad, or holy war, against US and UK forces,
    security and Islamist sources have warned.
    A senior western counter-terrorism official on Monday said the presence of
    foreign fighters in Iraq was "extremely worrying".
    A statement purportedly from al-Qaeda was broadcast on Monday by the Arab
    satellite television channel al-Arabiya. It claimed the al-Qaeda leader
    Osama bin Laden and the leader of the Afghanistan's ousted Taliban regime
    Mullah Mohammed Omar were still alive. But it also asserted that recent
    attacks on US forces in Iraq were the work of jihadis.
    The focus of concern for US counter-terrorist officials was at first on a
    reconstituted Ansar al-Islam, the al-Qaeda-linked terrorist group based in
    northern Iraq before the war. But US officials have recently acknowledged
    the presence of other foreign fighters in Iraq.
    Paul Bremer, the US administrator in Iraq, said recent raids, including one
    near al-Qaim last month, uncovered fighters "carrying travel documents from
    a variety of countries".
    According to Saad al-Faguih, a UK-based Saudi dissident, the Saudi
    authorities are concerned that up to 3,000 Saudi men have gone "missing" in
    the kingdom in two months, although it is not clear how many have crossed
    into Iraq.
    Saudis who have gone to Iraq have established links with sympathetic Iraqis
    in the northern area between Baghdad, Mosul and Tikrit, where they have
    hidden in safe-houses, a Saudi Islamist source said on Monday

    michael k matth

    I am evidently not the only market technician who thinks that such a turn is imminent. Peter Eliades, one of the very best timers in the business (and ranked #1 by Hulbert’s for five consecutive years), notes in his latest Stock Market Cycles update that August has been a standout month for important market turns. Here’s the record, going back 16 years:

    August 25th, 1987: >the exact top prior to the crash

    August 23rd, 1988: >low has never been returned to

    August 24th, 1995: low has never been returned to

    August 19th, 1998:
    August 31st, 1998:
    August 25th, 1999: >all-time high, then 14% plunge

    August 31st, 2000: >2 days before all-time high on NYCI

    August 24th, 2001: >end of rally-down 22% in under a month

    August 22nd, 2002:

    “It is a pretty imposing history, especially over the last five years,” notes Peter. “There should be little doubt what kind of a turn might be seen if this August joins the prior months of August in providing an important market turn. It is noteworthy, however, that the earliest August turn listed above occurred on August 19th. The implication is that we may have to wait several more days before a final top is registered. Let's be patient and see if the August syndrome appears again.”


    UN Attack Underlines America's Crumbling Authority
    And Shows It Can Not Guarantee The Safety Of Any One

    Robert Fisk

    08/20/03: What UN member would ever contemplate
    sending peace-keeping troops to Iraq now? The men who
    are attacking America's occupation army are ruthless,
    but they are not stupid. They know that President
    George Bush is getting desperate, that he will do
    anything - that he may even go to the dreaded Security
    Council for help - to reduce US military losses in
    Iraq. But yesterday's attack on the UN headquarters in
    Baghdad has slammed shut the door to that escape

    Within hours of the explosion, we were being told that
    this was an attack on a "soft target", a blow against
    the UN itself. True, it was a "soft" target, although
    the machine-gun nest on the roof of the UN building
    might have suggested that even the international body
    was militarising itself. True, too, it was a
    shattering assault on the UN as an institution. But in
    reality, yesterday's attack was against the United

    For it proves that no foreign organisation - no NGO,
    no humanitarian organisation, no investor, no
    businessman - can expect to be safe under America's
    occupation rule. Paul Bremer, the US pro-consul, was
    meant to be an "anti-terrorism" expert. Yet since he
    arrived in Iraq, he has seen more "terrorism" than he
    can have dreamt of in his worst nightmares - and has
    been able to do nothing about it. Pipeline sabotage,
    electricity sabotage, water sabotage, attacks on US
    troops and British troops and Iraqi policemen and now
    the bombing of the UN. What comes next? The Americans
    can reconstruct the dead faces of Saddam's two sons,
    but they can't reconstruct Iraq.

    Of course, this is not the first indication that the
    "internationals" are in the sights of Iraq's
    fast-growing resistance movement. Last month, a UN
    employee was shot dead south of Baghdad. Two
    International Red Cross workers were murdered, the
    second of them a Sri Lankan employee killed in his
    clearly marked Red Cross car on Highway 8 just north
    of Hilla. When he was found, his blood was still
    pouring from the door of his vehicle. The Red Cross
    chief delegate, who signed out the doomed man on his
    mission to the south of Baghdad, is now leaving Iraq.
    Already, the Red Cross itself is confined to its
    regional offices and cannot travel across Iraq by

    An American contractor was killed in Tikrit a week
    ago. A British journalist was murdered in Baghdad last
    month. Who is safe now? Who will now feel safe at a
    Baghdad hotel when one of the most famous of them all
    - the old Canal Hotel, which housed the UN arms
    inspectors before the invasion - has been blown up?
    Will the next "spectacular" be against occupation
    troops? Against the occupation leadership? Against the
    so-called Iraqi "Interim Council"? Against

    The reaction to yesterday's tragedy could have been
    written in advance. The Americans will tell us that
    this proves how "desperate" Saddam's "dead-enders"
    have become - as if the attackers are more likely to
    give up as they become more successful in destroying
    US rule in Iraq. The truth - however many of Saddam's
    old regime hands are involved - is that the Iraqi
    resistance organisation now involves hundreds, if not
    thousands, of Sunni Muslims, many of them with no
    loyalty to the old regime. Increasingly, the Shias are
    becoming involved in anti-American actions.

    Future reaction is equally predictable. Unable to
    blame their daily cup of bitterness upon Saddam's
    former retinue, the Americans will have to conjure up
    foreign intervention. Saudi "terrorists", al-Qa'ida
    "terrorists", pro-Syrian "terrorists", pro-Iranian
    "terrorists" - any mysterious "terrorists" will do if
    their supposed existence covers up the painful
    reality: that our occupation has spawned a real
    home-grown Iraqi guerrilla army capable of humbling
    the greatest power on Earth.

    With the Americans still trying to bring other nations
    on board for their Iraqi adventure - even the Indians
    have had the good sense to decline the invitation -
    yesterday's bombing was therefore aimed at the jugular
    of any future "peace-keeping" mission. The UN flag was
    supposed to guarantee security. But in the past, a UN
    presence was always contingent upon the acquiescence
    of the sovereign power. With no sovereign power in
    existence in Iraq, the UN's legitimacy was bound to be
    locked on to the occupation authority. Thus could it
    be seen - by America's detractors - as no more than an
    extension of US power. President Bush was happy to
    show his scorn for the UN when its inspectors failed
    to find any weapons of mass destruction and when its
    Security Council would not agree to the Anglo-American
    invasion. Now he cannot even protect UN lives in Iraq.
    Does anyone want to invest in Iraq now? Does anyone
    want to put their money on a future "democracy" in

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