Monday, June 14, 2010

Get out of all common stocks except...

Hi Guys
some very simple advice, so go do your own research on how it affects your financial future

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Richard Russell on the markets. Get out of all common stocks except PM's.

Hi, 
http://ww2.dowtheoryletters.com/ 
This is the same advice he gave as we headed into the 2008 market swoon. Anybody who took that advice emerged in reasonably good shape. 
This is a paid service so I will only post an extract. I strongly recommend a sub to everybody who wants to understand the internal mechanics of the market.

Richard has been doing this on a daily basis since about 1957 & is the best in the business IMO. 
I have cut & pasted this so it doesn't include the charts mentioned. 

----------------------------------------------------- 
Finally, it's happening. The stock market has "lost its mind." The poor thing is falling apart, when every sane investor knows that the market "should be" going up as it discounts the almost certain better economy that lies ahead. Then I remember that the stock market reflects what everybody knows about everything and anything that pertains to business and the forthcoming economy. So alas, the stock market has finally gone insane. It's not telling us what we already know. 

I search Saturday's Wall Street Journal and right on the front page I read, "The recovery is beating expectations as data show consumer and manufacturing strength." 

Then I look at the latest issue of Barron's (May 17) and right on the cover I read, "STRONGER THAN EVER, America's biggest companies are sitting on loads of cash and ready to earn higher profits than ever before. What it means for the economy, dividends and your investments." 

And I ask myself, "Am I seeing things? The April 26 high for the Dow was 11205.03. The Dow is selling as write at 10557 down 648 points from its April high. If business is even better than expected, then why is the Dow down over 600 points? And why, if there were 674 new highs on the NYSE on April 26, were there only 20 new highs on Friday, May 14? And if my PTI was 6133 on April 26, why is it down 17 points since its April high? 

The fact is that I've been seeing deterioration in the stock market ever since early-April, and this in the face of improving business news. The D-J Industrial Average is composed of 30 internationally known top-quality blue-chip stocks. These are 30 of "America's biggest companies." If Barron's is so bullish on the future of America's biggest companies, then why isn't the Dow advancing to new highs? 

Clearly something is wrong. But what could it be? Much as I love Barron's, I trust the stock market more. If I read the stock market correctly, it's telling me that there is a surprise ahead. And that surprise will be a reversal to the downside for the economy, plus a collection of other troubles ahead. 

About Dow Theory -- First, we saw the recent April highs in the Averages. Then we saw a plunge in both Averages to their May 7 lows -- Industrials to 10380.43, Transports to 4298.12, next a short rally. If ahead, the two Averages turn down and violate their May 7 lows, that would be the clincher. Such action would signal the certain resumption of the primary bear market. 

Just as for years I asked, cajoled, insisted, threatened, demanded, that my subscribers buy gold, I am now insisting, demanding, begging my subscribers to get OUT of stocks (including C and BYD, but not including golds) and get into cash or gold (bullion if possible). If the two Averages violate their May 7 lows, I see a major crash as the outcome. Pul - leeze, get out of stocks now, and I don't give a damn whether you have paper losses or paper profits! 

Question -- Russell, if you're so damn smart, then how is it that most of the economists and analysts disagree with you? The fact is that most experts are now bullish on both the economy and the stock market. 

Answer -- I think Washington and the economists have brain-washed themselves. They are so blasted anxious to be optimistic, they are all listening to each other and all thinking alike. And when everybody is thinking alike, nobody is thinking. 

Late Notes -- Another nasty and misleading day. Dow up, Trannies down. More "internal market" destruction. Breadth on the NYSE down. Down volume on the NYSE was 59% of up + down volume. My PTI was down 4 to 6112. MA was 6076, so my PTI is bullish by 36, lowest number in months. 

As we used to say, "What's the word, mocking bird?" The word, dear subscribers is "trouble ahead." 

Russell suggestion -- Do your friends a favor. Tell them to "batten down the hatches" because there's a HARD RAIN coming. Tell them to get out of debt and sell anything they can sell (and don't need) in order to get liquid. Tell them that Richard Russell says that by the end of this year they won't recognize the country. They'll retort, "How the dickens does Russell know -- who told him?" Tell them the stock market told him. 

And as we say a fond good bye to Monday, we look forward --





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