The wildly dramatic and profitable 3rd phase is upon us…

Posted by Richard Russell - Dow Theory Letters

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Partial comment from the lengthy daily comment by Richard Russell of Dow theory Letters. One of the best values anywhere in the financial world at only a $300 subscription to get his report daily for a year. HERE to subscribe. Editor note – now would be a great time to subscribe.

From Richard Russell “Today’s site is a gold special.

The important thing to know about gold is that it is in a primary bull market. The monthly chart below shows the path of gold along with a blue 50-month moving average and a red 200-month moving average. The red arrow marks the “golden cross-over” where the rising 50-month blue MA crossed over and above the rising red 200-month MA. The crossover occurred in May 2005. I took the monthly crossover to confirm my thesis that gold was in a long-term primary bull market. Note that the two moving averages have been rising ever since the crossover. Note also that, significantly, gold has held above its 50-month MA ever since the May 2005 crossover.

RR527

Every major primary bull market takes place in three sentiment phases. The first phase of the gold bull market occurred around 1999 to 2005. This was the “dirt cheap” phase of gold when only the true believers assumed positions. Old timers probably remember back in 2000 when I wrote that the listed gold shares were so ridiculously cheap that they could be bought and “put away” as perpetual warrants.

The second phase of the gold bull market started around 2005 and is still in force. This is the phase where the seasoned professionals and a few more sophisticated funds take their positions. It is in the second phase where we see the most painful secondary corrections. And it is in the second phase where the public first notices the persistent rise in gold. In the current area, gold is just starting to attract the attention of the public.

Every major primary bull market that I have studied or lived through ends up with a wildly speculative third phase. This is the phase where the public and the crowd rushes head-long into the market. We saw this last in the years around 2000 when people bought any kind of tech stock. “I don’t care what it is, if it’s tech, just get me in!”

My belief is that we’re now nearing the beginning of the third speculative phase of the great gold bull market. The huge secondary reaction that has held gold in its grip since early 2008 is coming to an end. Interestingly, this reaction has taken the form of a large head-and-shoulders bottoming pattern (see chart below). Most recently, gold has been climbing (almost unnoticed) up the formation’s right shoulder. If June gold can close above 1003, I believe that will signal the beginning of gold’s third speculative phase.”

Much much more about gold in this issue of  Richards Letter.

The 84 yr. old writes a market comment daily since the internet age began.  In recent years, he strongly advocated buying gold coins in the late 1990’s and 2000 below $300. His position before the recent crash was cash and gold.
There is little in markets he has not seen.  Mr. 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. 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. He loaded up on bonds in the early 80’s when US Treasuries where yielding 18%.
The above is a partial comment from the lengthy daily comment Richard Russell writes. One of the best values anywhere in the financial world at only a $300 subscription to get his report daily for a year.  HERE to learn more and HERE to subscribe online.