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Richard Russell continues: 

“The honest answer is that in all my years of studying and dealing with the markets, I've never seen anything like the action since the 2009 bottom.  As a practice study, I rethought the whole 1920s series as if I was reconstructing the events of 1929.  Suppose, after the September, 1929 record high in the Dow, the Rails had turned up from the crash lows and had also risen to a new record high? 

Then suppose the Dow had followed, and the Dow had risen to a new all-time high?  Such action would have been puzzling, but what would analysts have called it?  My guess is that analysts would have simply called it “confusing and unprecedented.” 

And I'm going to do the same thing today.  The collapse of 2008-09 was labeled a bear market by everybody.  The bull market of 1980 to 2007 was obviously a huge bull market which lasted 27 years.  Following a 27-year bull market, we might have expected a bear market lasting one-third to two-thirds as long as the preceding bull market. 

A bear market lasting one-third (nine years) in duration as long as the 1980-2007 bull market would be expected to carry into at least 2016.  Thus, on a timing basis I have to think that all the stock market action since 2007 was one continuous and erratic bear market.

Question -- OK, Russell, then what about the record highs recorded by both the Dow and the Transports? 

Answer -- My only answer to this is that both D-J Averages produced something never seen before, namely new highs during a post-crash upward correction.  My explanation of this unprecedented situation is that the advance to new highs was a direct result of never-before-seen manipulation by the Federal Reserve. 

The Fed was able to engineer new post-crash highs in both D-J Averages.  But I doubt if the Fed will be able to engineer a coming new era of prosperity in America.  Thus, it will be an example of where the stock market will not be predicting the nation's economic future.

As a matter of fact, I believe this stock market is predicting a very mixed and confusing economic future for the US.  As far as I can see, the Fed will be pumping in QE-to infinity for as long as it can get away with it.  The only thing that might halt the Fed is rebukes from voting members based on it's outrageous 3 trillion dollar balance sheet.  We're in uncharted territory in my opinion, and I expect to see a number of events in both the stock market and the economy which will be both surprising and upsetting.

One technical observation -- With the breakout and confirmation by the Industrials, this places tremendous psychological pressure on the 13.108 million shorts that are now positioned on the NYSE.  As a result, we should see irregular spates of short covering or buying panics, depending on the fears and psyches of the short sellers.  This makes shorting stocks in this market a risky game.

My view for the future -- erratic market action along with a disappointing US economy.  Incidentally, I don't know if you noticed, but some of the heavily shorted stocks surged yesterday, due, in part, to frantic and fear-filled short covering.

Item -- Since the 2007 bull market high, 18 D-J Industrial stocks are now higher than they were in 2007 and 12 are lower.

Gold and particularly gold mining stocks are being bad-mouthed unmercifully.  It's almost as though we're witnessing a veritable bandwagon of gold nay-sayers.  I suspect that some of this is a matter of “sour grapes” on the part of those who missed out on the tremendous 12-year bull market in gold.  And so it goes, to the gold pessimists goes a belated, sour grapes sneer.

Could this be the gold bottom?  Based on RSI gold is oversold.  The histograms on MACD are turning up.  And we have a little up-pointing formation in March.  Could it be a bottom?  It would require gold hitting 1620 for a major reversal.  Gold above 1600 would be impressive!

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© 2013 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.

The interviews with John Embry, Gerald Celente, Dr. Stephen Leeb, Jim Sinclair, Rick Rule, Ben Davies, Andrew Maguire and Marc Faber are available now.  Also, be sure to listen to the other recent KWN interviews which included James Turk, Egon von Greyerz, Felix Zulauf, Eric Sprott and Art Cashin by CLICKING HERE.

Eric King

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