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Quote of the Day

Tuesday, January 03, 2012

THE MOST RECENT DOW THEORY LETTER HAS JUST BEEN POSTED TO OUR SITE

 

January 3, 2012 --

 

"$6.3 trillion wiped off the markets in 2011" Page 1 headline from the January 1st Financial Times. 

 

Lowry's is one of the technical studies that I depend on in my appraisals of the stock market. Turning then to Lowry's figures, what we see here is critically important. In early August, the Buying Power Index (demand) broke below the Selling Pressure Index (supply). Even more important, Buying Power since last February has been in a sideways movement -- but in late-July Buying Power suddenly broke down and embarked on a long down-sloping trend. At the same time, Selling Pressure was gliding down gently but it suddenly turned up in late-July. What we see now is the two indices spreading apart which is extremely bearish -- Selling pressure is steadily increasing while Buying Power is dropping like a stone.

 

This clear and steady deterioration in the market's internals is being masked or hidden by a parade of good news regarding the US economy and by a persistent and deceptive rise in the Dow.

 

At some point in the near future, the weakening internals of the market will cause the Dow to buckle and the bear market will burst into view again.

 

The aftermath of debt bubbles, when they burst, is measured, not in years, but in decades. I've said before that my signal for the end of this extended top will be that time when the Dow breaks below 10,000. Once, having violated 10,000, I expect consumers to turn dead-bearish, and I expect the currently optimistic analysts to become pessimistic.

 

Once again I beseech (beg) my subscribers to be OUT of stocks. The outlook for the markets, all of it, is now very bearish. We are watching the greatest debt bubble in history about to deflate, and it won't be a pretty sight.

 

All man-made money is a liability of the creator and I am afraid that. Man-made Money is ultimately doomed. Gold will be the last man standing as it has been over thousands of years.

 

At the start this site I mentioned that already 6.3 trillion dollars have been lost in this early, and I emphasize, early, stage of the bear market. The essence of what I foresee ahead -- we are now moving into the second half of one of the greatest bear markets in history. It will not be a time for making money, rather it will be a time for austerity and survival.

 

Europe is already practicing austerity, and shortly I expect the US to follow in its footsteps. One great problem is that the US's politicians are trying to avoid pain. Austerity means pain, and to reduce our consumption and spending means one thing – taking the pain. Already the early signs of pain are appearing, and of course what I'm talking about is unemployment well above the present level. During the 1930s unemployment rose to 25%. I think ultimately we will again see unemployment above 25% before this bear market ends.

 

On a personal level I am starting to walk again; what I have to do is avoid falling. I want to thank all my precious subscribers for their kind notes and letters. Those communications have meant a lot to me and have no doubt helped me in my recuperation.

 

Signs of inflation are now appearing. Super Bowl ads for this year have already sold out at the price of 4 million per 30 seconds a piece. Starbucks has just raised its prices. The prices of oil, silver and gold have surged higher today -- all signs of inflation. Almost all commodities closed higher as well.

 

Amid all the good news, investors took the the bit in their teeth today and pushed the Dow substantially higher. Tomorrow I'll see how the internals of the market were affected by today's Dow action.

 

My bet -- Obama will be will be a one-term president after the next election. The economy, the stock and bond markets -- and stubborn unemployment will defeat him.

 

Again, my very best for the new year to all my faithful subscribers.

 

Russell

 

This site has been written via the remarkable Dragon software in which I talk into a microphone and my speeches is typed automatically onto the site.

 

TODAY'S MARKET ACTION:

 

My PTI was up 4 at 6339. The moving average at 6313, so my PTI is bullish by 23.

 

The Dow was up 179.82 to 12397.38.

 Transports were up 46.02 to 5065.71.

 

Utilities were down 8.96 to 455.72.

 

NASDAQ was up 43.57 to 2648.72.

 

S&P 500 was up 19.46 to 1277.06.

 

February crude was up 4.25 to 103.08.

 

Total Volume on the NYSE and associated exchanges was 3.9 bn.

 

There were 2369 advances and 176 declines on the NYSE.

 

There were 206 new highs and 5 new lows.

The Big Money Breadth Index was up 10 at 977.

 

Bonds: Yield on the 10 year T-note was 1.95. Yield on the long T-bond was 2.97. Yield of the 91 day T-bill was 0.03%.

 

Dollar Index was down 0.65 at 79.62. Euro was up 0.95 at 130.63 Yen was up 0.46 at 130.56. Currency Prices as of 1 PM Pacific Time.

February gold was up 33.70 to 1600.50. February silver was up 1.65 to 29.57.

 

My Most Active Stocks Index was up 10 at 230.

 

GDX was up 2.37 at 53.80.

 

HUI was up 23.49 to 522.20.

 

CRB Commodity Index was up 8.07 at 313.37.

 

The VIX was down 0.43 to 22.97.

Permanent Portfolio Fund (PRPFX) was up 0.20 at 46.09 (previous day closing). YTD Return: 2.13%