With the benefit of just a few hours of sleep (but no calls in the middle of the night thank you), I awoke to find numerous emails already from readers regarding my 10PM post last night.

First and foremost, it’s critical to remember I’m not a financial advisor nor should my commentaries be treated as such. I’m honored and sometimes (like in London) flattered that readers have made my work a regular part of their daily lives. I was truly blown away in London when a man in his mid 30s, and the head of a natural resources group run by one of the biggest Asian companies in the world today, not only told me how critical my work has been in his, but named his son after me! You will never know how much such a feat makes me feel about my work and overwhelms the handful of rather nasty comments I receive on occasion.

“Okay Peter, what about the markets” is what many are saying at this point of my commentary.

So that my update last night is “crystal clear”, let me sum up where my mind is at as of this moment.

U.S. Stock Market – Since the fall of 2007, I’ve stated that America was in serious dog-do. While I was blessed to foresee much of an incredible bear market rally, I never loss sight that such a rally was not a new bull market but a bear rally in a secular bear market that I constantly stated would need at least to eventually retest the 2009 lows. I compared my expectation to what took place in the Japanese stock market from 1989 until present.

While I was never able to get short, I also am not caught with my pants down to my knees but my limited exposure to mining shares has caused unfortunately some of my butt to be exposed.

As noted last night, out of this carnage an explosive rally should be born. But one should not think this is the second coming of a mega bull market but rather relief rallies within a bear market that has many more years to run its course (of which its ultimate target is at least the 2009 lows).

Gold and Silver – From the spring of 2003 until today, yours truly has seen gold and silver as the single best assets, bar none. I was blessed to have sidestepped some rather nasty corrections along the way. Since 2003, I’ve suggested gold being one’s single largest holding by far. I’ve maintain up to a 50% exposure to gold up until last evening where I suggested lowering such exposure down a notch. You will see that in my updated “Tracking List”, I lowered such exposure to 40% but also increased mining share exposure from what has almost always been limited to 20% to 40%. This is because while I still think gold can rise to my new target of $2,350, I think we can finally see the mining shares outperform the metals going forward (fingers, toes and everything else I can cross).

Let’s not forget that it’s the very things that unfolded for why we were so incredibly bullish on gold $500, $1,000 or even more lower. The difference now is it’s no longer cheap but still worthy. I can tell you don’t be surprised that you see it $50-$100 lower one day and for the umpteenth time, be proclaimed as “topped out” or “the bubble burst” as we’ve heard over and over again (yet rest assured the very journalists who wrote those stories will never ask their sources and/or themselves why were they so wrong for so long and instead simply say it all over again).

And with being wrong for years in mind, lets not forget with gold breaking above $1,700 we owe another dollar to the Tokyo Rose Relief Fund. Like World War II Rose, the ultimate gold perma-bear publishes daily propaganda. There’s no question that if you looked up nitwit in the dictionary, this Rose’s picture would be there.

U.S. Dollar – Terminally Ill

U.S. Bonds – The ultimate bubble that hopefully I will have the courage to short into.

Oil and Natural Gas – Bullish.

Please Note – I will do my best to stay on top of things during these violate days. For those who limit their reading to the daily email, note only the last 5 comments of mine will be shown in those email blasts. It’s always best to visit the blog itself.

Richard Russell has made his subscribers fortunes. One of the best values anywhere in the financial world at only a $300 subscription to get his DAILY report for a year. HERE to subscribe. The 87 year old Russell got his subscribers heavily invested in Gold below $300 and has urged his subscibers to stay long and keep buying all the way up to yesterday’s close of spot at 1,713.20

I get Richard Russell’s daily letter and have been his grateful subscriber for 31 years. Certainly the best return on a $300 a year investment I have had the good fortune to earn.

Yesterday Richard wrote that “This Time its Different” is one of the most costly and deceptive remarks anyone can make about the Stock Market. Then as he always does, especially when the market is out of control he interpreted the current market through the Dow Theory (his explanation of the Dow Theory HERE)

After yesterday’s close Richard made the comment that according to his proprietary indicators and the Dow Theory the market is either a violent correction in an ongoing Bull Market or its the beginning of a primary Bear Market.

