Gold & Precious Metals
“One question I am frequently asked is, “How do we know when a bull market is topping out?” First, we must determine which sentiment phase the market is in. This is particularly difficult now because this market is being manipulated by the Federal Reserve. Normally, the stock market will only top out when it is in the speculative or third sentiment phase.
However, the best gauge as to which phase a bull market is in is the matter of values and sentiment. At this time I judge sentiment to be excited and optimistic. Nobody I read or hear is talking or writing about a bear market. On the matter of values, the S&P 500 is now selling at a rich 19.29 times earnings while the dividend yield is at a micro 2.10%. These statistics compare closely with values at previous bull market tops.
So much for the current sentiment and values for a possible bull market top. Next we must address the matter of the formation in the stock averages. The secret of a market top lies in the secondary correction, and what occurs after the secondary correction.When the Averages turn down from a high, there is no way of knowing, at the time, what that downturn means. It is what happens after the initial correction that is critical.
After the initial decline, there will be a rebound. If, on the rebound, one Average or the other (the Dow or the Transports) fails to rally to a new high, we must watch the progression carefully. The Averages will then turn down. If the two Averages (Industrials and Transports) both break below the lows of the secondary reaction, such action will signal that a primary bear market is in force and that the tide has turned bearish.
So that’s the story. We must remember that when the Averages turn down from peaks, there is no way of knowing whether we face a mild decline or a primary bear market. But the fact that this market is on thin ice, from a standpoint of sentiment and values, makes any downturn in the Averages a move to be taken seriously and a hint of potential danger.
This is probably why big money, knowledgeable money, is so careful and “spooked” by the market at this time. Big money knows that a primary bear market could materialize at any time, and big money knows that it often takes considerable time to withdraw one’s assets from the market. In other words, big money does not want to be left out of any decent rally, but at the same time big money does not trust this manipulated overvalued market.
Turning to gold, the P&F chart below is extremely interesting. Gold rallied to the 1340 box and then backed off for three boxes to 1310. Following gold’s rally to the 1340 box, gold formed a little consolidation pattern. Normally, the consolidation formation will break out in the direction that existed prior to the consolidation, which means that gold should break out to the upside.
If gold breaks down out of the little consolidation formation to 1300, that would be bearish. However, if gold breaks out to the upside from the consolidation pattern to 1350, that would be very bullish and would suggest higher prices for gold. Russell opinion — Gold will break out to the upside.”
Richard Russell
To subscribe to Richard Russell’s Dow Theory Letters CLICK HERE. Ed Note: I spoke with Richard’s head office recently and was told that Richard still wakes up every morning excited to see what is going on in the markets. That is why his production of writing for his customers is so prolific. Not only does he mail out his extensive Newsletter every 3 weeks, but he sends out a comment every day with his thoughts on the market action that day. All this for .82 cents a day, or only $300 per year!
About Richard Russell
Russell began publishing Dow Theory Letters in 1958, and he has been writing the Letters ever since (never once having skipped a Letter). Dow Theory Letters is the oldest service continuously written by one person in the business.
Russell gained wide recognition via a series of over 30 Dow Theory and technical articles that he wrote for Barron’s during the late-’50s through the ’90s. Through Barron’s and via word of mouth, he gained a wide following. Russell was the first (in 1960) to recommend gold stocks. He called the top of the 1949-’66 bull market. And almost to the day he called the bottom of the great 1972-’74 bear market, and the beginning of the great bull market which started in December 1974.
The Letters, published every three weeks, cover the US stock market, foreign markets, bonds, precious metals, commodities, economics –plus Russell’s widely-followed comments and observations and stock market philosophy.
In 1989 Russell took over Julian Snyder’s well-known advisory service, “International Moneyline”, a service which Mr. Synder ran from Switzerland. Then, in 1998 Russell took over the Zweig Forecast from famed market analyst, Martin Zweig. Russell has written articles and been quoted in such publications as Bloomberg magazine, Barron’s, Time, Newsweek, Money Magazine, the Wall Street Journal, the New York Times, Reuters, and others. Subscribers to Dow Theory Letters number over 12,000, hailing from all 50 states and dozens of overseas counties.
A native New Yorker (born in 1924) Russell has lived through depressions and booms, through good times and bad, through war and peace. He was educated at Rutgers and received his BA at NYU. Russell flew as a combat bombardier on B-25 Mitchell Bombers with the 12th Air Force during World War II.
