Russell On US Dollar & DowThe cheap and getting-cheaper dollar is killing European and Japanese exporters. In fact, if the dollar continues on its collapsing ways, both Europe and Japan could slide into something resembling a recession. How about China? China has pegged its renminbi to the dollar so as the dollar probes the lower depths, the renminbi goes with it. This, of course, put pressure on other Asian nations who have to compete with China. Hey, isn't paper currency fun? Like, uh like it's turning the whole world into a casino!
How about that Dow? Below we see a P&F chart of the dear old D-J Industrial Average, 30 monster corporations which combined I call "the backbone of the US economy. But the damn Dow won't confirm the S&P and it won't confirm the Transports. Well, sure, the Dow has moved above previous secondary peaks, but that February 2004 peak at the 10750 box, the Dow hasn't, so far, been able to climb above that peak.
Will the Dow, at last, confirm? Hey, if I could answer that kind of question I would be the richest man on the planet. Warren Buffett would be calling to ask me what he should do next.
I just got a call from an old buddy in NYC. Let's call him Jay. Jay is down has been on Wall Street since the late-1940s, and he hears everything and knows just about everything that's going on. So I asked Jay the obvious question, which is -- "What's going on?" Jay answered with one word -- "XFI." Everybody's interested in, and some are hot about, FXI. You want to know what FXI is? It's an Ishare or ETF covering 52 important Chinese companies.
This new ETF was listed on the Amex on October 8. It hit a high of 54.33 on October 11, promptly plunged to a low of 50.60 on Oct. 28., then began steadily climbing. Today FXI is trading around 56. Russell thought -- Some experts I read believe China is in for a virtual crash, based on the banks being loaded with bad debt. Other experts say that China is the wave of the future, and that there's no stopping 1.2 billion people who will work for far less than we will work for. And as for technology, China is surging forward.
So is FXI worth a shot? I don't know. It is the easiest way I know of -- of taking a position on China. I do think this -- XFI is sure worth watching.
Bond Thoughts -- Everybody and his brother knows that both the US dollar and US bonds are headed down. But today on the lousy employment news, the Bonds rocketed higher, up a huge one and 21/32nds. Does the bond market think that the US economy has "had it," based on the poor employment reports and the dismal sales at the retail stores. Of was today's action just a violent pull-back after the bond had broken support. The mystery deepens. But if the US economy is fading out, we should also see it in the action of the stock market.
Richard Russell
Editor-in-chief - DOW THEORY LETTERSwww.dowtheoryletters.com/ServicesOnline.nsf/Subscription+Form?OpenForm
December 4, 2004
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-'66 bull market. And almost to the day he called the bottom of the great 1972-'74 bear market, and the beginning of the great bull market which started in December 1974.