“I follow the D-J Averages, and most of the time this procedure places you on the right side of the market” – Richard Russell 08/08/11

The Dow Industrial Average has now broken both its 50-day and 200-day moving averages. It has also broken below both its March and August lows.

He reaffirms that in the Dow Theory “a movement of one Average, unconfirmed by the other, is often deceptive and should not be taken seriously.” As it happens the  D-J Transportation Average, “is almost carbon copy of the Industrials.” The Transports have also clearly broken below both its 50 day and 200 day moving averages as well as both its March and August lows. According to the Dow Theory, that’s about as bad as it can look.

On the postitive side, if this is a violent correction in an ongoing Bull Market instead of the beginning of a Primary Bull Market, the percentage of stocks holding above their 200 day moving average has plunged to the point where only 20.79%. An area where “the market is either drastically oversold and ready to rally, or an area that characterizes bear market action. Note that RSI and MACD are deep in bear territory.”

Take note: Richards proprietary indicator, the PTI, is bearish. The PTI is an indicator Richard regularly says is smarter than he is. (How he constructs the PTI is a secret known only to him.)

All that said, Richard says the market is in the territory where it should rally, and the quality of the rally will tell him what the future holds for this market. A powerful rally with high volume and this collapse was just a wicked correction in a Bull Market. The opposite, a weak rally on low volume and its the beginning of a dreaded Primary Bear Market with a corresponding case economic heart attack.

Another interesting note: Richard also said “Today’s decline came on news. Remember, the market never discounts the same thing twice. But, but — this news is not over yet. And the problems have not been resolved.” the comment that the problems have not been resolved is also what Greg Weldon told Michael Campbell in an interview at 1pm PST yesterday which you can read in this article Denial Disaster Destiny & The Man Behind the Curtain.

Last note: Richard was not thrilled with the gold action. Probably for the same reason that Peter Grandich points out ” It would not surprise me if the next $50 move in gold is down and there’s a couple of reasons for that. A) it’s had a big move, B) people tend to sell winning things to average down on losing things.  So I can see some people taking some money and profits in gold, putting it into other areas now. You can read the transcript of Peter’s interview that took place early yesterday morning or listen to it in ful here: Grandich on Stocks & Gold – Mark Leibovit sells all Mining Stocks

This might be the time to read or re-read Richards great article on Hope:

HOPE: It’s human nature to be optimistic. It’s human nature to hope. Furthermore, hope is a component of a healthy state of mind. Hope is the opposite of negativity. Negativity in life can lead to anger, disappointment and depression. After all, if the world is a negative place, what’s the point of living in it? To be negative is to be anti-life.

Ironically, it doesn’t work that way in the stock market. In the stock market hope is a hindrence, not a help. Once you take a position in a stock, you obviously want that stock to advance. But if the stock that you bought is a real value, and you bought it right — you should be content to sit with that stock in the knowledge that over time its value will out without your help, without your hoping.

So in the case of this stock, you have value on your side — and all you need is patience. In the end, your patience will pay off with a higher price for your stock. Hope shouldn’t play any part in this process. You don’t need hope, because you bought the stock when it was a great value, and you bought it at the right time.

Any time you find yourself hoping in this business, the odds are that you are on the wrong path — or that you did something stupid that should be corrected.

Unfortuneately hope is a money-loser in the investment business. This is counter-intuitive but true. Hope will keep you riding a stock that is headed down. Hope will keep you from taking a small loss and instead, allowing that small loss to develop into a large loss.

In the stock market hope get in the way of reality, hope gets in the way of common sense. One of the first rules in investing is “Don’t take the big loss.” In order to do that, you’ve got to be willing to take a small loss.

If the stock market turns bearish, and you’re staying put with your whole position. and you’re HOPING that what you see is not really happening – then welcome to poverty city. In this situation, all your hoping isn’t going to save you or make you a penny. In fact, in this situation hoping is the devil that bids you to sit — while your portfolio of stocks goes down the drain.

In the investing business my suggestion is that you avoid hope. Forget the siren, hope — instead embrace cold, clear reality.