Richard Russell: Dow 10,000 To Be Tested Soon
Last week, I asked the question “Where Are the Bears?.” I was quoting technician Helene Meisler, who had pointed out that many of the more well known bears had flipped bullish as markets approached multi-year highs.
Amongst the few bears remaining, we can add famed Dow Theorist Richard Russell. The octogenarian wrote the following late Wednesday:
“The worst kind of market is a market that goes down on good news. As I write, optimism is in the air, and the Dow is down 95 points. Dow 10,000 continues to be the great psychological barrier and my work suggests that that Dow 10,000 will be tested in the next few months. Therefore the operative word is caution. Keep the word caution in you conscious unconscious mind.”
My only quibble is “What good news?” There has been soft earnings, mixed economic reports, and continued worries in the EU Zone.
Regardless, Russell still likes gold, pointing out it “holds valiantly in the 1700s.” He adds “Something big is in the wind, and the stock market senses it.”
My perspective is a bit different. Markets have rallied hard to start the year, and have been pulling back on lighter volume. That sort of back & fill is what we typically want to see in healthy markets.
There is still plenty to be concerned about — Sentiment is frothy, the never-ending Greek saga is nettlesome, and earnings are near a cyclical peak.
Regardless, Russell has been around a long time and has a decent track record.
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February 16th, 2012 at 7:43 am
hi BR, good to see a posting about Richard. I do not read him any longer, but knowing
him he posted yesterday about the transports and Dow Theory. Richard was pretty good
leading into 2009, but even he ignored the buy signal his system gave him. He did
recommend the gold miners in the 20s, heh.
I’m with you, I don’t see a ton of ‘good’ news out there, but sentiment (as Helene has pointed out)
is getting towards the danger zone.
The ECRI numbers continue to improve, and I continue to mark that someone big is going to be very wrong. ECRI and bears like Hussman, or Doug Kass who has been adamant no recession is in the cards.
good posting, thanks!
Tim
February 16th, 2012 at 7:50 am
A few years ago Mark Hulbert had Russell’s record right at the average of the S&P 500. RR hasn’t exactly been tearing up since. I’ve never been able to determine what makes RR so popular. Maybe Betsy Russell?
February 16th, 2012 at 7:57 am
hey DrungoHazewood:
I suspect some of it has to do with a few very good calls he made, and then the fact that he’s been doing this since like the 1940s ha! I admit to being very surprised at how simple Dow Theory got him out of the market in 2008 (January!) and then he didn’t listen in 2009 when it told him to buy. But during that time he did pound the table on gold and miners, so that helped somewhat.
I for one simply respect people that have been around, successfully in the markets, for this long.
Tim
February 16th, 2012 at 8:14 am
Pull up a chart of the daily SPX and put in a full stoch 14,3,3 indicator. There is a rising compression pattern on that indicator. This pattern almost without fail results in the indicator reversing and dropping quickly to the start of the pattern on the indicator, which would be oversold territory. Patterns indicate we will soon drop to test support in the 1257-1270 SPX area.
A pullback does not change the other indicators I’m watching that point to new post 2009 recovery highs on all the major indexes this year.
AAPL will probably also need to fill those gaps going back to the $425 area soon.
February 16th, 2012 at 8:35 am
“What good news?”
The good news is the optimism. The good news is complacency morphing into faux normalcy. The good news is that the ocean went away, and now we don’t need a boat — we can just walk on out and pick fish up off of the ground!
I have a feeling we are approaching a hoocouldaknowed moment.
February 16th, 2012 at 8:44 am
“…he didn’t listen in 2009 when it told him to buy. But during that time he did pound the table on gold and miners, so that helped somewhat…”
here’s SPY v. GLD Chart (3 Years) (2012-2009=3, yes?)
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Fund&symb=SPY&time=10&startdate=1%2F4%2F1999&enddate=2%2F16%2F2012&freq=1&compidx=aaaaa%3A0&comptemptext=GLD&comp=GLD&ma=0&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=2&style=320&size=2&x=16&y=6&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=12
looks like ol’ Yellow is, still, out ahead..
I guess that passes for ‘helped somewhat’…
here..
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Fund&symb=SPY&x=0&y=0&time=13&startdate=1%2F4%2F1999&enddate=2%2F16%2F2012&freq=1&compidx=aaaaa%3A0&comptemptext=FAX&comp=FAX&ma=0&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=2&style=320&size=2&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=12
a SPY v. FAX 10-Year Chart..
good thing ‘nominal’, now, = ‘real’..
February 16th, 2012 at 9:57 am
Hey Mark,
Definitely no disrespect to gold or gold holders, or Richard. But he did say to keep < 20%
of your money there. So I did not draw any further conclusion.
Agree with your analysis!
Tim
PS long physical gold, silver, and platinum in a box
February 16th, 2012 at 9:59 am
Is this a robust or fragile market?
Robust – maybe Euro ringfencing is buying time but longer term this still indicates fragility esp in light of changing German sentiment toward Greece
Robust – earnings are stable as corp balance sheets and measures to reduce costs work their magic
Robust – interest rates could stay low for some time
Fragile – Greece could easily become disorderly default
Fragile – Mid East situation
Fragile – consumer is not robust as savings are driving consumption
Fragile – sentiment complaisent
February 16th, 2012 at 11:03 am
Hi BR,
Can I ask a question?
You have mentioned before many times, that we are in a secular bear market, but are seeing cyclical peaks/troughs etc.
Can you tell me during the 1960-82 period, which type of stocks/sectors held up best, or were most consistent?
Last year for example, it appears that in a low growth environment people see to pay a premium for earnings growth, visibility & safety – as opposed to say value. It seems utils/healthcare won the day.
Now people are looking more towards cyclicals and to a much lesser extent value.
I just thought that it may be useful to look at that period, to shed some light on what looks as though may be a similar period in history – valuation compression.
Thanks
February 16th, 2012 at 11:34 am
The normal state in capitalist economies is slight growth year in year out. If APPL “reverses” one day, that means nothing.
The publc markets see a return to normalcy and are telling you that in the medium term things will to be back to normal ( as they surmised in 3/09 we would avert a calamity.) The return to a normalish economy was accomplished with Keynesian demand stimulus, continued investment and continued technological developments.
With the vast majority of the Earth’s people living in capitalist systems, the growth in economies will continue. But so too will the charlatans who convince suckers they can prognosticate based on looking at charts, and the minority politicians who are seeking power, trying to convince the voting market that the economy in aggregate is somehow in a near-apocalyptic state. Their ‘business model’ is no different than a man wearing a bed sheet on a street corner in a bed sheet holding a “The end is near” sign. Sending them your money is simply a way to decrease your own ability to consume and invest.
February 16th, 2012 at 12:08 pm
Tim,
glad you read that Post the right way..~
wasn’t meaning for it to be ‘negative’ (as it may have been taken..)
February 16th, 2012 at 1:02 pm
Russell has been around a long time and a perma bear.
ECRI has been around a long time and pretty much agnostic.
ECRI’s been calling for recession since, what, Sept 2011. Says we’ll know by June if they are wrong.
Their track record is stellar but data is improving ever so slowly.
Markets are not currently listening to ECRI.
February 17th, 2012 at 7:03 am
[...] Yesterday, I mentioned that Richard Russell suggested Dow 10,000 was going to be tested. [...]
February 17th, 2012 at 11:29 am
[...] range, reeling in suckers ahead of the big reversal that no one could have possibly seen coming (except this guy but he’s 100 yrs. and just got divorced, so he’s bound to be in a bad mood). [...]