Russell: 3 Things I’m Watching

Posted by Richard Russell - Dow Theory Letters

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For the first time in history, ALL the major central banks are printing money. One of two things will occur. If they continue to print, their respective currencies will lose their purchasing power, and we’ll have inflation or even hyper-inflation. If the central banks pull back on their printing, we’ll have crashing markets and a world depression. This is the problem with creating ever more debt. Ultimately, the debt owns you, and the compounding process renders the debt situation unsustainable, which is what the CBO has just warned us about.

The underlying problem is the common man’s desire for profits — his insatiable greed. Eventually, greed becomes its own worst enemy. To “grow” the economy, you must have expanding credit. Eventually, credit, when compounded, becomes unsustainable — particularly when a nation can print all the money it wants out of thin air. Thus, the acceptance of fiat money spells the eventual death of an economy.

Below I show a chart of JP Morgan, the biggest bank in the US. Here we see a textbook head-and-shoulders pattern that I think should break down. JPM was just hit with a huge $900 million fine, based on its notorious trader, known as the “London Whale.”


Another choice place I’m watching is the US dollar. The US dollar has dropped three boxes on the P&F chart. If the dollar hits the 79 box, it will have issued a clarion sell signal. So at any rate, I’ve got my eye on the dollar.


Here’s something that bothers me. Below we see the D-J Industrial Average. As you can see on the chart, over the last four trading sessions, the Dow has declined each day. Is this the sign of a market top that is subtly breaking down? If this declining action continues, I’ll really begin to wonder whether something ominous is in the cards.



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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.

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