One of the favorite features of the Letter is Russell’s daily Primary Trend Index (PTI), which is a proprietary index which has been included in the Letters since 1971. The PTI has been an amazingly accurate and useful guide to the trend of the market, and it often actually differs with Russell’s opinions. But Russell always defers to his PTI. Says Russell, “The PTI is a lot smarter than I am. It’s a great ego-deflator, as far as I’m concerned, and I’ve learned never to fight it.”
Letters are published and mailed every three weeks. We offer a TRIAL (two consecutive up-to-date issues) for $1.00 (same price that was originally charged in 1958). Trials, please one time only. Mail your $1.00 check to: Dow Theory Letters, PO Box 1759, La Jolla, CA 92038 (annual cost of a subscription is $300, tax deductible if ordered through your business).
IMPORTANT: As an added plus for subscribers, the latest Primary Trend Index (PTI) figure for the day will be posted on our web site — posting will take place a few hours after the close of the market. Also included will be Russell’s comments and observations on the day’s action along with critical market data. Each subscriber will be issued a private user name and password for entrance to the members area of the website.
Investors Intelligence is the organization that monitors almost ALL market letters and then releases their widely-followed “percentage of bullish or bearish advisory services.” This is what Investors Intelligence says about Richard Russell’s Dow Theory Letters: “Richard Russell is by far the most interesting writer of all the services we get.” Feb. 19, 1999.
Below are two of the most widely read articles published by Dow Theory Letters over the past 40 years. Request for these pieces have been received from dozens of organizations. Click on the titles to read the articles.
Newmont Mining has experienced heavy liquidation for the past 20 months since peaking at $72.00 in October 2011. This month we saw the shares trade down to a low of $26.47 for a decline of 63%.
However in the past few days we saw some interesting price action that caught our attention! The shares actually saw some strength and traded above the high set at the beginning of the month. It may still be too early to tell but we could be witnessing a reversal of the downtrend that began last fall if the shares can close above the July 23rd high of $31.41 which would also break out of an intermediate downtrend that began last fall.
When looking at a 20-year chart we see something very interesting! The July low found support at a 13-year trendline going back to the year 2000. At the same time there’s been a pick up in volume as sellers have finally thrown in the towel in disgust and are bailing out after a long period of suffering.
We see a great buying opportunity unfolding in one of the world’s largest gold producers!
The information contained in this report was obtained from sources believed to be reliable, however, we cannot represent that it is accurate or complete. This report is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell securities. The views expressed are those of the author and not necessarily those of Raymond James Ltd.
Over the last week, the chatter about who will succeed Ben Bernanke as the Chairman of the U.S. Federal Reserve Board has really heated up. The front runners are Janet Yellen (someone who is more dovish than Bernanke) and Larry Summers (someone who is friendly towards financing budget deficits with easy monetary policy).
However, there is a common bond between the two that suggests that the current trajectory of monetary policy will stay mostly unchanged after Bernanke’s assumed departure next January. Both Yellen and Summers are part of the same group that has been steering the financial and monetary direction of the U.S. for the last two decades (Bernanke, Alan Greenspan, Tim Geithner, and Robert Rubin are the other more prominent members of this group).
The big problem with the perpetuation of this cabal is that they are charged with trying to fix the problems that they themselves contributed to creating earlier. Obviously, they are not inclined to indict themselves by admitting to past mistakes. This removes the potential for fresh thinking in terms of coming up with new solutions to persistent problems. It is tantamount to hiring an arsonist to put out the fire that he started.
Until there is a “new guard” in place, expect a continuation of Quantitative Easing and very easy monetary policy until an inflationary wall is hit. Also, expect very little to be done on needed reforms geared at increasing competition and doing away with the “zombie corporations” that are able to live on in such a benign environment.
Yellen and Summers represent the “old guard.” Inflationary hedges such as gold and companies that are price inelastic (able to pass along price increases without hurting sales) continue to look intriguing as long as the “old guard” is in place, regardless of which individual ascends to become leader of the Fed.
MOSCOW (Reuters) – Russia’s Uralkali has dismantled the world’s largest potash cartel in a move that it expects to slash prices by 25 percent, heralding a reshaped industry and pummelling shares of companies that produce the key fertiliser ingredient.
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