Timing & trends

By Randall Palmer

OTTAWA (Reuters) – The Canadian economy grew by 0.2 percent in May from April, according to Statistics Canada data on Wednesday, below forecasts and dampening expectations for the second quarter.

CLICK HERE for the complete article

For anyone who sold physical gold in the current precious metal downturn, money manager Peter Schiff says, “There’s going to be a big problem because the gold they sold on the way down isn’t going to be available on the way back up because the people who own it aren’t going to sell it at any price. . . . This is the time to load the boat, to back up the truck.”

Ed Note: For a few more key transcripts and the entire 16 minute interview go HERE

Gold and Gold Stocks – An Important Week

HUI-2000-2001

The Perverse Focus on the FOMC and Jobs Data

This week will bring the types of news that are generally considered to be among the most important for gold – the FOMC statement, as well as the July payrolls report (which in turn derives its perceived importance from its effect on central bank policy). It should be pointed out here that it actually makes very little sense for the market to focus on these data points (even though it is clear that the focus exists and cannot be ignored).

Let us consider the payrolls report first: what does it actually tell us? In reality it is a fairly meaningless datum. Not only is it merely an account of the past, it is not even a particularly precise account of the past. The report gets revised several times (at least thrice if memory serves, with the final revisions being done a full year after the report’s first publication, when the BLS does its annual revisions). Even the thrice revised version of the report isn’t really all that meaningful. After all, the employment statistics are collated in such a manner that all those who are long-term unemployed and considered ‘discouraged’ are simply no longer counted as unemployed, even though that is what they are. Lastly, even if there were some way of obtaining a perfect payrolls report, it would not really mean much or tell us anything about the future. Employment is a lagging economic indicator. The economy could well be in recession already, even in the face of employment data that still ‘look good’.

That is in fact what happened in late 2007: in hindsight it was determined that the economy entered a recession in late 2007, even though most of the real time economic data releases at the time – including payrolls data –  appeared to still look fine. In fact, the Fed, whose reaction to economic data is what the market really cares about, still proclaimed in summer of 2008 that the US economy was likely to ‘avoid a recession’. At the time, the recession had been in train for more than half a year already. In short, the Fed is not only incapable of forecasting an economic downturn, it is not even able to recognize a recession that is staring it right into the face.

Now let us consider the FOMC statement, which this month may contain news about the planned ‘tapering’ of ‘QE’ as well as refined ‘forward guidance’ regarding the Fed’s interest rate manipulations. Fresh Hilsenblather to that effect has been published late last week, entitled: “Up for Debate at Fed: A Sharper Easy-Money Message”. Apparently we need a more forceful reminder that there will be easy money for as far as they eye can see, or for however long it takes for easy money to bring the economy to utter ruin, whichever comes first.

A pertinent excerpt:

R Russell – Gold, Stocks, Bull Markets & “Big Money”

“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.

KWN Blog Russell I 7-30

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.

Rich Man, Poor Man (The Power of Compounding)

The Perfect Business

 

Saving silver before the real confiscation

iStock 000019087209XSmall-resize-380x300The general case for holding silver continues to improve as the MF Global and HSBC scandals confirm the absence of any rule of law or justice in the global financial system. The Peregrine Financial fiasco only serves to verify this somewhat jaded viewpoint.

Furthermore, the Cyprus “bail-in” or savings confiscation debacle makes it perfectly clear that keeping more than a small portion of one’s assets in the financial system is increasingly unwise and could be subject to greater risks than most investors think.

Add to this situation a dysfunctional government, the media’s overwhelming daily propaganda, and the fact that the rest of the world is sick and tired of being bullied by the United States. Also understand that many nation deals are being forced to bypass the un-backed fiat U.S. dollar, and it is becoming increasingly clear that the days of paper fiat currency are numbered.

….read more about the Implications of the Cyprus Bail-in HERE