the dow ~ richard russell comments

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    Apologies for not being able to reproduce the point and figure charts to which Russell refers...

    September 25, 2003 -- The different newspaper headlines are often indicative. For instance, USA Today headlines the UN get-together, "Chirac Signals Flexibility on Iraq."

    The Wall Street Journal ignores the issue by giving us no headlines at all today.

    The Los Angeles Times gives us happy headlines -- "Bush, Schroeder End Feud; Germany Offer Aid in Iraq." Russell comment -- What kind of aid? Well Germany will help train the Iraqi police!

    Less enthusiastic, the New York Times front page headline it "Bush Officials See Long Road to Resolution."

    The Financial Times headlines it, "Bush's Plea For Iraq Fall on Deaf Ears."

    Who do you believe? Believe the Financial Times, which is not a cheerleader, that's my considered advice.

    The Bush policy of preemptive strikes against anyone the administration believe is a potential enemy is finished, it's history. Bush knows it (if he's got any brains), and so does Rove and Wolfowitz and Rumsfeld. What's the problem? Easy, we don't have the manpower or the money -- or the backing from the UN or anyone else but maybe Tony Blair.

    The latest -- Defense Dept. is considering calling up more reserves.

    Other news stories -- US August new home sales rise 3.4% to the second highest on record.

    Durable goods orders in US drop unexpectedly 0.9% based on a decline in auto sales.

    Here's one -- Bush's Approval Rating falls to the lowest level of his Presidency, according to a poll run by NBC news and the Wall Street Journal. The figure -- 49%.

    Russell Comment -- In my opinion, the Bush administration is falling apart. And I'll repeat what I wrote yesterday, "When the administration in Washington is in trouble, the stock market is in trouble."

    All right, enough gossip and opinion.

    Let's study the point & figure chart of gold below. All months are numbered on the chart. Thus, we see the steep January-February rise (long row of Xs) to the high of 388. Next came the correction down to the April low to the 324 box.

    From there we see the May rise to the 372 box, followed by five swings back and forth. In August gold dropped to a final "shakeout" low of 348. This was followed during August and September by the most recent long rising line of Xs to yesterday's high at 388.

    This gave us a "double top" at the 388 level. The question, would gold continue to rally to the 392 box -- or would a "back-off" consolidation phase be needed first, prior to an attack on the 392 box?

    That's the question that could be answered today or in a week or even longer. I say that because the most recent advance shown on the chart is extended, but in powerful bull markets the price action can get extremely extended prior to any correction.

    I'm writing this at 3:30 AM in the morning, and I note on Kitco that gold is up 4.90 to 392.60, which is impressive for a night move (usually, gold is knocked down a few dollars at night). If this move holds at the morning opening gold will have broken out to a new high for the move.

    Often, following this kind of breakout the item will drop back into a consolidation pattern, but in particularly powerful bull markets the upward momentum will take the item well above the preceding peak first -- prior to any consolidation.

    Flash -- this is written after the close today. Gold moved to a new high to the 392 box, then backed off by today's close to consolidate, since gold (as you can see on the chart) is extended.

    The obvious next "psychological" level for gold is 400. Moving above 400 will get attention from the media and from the crowd. This is because the crowd tends to think in terms of even numbers -- 300, 400, 500.

    I'm asked whether the 50% principle can be applied to the action of gold. I believe it can. And this is the way I am applying the 50% Principle to gold.

    The previous bull market high for gold was set on January 21, 1980 at 861.

    The bear market low for gold was set on July 7, 1999, at 252.

    The 50% or halfway level of the long bear market comes in at 556.

    Therefore, I see 556 as a very important upside target for gold. If gold can reach and then decisively better 556, I believe the gold bull market will begin to eye the 1980 high of 861. Of course, this is looking far ahead, very far ahead. Right now the "task" for the gold bull market is to close and hold above 400. If that can be accomplished the next upside target will be to advance above 500.

    Because there is and will be so much opposition to higher gold prices, my thinking is that the gold bull market is fated to be a long, drawn out affair, but with its ultimate high much higher than even the bulls are now contemplating.

    It's well to remember that bull markets in gold are different than bull markets in stocks. Primary bull markets in stocks end with massive speculation grounded in greed. But explosive bull market finales in gold are a product of fear. And we might remember that fear is a stronger emotion than greed. Thus, I foresee the final end of this gold bull market to be a spectacular affair and a reflection of fear by the crowd, fear that their savings in dollars are going "down the drain."

    Now let's turn to the key barometer of the stock market, the D-J Industrial Average. The P&F chart below gives us a graphic picture of the price action of the Dow. Each box on this chart represents 50 Dow points and only advances or declines of 150 points or more are depicted. This is a 50 point 3 box reversal chart.

