HAS RICHARD RUSSELL TURNED BULLISH?
A recent article at MarketWatch by Mark Hulbert said Richard Russell was now bullish on the stock market despite just recently saying that the market was in a bear market rally. Hulbert wrote:
Richard Russell, editor of Dow Theory Letters, is one of the technical analysts who, in light of the joint new highs of both the Dow Industrials and the Dow Transports, are now officially bullish on both the secondary and primary trends of the stock market.
So has Russell flip flopped in just a week? Not even remotely. Although Russell’s short-term indicators are bullish he is still skeptical of the market rally and maintains his position that the market is due for another vicious downturn. Just yesterday Russell wrote:
Russell on the stock market – My PTI is bullish, the Lowry’s statistics are bullish. The Industrials and the Transports corrected and then both Averages rose to new highs. The mechanical part of the situation has been satisfied by Dow Theory. But I’m still bothered by the fact that this “bull market” never started from an area where stocks were selling “below known values.” Every bear market I’ve ever seen has ended with stock selling “below known values.” We never saw anything like that at the October 2008 lows or at the March 2009 lows.
For this reason, I continue to think that maybe the final bear market bottom lies ahead. Suspicion, thy name is Russell. I think it’s OK to take a limited position in DIA (a proxy for the Dow). I don’t know whether such a position will turn out to be a long-term hold or whether it will turn out to be a trading position. And yes, I’m aware that my PTI looks like a head-and-shoulders pattern. But at the first sign of this advance actually breaking down, I’ll alert my subscribers to it.
So no, Mr. Hulbert, Richard Russell is not beating the same rah rah drum that the mainstream media bulls are. Not even close. But that doesn’t mean Russell isn’t bullish at all. In fact, he remains incredibly bullish about gold and given his uncanny accuracy it’s well worth listening to him:
Question — Russell, what have you personally done in your investing over the last many months?
Answer – I’ve stuck with gold, because I have such a firm conviction that gold is in a primary bull market. Of course, I’ve held this opinion for years, and for all those years I’ve begged my subscribers to buy and hold gold. Gold’s relative strength continues to be stronger than the Dow, but a position in DIA is now warranted.
So yes, Russell is bullish. He’s just not bullish about equities.
Source: Dow Theory Letters
Sounds like he is short term bullish on the DOW for technical reasons. He is recommending DIA as a trade, maybe to hold.
the problem I see with the above Dow Theory analysis is that there is a non-confirmation by the Trans to surpass the Oct 08 rally high of 4217 whereas the Industrials have long exceeded its same period high of 9794; we’ll see which one has more significance…his PTI is much more useful in making investment decisions than all the ramblings about secular bull mkt vs bear mkt rally etc, especially after a 63% (S&P) rise in 9 mos.
TPC Reply:
November 19th, 2009 at 7:47 AM
Really, it’s his daily readings that are so great. He just combines a vast amount of market knowledge with common sense. I am not even convinced that the Dow Theory works. Much like David Rosenberg, you read him not necessarily for this strategic thinking, but for his unconventional thinking.
So bearish for 500 points up in the dow then advises a position in the dia, come on, I love reading the letters but he is by no means a good market timer.
Eric Reply:
November 19th, 2009 at 11:48 AM
500 in the s&p I should say.
BGray Reply:
November 19th, 2009 at 1:19 PM
Russell is definitely not a good market timer. I love reading him everyday for his wisdom on the markets and life, but he only occasionally gets the timing just right.
I have a huge respect for Russell. I think his instincts are spot on. What occurs to me is that Dow Theory works just fine, as long as we don’t have so many of the market sectors that have been (and continue to be) manipulated, for so long. If all arenas of the investment field were truly free markets I think there is little doubt that Mr. Russell would have seen his gut instinct confirmed long ago. Love his glimpses into history and WWII as well. May you live another 80(+) years Mr. Russell!
TPC Reply:
November 19th, 2009 at 2:09 PM
I couldnt agree more….
No one can consistently time the markets, i.e., call tops and bottoms with anything approaching precision. Most who have tried have gotten fried. The important thing is to be on the right side of the market most of the time and even more importantly, never suffer a large loss. Studies have shown that large losses are never made up. RR appears to do this as well as anyone.
TPC Reply:
November 19th, 2009 at 2:53 PM
Exactly. It’s not missing the big gains that kills most investors, but suffering through the large losses. This is one factor that readers often overlook. I have been skewered by readers at Seeking Alpha who point out that I missed much of the rally up (which is true), but I also missed out on all of last year’s losses (actually posting double digit gains). My gains this year, though underperforming, still notch a high water mark. I attribute this entirely to good risk management.
Rob Reply:
November 19th, 2009 at 3:25 PM
I too have missed the big losses, but missing too much of the big run up since March has been killing me.
TPC Reply:
November 19th, 2009 at 3:30 PM
Rob, it sounds like an option writing strategy would work well for you. Have you ever looked in it?
The U.S. indices are topping right now technically.
JTodd Reply:
November 19th, 2009 at 8:07 PM
Keep an eye on the IWM, it was down 2.5% today and has confirmed lower highs and lows. The daily S&P has four swings of negative divergence with the MACD and the RSI this is a rare event.
James Reply:
November 19th, 2009 at 8:15 PM
I don’t understand what you are trying to convey.
I remember back when Dow was above 7500, Mark Hulbert wrote an article saying that it wouln’t break below….Little that he knows, it broke below…Keep in mind that
Meredith call for a double bottom…and market ignored…anyone check the outflow of funds??….
Russel’s BiG Picture Bearish based on what he says is a rally from stocks that weren’t under valued? 9th March 2009 weren’t we at 15 year lows on the Dow and S&P and 30 year lows on stock in major emerging markets (except China which was already running up from start of the year)? I was under the impression that we were very under valued, especially after that huge drop in Oct ‘08 not to mention the lower levels in March ‘09.
What about our last huge Big Bull run up from 2001 to Oct 2007? Didn’t that come from the Tech Bubble Burst where even at the lowest many stocks were still very much over bought?
Actually contrary to this article the majority are not looking to a continuation major Bull Run from here, but are looking to that double dip as evidenced from the reactions here. No one it seems from March this year to now are prepared to say we are under way Bull cycle.
Except for Buffet who must be in deep manure having just spent $34Billion on the Burlington purchase betting on an up cycle … $8 Billion of it borrowed money.
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