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Richard Russell: “I don't think the public is aware of the problems that are arising in America's cities ... What's really happening is nothing like what the government reports to us through their frequent rosy announcements.  But it won't be long before the US public realizes the ominous drift that the nation is sinking into. 

Maybe the best indication is the sudden slowdown in sales at mighty Wal-Mart.  It's clear that the public is at least beginning to “pull in its horns.”  A recent poll tells us that the majority of the US public believes that the nation is still in a recession.

So what are the charts telling us?  We might as well start with the biggie, which is Wal-Mart.  Here we see declining tops with a huge surge of volume on last Thursday's sell-off.  MACD has rolled over and is in a bearish formation. 

Below we see Target, which gapped lower late last week.  Here again MACD is in the bearish position.

The chart below is consumer discretionary.  These are items that consumers buy when they are feeling confident.  And they are articles that consumers skip when they are strapped for funds.  As of Friday, XLY ended by sitting right on its 50-day moving average.  RSI and MACD are both bearish.  Note the huge surge in volume on last week's big down day.

I'm trying to remain neutral on the US economy, but I keep reading stories that make that difficult … Big money sets the trend of markets, with the public always following the lead of big money.  Of course, wealthy individuals can be wrong.

Below we see gold surging out of its base formation to the 1360 box.  The P&F target or projection is 1530.  If gold can make it to 1530, that would be a remarkable technical feat, since it would take gold above its recent down-trending line, and it would create a sort of huge head-and-shoulders bottom.  Actually, as things stand I can see the outline of a H&S bottom.  Technically, gold is in the best shape it has been in, in over a year.

Last week saw the first new inflows into the gold-backed ETFs.  On top of that, the China Gold Association reported that Chinese gold demand in the second quarter rose 87% from 2012, to 386 tonnes.

Just for good measure, I am including HUI, the “gold bug's index.”  Here we see HUI surging out of a well-defined base while delivering a bull signal.  The base is large enough to deliver a target projection to 360.

So it seems that all the gold items have formed bases and have advanced out of their bases.  In some cases, the gold items have rallied so far that they are over-bought and a little backing off and consolidation may be needed.

One final gold chart, GDM, is the Gold Miners Index.  The gold miners have lately been absolutely the most disparaged and hated group in the market.  No group on the exchange has been more “sold out” and more despised.  The result is that when the mining group gave a bull signal, the short sellers were slaughtered as the mining group rocketed higher.  This chart below is a textbook classic and should serve as a warning to refrain from putting out shorts in a stock group that everybody hates.

I don't believe the economy will be bright enough for the Fed to cut back on QE later this year.  A continuation of QE should be bullish for gold.  Speaking of gold, I was amazed that there was absolutely no mention of gold's brilliant performance last week in Barron's or any other newspaper. 

Evidently, nobody wanted to even mention gold's upside breakout.  Just a complete silence on gold -- amazing.  When gold was falling, it was the talk of the town.”

KWN note:  This was a tremendous piece from 60-year veteran.  As the legend pointed out, the silence on gold is astounding.  To subscribe to Richard Russell’s Dow Theory Letters CLICK HERE.

© 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.

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Eric King

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