With key global markets at or near breakout levels, and the “Metal of Kings” marking time before reasserting its dominance, the Godfather of newsletter writers, Richard Russell, writes about Americans still partying, gold, the Fed, and stocks in a note to subscribers: “The central banks of the world are on a mission to keep the world economy going. A great bull market started in 1980. It ended in 2007, a period of 27 years. As such, it was, in duration, the longest bull market in US history. A bear market started in October 2007.”
Richard Russell continues:
“Bear markets tend to last from one-half to one-third as long as the preceding bull market. On that basis, the bear market that started in 2007 might be expected to continue for at least nine years (one-third of 27) or until 2016. However, the Central banks, and certainly President Obama, have attempted to halt the bear market and thus continue the prosperity we have enjoyed ever since World War II.
As proof of the Fed’s success, I would expect both the D-J Transportation and Industrial Averages to advance to new highs, thereby signaling that the tide had reversed to bullish (a bull market). According to classic Dow Theory, the primary trend of the market cannot be manipulated. Further, according to classic Dow Theory, the movements of one Average, unconfirmed by the other Average, are useless as guides to direction, and are more than likely to prove deceptive.
Sundry Observations — From what I see, Americans are still spending and partying as if nothing has changed. Here in Southern California, the restaurants are full, and this is especially true of the breakfast places (in my opinion, the height of free-spending is going to a restaurant for an expensive breakfast when you could have had an inexpensive breakfast at home).
The Fed and the government have bent over backwards in their crude and dishonest program to show the American public that the punch bowl is still full to the brim, and that “all is well” at home. We might even possess some hidden or inside information regarding what’s coming up, but we never know how the markets will react to that news. Usually, it is the market itself that will provide the only reliable hints as to where the market is going. Of course, this entails our learning to read the market.