JustThinking.us

From today's installment of Richard Russell's Dow Theory Letter.

Below are the last day of the year quotes for gold.

2000 -- $273.60
2001 -- $279.00
2002 -- $348.20
2003 -- $416.10
2004 -- $438.40
2005 -- $518.90
2006 -- $638.00
2007 -- $838.00
2008 -- $889.00 
2009 -- $1096.50
2010 -- $1421.40
2011 -- $1566.80

This year's close for gold marks the 11th year for higher year end gold closing.

To my knowledge this is the longest bull market of any kind in history in which each year's close was above the previous year.

This fabulous bull market will not end with a whisper and a fizzle. I continue to believe that the upside gold crescendo of this bull market lies ahead.

We are watching market history.

More than once now, I've plugged Richard Russell and his fine site Dow Theory Letters.

As though he needs it.

The following perfectly simple explanation of how to read a chart, perfectly illustrates his value.

Question -- Are charts really of any use?

Answer -- You might as well ask the question, "Are maps of any use?" And the answer is "Yes, both charts and maps are useful with one caveat, you must know how to read them."

Let's take a current example. Below I show a daily chart of the Dow going back three months. The first thing I see is that long blue ascending trendline. It continues higher until it hits what I call a consolidation box. The box is defined by a horizontal line at its top and another one at its bottom. So far, the Dow is "caught" in the middle of the box; it hasn't broken out to the upside or the downside. 

Then I see the red arrow at RSI. The arrow points to RSI heading down. Next I see another red arrow at MACD at the bottom of the chart. Here we see MACD rolling subtly over. In both cases, RSI and MACD appear to be ready to sink lower. This suggests that the Dow will break out below the box.

 If the Dow does break below the box, where is it likely to stop? The first support appears to come in at around 10800 on the chart. That is where the last decline halted when it touched the rising trendline. Often, moving averages will provide mysterious support and resistance levels during advances and declines. Today, the 50-day moving average for the Dow comes in at 10671. This should represent a resistance level on the downside. Below that we have the 200-day MA, which comes in at 10523. 

And that's the valuable information this single daily chart of the Dow provides us with. So are charts useful? Do they serve any real purpose? I'm convinced that they do. But like an explorer with a map, you have to know how to use charts.

Piece of cake.

This one has been going around for a while within a number of different presentations.

Having seen it again this PM at Richard Russell's Dow Theory Letter, and lacking the energy to work up any of the other ideas I have percolating, I decided to grab it.

As the great Vince Lombardi almost said,

"Fatigue makes mooches of us all."

Our elected officials are charged with dealing with our national deficit.

Now measured in the TRILLIONS of dollars.

Very few elite mathematicians are able to comprehend the impact of TWELVE ZEROS.

Instead of DOLLARS, let us imagine SECONDS of time:

ONE MILLION -------- 1,000,000 Seconds. ------ 1.65 WEEKS

ONE BILLION -------- 1,000,000,000 Seconds. ------ 31 YEARS, 8 MONTHS, 15 DAYS

ONE TRILLION ------ 1,000,000,000,000 Seconds. ----- 31,710 YEARS !!!

To quote Richard Russell one more time,

He goes on to say something about denial, the NYSE, the administration, the Fed and clueless newspapers.

It all seemed redundant.

But then ...

He hits his stride.

And since we're on the subject of jokes .....

I have for a long time now read people who read Richard Russell.

Bonehead!!!

He's well into his 80's now and his Dow Theory Letters isn't cheap.

Still, the more I read him the more I wish I had been doing so all along.

"If I told you I was going to give you a large steel box for your kids,

and that box was not to be opened for fifty years,

would you rather I put three million in cash in that box,

or three million in diamonds or gold?"

Helluva question ain't it?

"Nearly everybody I read or talk to is convinced that we're in a new bull market -- a primary bull market which they claim started at the March 2009 low.

If the March 2009 was a bear market low, it was unlike any bear market low that I have ever seen.

Where were the "great values" that always present themselves at a bear market bottom?

Where were the juicy Dow dividend yields that we invariably see at true bear market bottoms.

For instance, back in 1981 the Dow dividend yield was 6.42%.

At the bear market low of 1974 the Dow dividend yield was 6.12%.

In 1940 the Dow dividend was 6.84%.

In the dark year 1931, the Dow dividend yield was 10.78%

Where were the fabulous values in March 2009?

The answer, March 2009 was not a true bear market bottom.

The next great bear market low lies ahead!"

Here's Richard Russell, publisher of the Dow Theory Letters, with yet another take on the Bond Market.

He offers this chart on the 30-Year Treasury Bond with the following comments,

"I've been keeping an eagle eye on the daily chart of the 30-year Treasury bond. As of yesterday, the "long bond" had sunk exactly to its support at around 114. If support breaks, interest rates will be heading dangerously higher. The chart shows a double top (first two red arrows). Then a break to the downside and a formation showing a triple top (second set of three red arrows). As of yesterday's close, the 30-year T-bond was sitting exactly on critical support. If bonds are down today, it won't be pretty.

Friday Alan Greenspan called higher Treasury rates "the canary in the mine" and forecast rising rates. Greenspan is almost always wrong, but this time I agree with the former "Maestro."

Might be just about time to get that 30 year fixed refi, if you're able.

"This is very bad."

Among those things slowing down my posting lately, is the following quote by Richard Russell who has written and published the Dow Theory Letters for many years.  This quote is the first questioning I've seen from a serious, well respected, and heavily followed source of President Barack Obama's competance.  

Criticism of Obama, up until this instant have always been proceeded by qualifiers having to do with The President's obvious intelligence, communication skills and his seeming niceness, before fault finding on his specific policies could begin.  

 “I've been thinking about President Barack Obama and the nation's problems. My conclusion, in all honesty, is that Obama was unqualified for the job. Unlike Reagan, Obama had no deep-seated convictions about anything other than he would spread the wealth and go down in history as the people's hero.

 “When it comes to economics, I'm afraid that the President is lost. It's all so clear now that we can't spend ourselves back into prosperity, although some dour souls insist that we are spending ourselves into virtual bankruptcy. Even the American public understands that, but the prez doesn't.

“On economics, Obama is a rank amateur. He thought he could listen to a collection of name-economists and come up with the right answer. Unfortunately, Obama listened to the former head of the Princeton economics department an erudite young man named Ben S. Bernanke. Ben was considered to be our reigning top-expert on the Great Depression. Bernanke's solution to the whole mess was simple -- first save Wall Street and then release a massive amount of liquidity into the system. If there wasn't enough inflation in the system, then flood the system with liquidity and hopefully inflation will return. Anything to hold off dreaded deflation.” – Richard Russell, Dow Theory Letters, 01-26-10

 Up until this instant, while it had been OK to question The President's competance at the bar over a beer, in the elevator, or over the telephone while sitting there with your feet on the desk,  no credible public source had felt the need, or found the stones, ... take your pick, ... to question the man's abilities.

 Now comes the following from The Wall Street Journal.