“Sit back and watch history. The chart below shows the Dow spurting out of a powerful base with a P&F projected target of 17,900. They say that no tree grows to the sky, but this “tree” is attempting to negate this aphorism. They also say that “the higher they rise, the greater they fall.”
So I said, sit back and watch stock market history … I have this strong intuitive “feeling” that I should be OUT of the stock market. Along these lines, I note that there are now 6 distribution days on the S&P and 5 on the NASDAQ. Moreover according to Investor’s Intelligence 59.6% of advisers are bullish with only 14.1% bearish. These are percentages seen at market tops, but they sometimes lead tops by a matter of weeks and even months.
I note that in early morning trading, the US dollar dipped briefly below 80 and then recovered. Also TLT sank briefly by 12 ticks and then recovered. Gold rose by 20 cents. So there is a fierce battle in progress to hold the dollar up and to hold bonds up.
Thus, the Fed has it’s hands (computers) full in trying to hold this market together. All in all, these are dicey markets that are skating on thin (and melting) ice, and I am just as happy watching the shennanigans from a distance. If anything falls apart, I suspect it will be the dollar first.
History tells us that the owner of the World’s reserve currency is the country with the greatest military and the country that owns the largest hoard of gold. China is going all-out to build its military, particularly its navy, and China is accumulating gold as fast as it can.
There is no doubt in my mind, that China wants its yuan (probably backed with gold) to be the world’s next reserve currency. The US with its obscene level of debt is in no condition to keep the dollar as the world’s reserve currency. Incidentally, I note that an increasing number of international commerce are now transacted in Chinese yuan. The dollar is the Achilles heel of the US.
As I’ve been saying, the year 2014 will be a year of tectonic changes. Bitcoin currency is becoming acceptable by an increasing number of organizations. Bitcoin is a menace to the phony dollars that are pumped out by the Fed. I know that the Fed wants to have a monopoly on the production of US money. Therefore, Bitcoin is a menace and rival to the Fed “dollars.” Therefore I expect the Fed to attempt to outlaw trading in Bitcoin.
Pity the Fed, besieged by Bitcoin and Chinese yuan. Bernanke will be happy to get back to South Carolina and out of DC … Will the Treasury have the nerve to re-set the price of gold to $10,000 an ounce? And do we have enough gold to make a re-set worthwhile?
If it turns out that the US doesn’t have the gold it claims to have. We could be looking at the biggest scandal in economic history. If we have all the gold we say we have, where’s the damn audit?
The chart below shows five years of the S&P. You can see that around late-2011 the SPX began the pull away from its rising trendline. This represents increasing enthusiasm and extreme bullishness. As I said, we are now seeing what I believe will be stock market history. It will be something to tell your grandkids about. You know about the little moth who flitted too close to the flame.
Late Notes — The Fed continues it’s vain fight against the forces of deflation. To create inflation in one fell swoop, all the Treasury has to do (following FDR’s example during the Great Depression) is unilaterally re-set the price of gold to some high number. Who would object? Only the gold shorts and maybe the Fed since it would devalue the phony dollars that the Fed creates out of a computer.”
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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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