Richard Russell - Dow Theory Primary Trend Change Confirmation - Bear Market Ahead

Richard Russell - “How far will the bear market carry?  No one knows.  Already all of 2012's gains have been wiped out.  There's a number down there to where the bear market is heading.  I don't know what that number is.  Dow 8,000?  Dow 6,000?  Dow 4,000?  Dow 2,500?”

“The number could be any one of these.  What I hope is that we get to that number as quickly as possible.  I just hope we get the pain of the bear market over as fast as possible.  One mistake is to think we know how costly the bear market is fated to be -- and how far the bear market will carry.  The Primary trend is a law unto itself.  It will continue until it dies of exhaustion. 

In the meantime, the bear market goes on.  I'm afraid it has a long way to go.  But we will survive.  In all seriousness, I feel it is my duty to help my subscribers to survive and weather this bear market.

DANGER -- A primary bear market has been signaled according to Dow Theory.  On May 1 the Dow Industrials rose to a high of 13,279.32. The Transports failed by a wide margin to confirm.  The two Averages then turned down and broke below their April lows.  Under Dow Theory, this was confirmation that a primary bear market is in progress.

As so often happens, the bear signal arrived at a time when the stock market was acutely oversold.  Most bear markets wipe out a half to two-thirds of the preceding bull market.  As a rule, the more froth the bull market generates, the nastier the bear market that follows.

Major bear market declines can be extended and even tedious, while the rallies or counter-moves can come unexpectedly and are often rapid and violent (the violence is usually a result of frantic short-covering by traders who are trapped by the rally).

I want to reiterate that bear markets tend to be deceptive and not usually given to logical analysis.  One reason for this is that bear markets operate within a background of naked fear.  Two emotions rule the market -- Fear and greed.  Of the two, fear is the stronger of the two -- because the specter behind the fear is LOSS.  Greed is also a strong emotion, but fear of loss trumps the desire for gain.”

Russell also added: “Gold is finally above 1600 again, and I think it has moved into a buying range.  I no longer see a BIG correction ahead for gold.  As the euro and other junk fiat currencies weaken, there will be more and more buyers of gold -- including confused central banks. 

Retail sentiment for gold is now low, which is bullish for the metal.  I've been sitting with all my gold and paper gold.  I've been determined that I'm not going to be knocked out.


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