    First note that all the action since March has taken place above the rising or bullish trendline. The Dow made steady upside progress to the September high of 9650. From there the Dow turned down, and we see the row of four red O's.

    The question now is whether the decline will continue down to the 9350 box. If so we will have our first P&F indication that the trend is in the process of turning bearish. If the Dow declines to 9350, the next test will be whether the Dow will decline to the 9200 box.

    On the upside, it will now take a Dow advance to the 9700 box to re-confirm the bull trend.

    Since the primary trend of the market is bearish, I believe that the odds during this or any trading range favor an eventual breakout to the downside.

    Flash -- since writing the above, the situation has changed -- see below.

    TODAY'S MARKET ACTION -- My PTI was down 4 to 5333 with the moving average at 5307. PTI remains bullish.

    The Dow was down 81.55 to 9343.96. One mover in the Dow today -- EK down 4.84 to 22.15.

    The Dow came down to fill the 9350 box on the P&F chart above, breaking below the preceding row of O's which had halted at 9400. Thus, we got the first "sell signal" registered by the Dow, and it could be an important one. A second sell signal will be registered if the Dow hits the 9200 box.

    December crude was up .12 to 28.08. Why did OPEC cut production and push prices higher? Probably to offset waning demand. Deflation?

    The Transports were down 48.81 to 2697.12.

    Utilities were up .80 to 246.41.

    There were 1112 advances and 2114 declines. Down volume was 73.6% of up + down volume.

    There were 75 new highs and 16 new lows. My High-Low Index was up 59 to 13451.

    Total NYSE volume was 1.52 billion shares.

    S&P was down 6.12 to 1003.26.

    Nasdaq was down 26.50 to 1817,20 on 2.01 billion shares.

    My Big Money Breadth Index was down 2 to 717.

    Dec. Dollar Index was up .05 to 94.12. Dec. euro was down .01 to 114.57. Dec. yen was down .45 to 98.48.

    German DAX was up 18 to 3326.

    Bonds were higher. Dec. long T-bond was up 17 ticks to 110.09 to yield 5%. Dec. 10 year T-note was up 65 ticks to 113.03 to yield 4.10%.

    Dec. gold was down 2.50 to 385.90. Dec. silver was down 8.8 to 5.22. Oct. platinum was up 1.00 to 715.80. Dec. palladium was down 4.40 to 218.10.

    Gold/Dollar Index ratio was down 3.00 to 409.90.

    One share of the Dow buys 24.21 ounces of gold.

    XAU was down 3.93 to 93.57. HUI was down 9.25 to 201.25.

    ABX down .74, AU down 2.18, CDE down .32, GG down .61, GLG down .42, GSS down .22, KGC down .35, NEM down 1.84, RGLD down 1.12.

    Gold stocks were extended and ready to correct. Today they corrected, it's as simple as that. The October gold futures expired today, and that may have had something to do with the gold action.

    I've been saying that the gold shares have been acting "spooky," ready to correct on the slightest sign that gold could back off. Today gold did back off and the stocks dropped back with a vengeance. Gold shares are very tentative here, since they are very overbought and have been rising for week on end.

    STOCKS -- My Most Active Stock Index was down 5 to 272.

    VIX was up 1.05 to 22.27.

    McClellan Oscillator was down 19 to minus 38. The Oscillator is not yet oversold.

    CONCLUSION -- Is the whole corrective advance against the primary bear trend over? Obviously, I don't know and can't know, but let me put it this way -- it wouldn't surprise me.

    Values are ridiculous, sentiment has been bullish for months, the Dow failed numerous times to hold above the 50% level, and from what I gather many people and most equity funds are heavily long. A bear market likes to head down when the greatest number of people are least prepared for trouble, and this could certainly be one of those times.

    The economic fundamentals, in my opinion, are ominous, and the administration is unraveling. So nothing would surprise me here. Anyway, that's the way Richard Russell sees it.

    I think the Dow will tell the story, and I hope the P&F chart above helps subscribers to see the big picture.

    And that's all for Thursday -- signing off --



    The loss of an American Icon. It is disheartening that we are exporting not
    only our manufacturing jobs but a part of our heritage as well. Oh well, we
    still have the service industry, don't we?


    Levi Strauss to Close N. American Plants
    Thursday September 25, 10:35 am ET
    NEW YORK (Reuters) - Jeans maker Levi Strauss & Co. said on Thursday it
    would close its remaining North America manufacturing and finishing plants,
    leaving nearly 2,000 employees out of work.
    The job cuts and plant closures comes as the 150-year-old
    San-Francisco-based company battles growing competition in a crowded
    jeanswear and apparel market.

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