It looks to me as if the equity markets are perched on the edge of a cliff ready for the next leg down in a massive secular bear market that began in March 2000. The huge rounding topping pattern of all the major indexes suggests a major distribution process is underway. Yes, all of Wall Street still seems to believe equities are a good deal. Either that or they have been buying into the fiat currency lies of the Federal Reserve system for so long that they have forgotten that markets have always and will always experience major expansions and contractions no matter how much money is printed. With more and more intervention, most have become anesthetized against this truth. But it is a truth that will be learned again. The first leg down in the bear market that began in 2000 was a wake up call, but most people never woke up.
CNBC talking heads asked superficially whether we had experienced "the capitulation" and those who wanted to get the bear market over with so they could waddle in easy gotten gains gave a quick and resounding yes to Maria Bartiromo. But they are about to learn that the bear market isn't over. And I believe when the next leg is over, no one will have to ask whether we have had capitulation. When capitulation arrives you won't need to ask because, like a desert wasteland, there will be dead bodies all over the place and no one but no one will want to own stocks. That's just the way it is at the bottom of bear markets.
The huge and rounding top I mentioned above can be seen from the following chart. Regarding the Dow Jones Industrial Average, Trader Rog sent me the following e-mail note this past Thursday. "Jay-Look at the index stuck right on 9815 where I said support was. It's breaking down, and it's only a matter of days or a couple of weeks and this thing is down the slide and gold will run.-Roger"
If what we see is a gigantic wealth distribution pattern, then who is taking all this money off the table? Why do you ask? It is Wall Street insiders, of course.
Insiders Are Running From The Market!
Wave after wave after wave of insider selling and almost no insider buying is the pattern we see day after day as reported in The Wall Street Journal. CNBC won't talk about it, but The Wall Street Journal publishes statistics provided by Thomson Financial. What the Journal publishes are the top ten insider buyers and top ten insider sellers each day. And then once per week they provide a summary for the week of the top ten sellers and top ten buyers.
For the last week in July, among the top ten, there was $143.6 million of insider sales vs. $35.6 million of insider purchases. However, the sales to purchases are much more lopsided than this, judging by the daily statistics because the cumulative magnitude of sellers to buyers is masked by picking only the top ten largest in both categories. For example, in reviewing the numbers for August 2, 2004, I see a total of $93.6 million of insider sales among the top ten sellers and only $1.6 million of insider buyers among the top ten buyers. That amounts to $58 sold for every dollar purchased. On a daily basis the ratios are from a low of around $10 sold for every $1 purchased, to a high of closer to $100 to $1.
Who are some of the big name insiders who are taking millions upon millions of dollars out of the market as CNBC keeps telling small fry investors to keep pumping their 401-K money into stocks? I see Bill Gates has taken close to $200 million out in the last few days. Larry Ellison of Oracle Corp. has been pulling tens of millions out day after day. Top bigwigs from Dex Media have pulled upward to $1 billion out over the past few weeks. Many more hotshots have not only been taking a few chips off the table but have been running like mad out of the market. I wonder where their money is going? Gold perhaps? That you won't find out until gold has its run to well over $1,000 per ounce. But no doubt these guys are also getting much of their wealth offshore so that when the fecal matter (the dollar) hits the rotary oscillator here in the U.S. When most Americans have seen their dreams of a comfortable retirement washed down the drain, the ruling elite will no doubt have their wealth already safely squirreled away in a Swiss account, quite beyond the reach of armed tax bureaucrats.
So for the last week of July 2004, as reported in The Wall Street Journal, there were nearly $1.5 billion of securities sold by insiders compared to $48.5 million bought. That works out to a ratio of around $30.80 of securities sold for every $1 purchased. If the CEO and other high ranking members of management, who are in a position to see the future of their companies better than anyone, are selling their stock in droves, why should you continue putting money into stocks in your 401-K program? Unfortunately for most, many if not most 401-K programs do not give you any good options other than stocks and bonds, and few (if any) allow you to buy a good gold mining share fund.
But that's the way the game is played. That's how the establishment robs average folks of their wealth. By fiat, they require us to use paper money, which the bankers with the permission of the politicians create out of thin air. Wealth is reallocated via big market expansions and contractions. (The next leg of contraction in equities is, in my view, just beginning.) Meanwhile, the ruling elite make it as difficult as possible to buy and own gold, either via regulatory hurdles or outright lies and CNBC spinning. In that way they keep you in the system so they can continue to rob you. Wonder why the much-heralded gold Exchange Traded Fund (ETF) has not yet been constructed in the U.S.? Funny how we have ETF's for everything else but not gold. I suspect the establishment has fought the ETF for the same reason they hit the gold market every time there is a reason for gold to run. They don't want you thinking gold is better than paper money. But if you can see beyond these games, you will be taking advantage of these low prices to buy gold and to buy as much of it as you can at these subsidized levels.
THE DOLLAR
Today's (Friday 8/13/04) U.S. dollar continued to sink; lost .76 and closed at 88.04. Its opposite, the Swiss Franc, closed at .8073 (almost to main resistance), being up .0096. These two currencies up and down, with sinking stocks and rising gold, all indicate that the precious metals markets are preparing to rally. The most important support that must hold is the U. S. dollar at 80.00 or above. The rest of charts are important, but the dollar chart is the most important of all. If 80.00 support can hold, the really bad stuff can be prevented. If the dollar breaks below 80.00, and closes below 80.00 three days in a row, a series of very nasty problems can surface. It's all going down for sure, the big question is how much.
PRECIOUS METALS STOCKS
I would only be holding precious metals stocks, and nothing else except perhaps some choice energy stocks. Even the PM stocks might drop in sympathy with the other markets for a few days. Do not panic; continue to hold them for the inevitable rallies.
Strap on your seatbelts as the volatility is going to give new meaning to the word. Earn your profits and take your profits, but do not get scared out of your PM positions, as they are going to be truly precious to you in the days ahead. -Trader Rog, August 13, 2004.
August 14, 2004
Jay Taylor, Editor of J Taylor's Gold & Technology Stocks
www.miningstocks.com