Richard Russell The Stock Market Bull
April 4, 2008 - (Bloomberg) -- The U.S. lost jobs for a third consecutive month in March and the unemployment rate rose to the highest level since September 2005, pointing to an economy that may already be in a recession. Payrolls shrank by 80,000, more than forecast, after a decrease of 76,000 in February that was more than initially reported, the Labor Department said today in Washington.
Russell Comment -- What was the market's reaction to this "shocking" news? Very little (yawn). The stock market backed off a bit, muggled around all day and finally closed slightly lower. Breadth was actually up a bit at the close, and the NYSE could come up with only 14 new lows. S&P and NASDAQ were up.
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Ah, Friday is finally here. This has been a tough week, and I'll tell you the truth, I thought Friday would never come. Friday's close is always interesting because it gives you a hint regarding the traders' sentiment. If traders are bullish, they'll be more amenable to holding stocks over the weekend. If traders are worried or bearish, they'll go home "clean."
As I see it, the market is looking a lot more promising than it did a month ago. Consider the following --
We've had a stubborn and continuing non-confirmation on the part of the Transports.
We've had two 90% up-days, one on March 18 and a second one soon after -- on March 31.
We've seen the new lows on the NYSE collapse from 1,114 on January 22 to just 10 yesterday. On April 1 we finally saw new highs on the NYSE outnumber new lows.
We've seen the market's technical action improve in the face of frighteningly bad news along with an avalanche of bearish opinions and forecasts, many from some of the nation's leading economists.
We've seen the short interest on the NYSE build up to a record 16 million shares sold short. The higher the short interest within a market that's working higher, the more bullish the situation. There's nothing more frightening to a short seller than to be locked into a market that won't go down. Talk about staying awake nights, that's what today's short sellers must be doing.
Here, add another plus to the total stock market picture. The Bullish Percentage of Stocks on the NYSE trend has been UP ever since the January 22 low, and now the Bullish Percentage has rallied above its preceding peak to a new high since January, the new high being 46.85%. That's a bullish progression, and even better news would be to see the Bullish Percentage rise above 50%.
I'm afraid I've been neglecting the NASDAQ, which has formed a large basing-pattern along with four bullish P&F signals. It is also pertinent to note that the NASDAQ is now doing its work well above the red declining trendline, and this is bullish. It seems to me that the Dow, taken together with the Wilshire and the NASDAQ, is telling us that the stock market has already discounted the worst that can be seen ahead. The bases have been formed. The markets are in a recovery phase. Time is on the side of the bulls. By summer or early fall, it should be apparent that the US economy is on the healing path.
The healing, the recovery, has been partly the result of a huge mass of currency having been injected into the US and the world financial systems. My instinct tells me that once the worst has visibly passed and recovery is on the way, that mass of currency is going to set off world inflation in all areas. We may be getting an early taste of that inflation now in the price of food and in some materials such as platinum and aluminum and iron.
The fact that gold has bounced back above 900 may indicate things to come. So far, I'm rather impressed by gold's performance.
Hey, how's the world looking to you? The S&P's Global 100 of the world's largest corporations took a swan dive down to the 69 level, but it's now in a recovery phase, having built a base and just recently having advanced above two preceding peaks. I like IOO and consider it a good long-term holding. Buy IOO and you own a piece of the 100 largest corporations on the planet. Nothing wrong with that. And you're certainly diversified. As the world goes, you go.
Comment -- The market's bullish action has left some of the nation's leading bears confused, frustrated and even angry. Every bear with any brains should know enough not to argue with the markets -- even though I've hear many analysts complain that this stock market is "crazy," and that the "speculators" and "manipulators" are taking the market to ridiculous and phony heights.
The latest excuse by those who don't see the picture is this -- "Yeah, the market may rally for a few months or so, but then the bear is going to tighten his grip and this market is going to hell in a handbasket." My response is -- maybe it will happen exactly that way, but that's just a sheer guess on the part of the frustrated bears. If the market won't do what you want it to do now, then predict is will do your bidding a few months from now.
Hey, if this market starts to look bearish, I'll turn bearish. In the meantime, I'll continue to be guided by market action, not by talk or the forecasts of so-called experts.
My intention has always been to remind my subscribers to respect the market. I've always stated that any time you think you know more than the market, you're looking for trouble. Ninety percent of the time, whatever "secret inside information" you have come up with -- is already built into the structure of the market. Our job is not to try to outsmart the market, our job is to try to uncover what the market is telling us.
It's been my opinion that the stock market at the January 22 low had discounted the worst that could be seen ahead. At the time my stance seemed to be absurd if not impossible. Today my bullish stance seems -- well less absurd. It's hard to take a stance opposite to the general and obvious opinion. I've done it so many times that if now seems almost natural.
Of course, when you go against the consensus, you always do a bit of sweating. So what, it's all part of my job. Of course, there's a reward for all the sweating. The reward is that if I turn out to be right, my subscribers are at least getting their money's worth. I'm never happier than when I feel my subscribers are getting their money's worth.
Richard Russell
Editor-in-chief - DOW THEORY LETTERS
http://www.dowtheoryletters.com
April 6, 2008
The inimitable and venerable Mr. Russell gained wide recognition via a series of over 30 Dow Theory and technical articles that he wrote for Barron's during the late-'50s through the '90s. Through Barron's and via word of mouth, he gained a wide following. Russell was the first (in 1960) to recommend gold stocks. He called the top of the 1949-1966 bull market. And almost to the day he called the bottom of the great 1972-1974 bear market, and the beginning of the great bull market which started in December 1974.
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