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Richard Russell continues:
“Maybe it's just the Dow that is dying, and the rest of the market is OK. But don't you believe it. The Dow represents the manufacturing capabilities of the United States, and when you see the Dow doing what it's doing, you can be sure that somewhere ahead business is going to take it on the chin.
By the way, on May 1st, the Dow recorded a high, but that high was not confirmed by the Transports. The two Averages then plunged below their April lows, delivering a bona fide Dow Theory bear signal. So yes, this is a continuation of the bear market. But it's starting out in a stranger way than any bear market I've ever seen. Maybe the experts are so fascinated with the Dow and Facebook that they're not taking in what's happening.
Stay in cash, because I intuit that something BIG is heading our way ... I believe the proper position is to be on the sidelines with zero stock holdings. We are entering the second half of the bear market ... After all these years following markets, sometimes I have the feeling that I've seen everything. But not this time. Hey, would you believe the Dow could go down 14 out of 16 sessions, and people would still be complacent?
There are so many potentially bearish scenarios in the wind that my head is spinning. Last night, I noted that the Dow futures were down 55 points. I can't remember ever seeing a series like this in my lifetime. As a loyal American, I'd feel better if people were scared out of their wits. What's it going to take to scare people -- the Dow going down to 4000?
It looks like a sure thing that Greece will be leaving the EU. Greeks must be pulling out their euros and shipping them to German banks. It must be the same with Spain, which I think will follow Greece out of the Eurozone.
Back to the markets. I note that the negative spread between Lowry's Selling Pressure Index (supply) and their Buying Power Index (demand) has widened to 184, the widest on this series. The wider the negative spread, the more bearish the picture.
So far, the decline in the market has been fairly orderly; no panic, no hysteria to get out of the market. I wonder how much longer the decline will continue to be orderly. Even the VIX has remained calm with the latest figure being 24.16. My guess is that investors are waiting for the Fed to take action again -- probably in the form of QE3. So why sell before then?
Frankly, there's something eerie about what's happening. Bernanke tried to halt the bear. Maybe we should call this the ‘Grizzly's Revenge.’ To be honest, what's happening is almost beyond analysis. I have nothing to compare it with.
I really have to go on my intuition and instinct at this point. And my instinct is to get in cash. Investors the world over are searching for safe harbors. These seem to boil down to US dollars, Treasuries, German bonds and just maybe gold bullion. Of course, we don't know who owns gold coins since such records are not kept and are secret -- often handed down from generation to generation.
How's the world doing? The chart below is the Dow Jones' World Index. What I see is a head & shoulders formation that has broken down below both its moving Averages. RSI says it is oversold, so I guess a rally back to its 50-day moving average would be no surprise. The real support comes in at 210 to 215.
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© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
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Eric King
Richard Russell: We Are Entering Second Half of the Bear Market
With tremendous volatility in global markets, the Godfather of newsletter writers, Richard Russell, warned his readers that “something BIG is heading our way,” and “I wonder how much longer the decline will continue to be orderly.” Here is what Russell had to say: “As of today's closing, Dow down 14 out of 16 sessions! This is one you can tell your kids about. And still no collapse in breadth, and still no crash. The only thing I can make out of it is that a lot of people are standing their ground.”
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast,
rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
May 24, 2012
