Oh, where have you been, my blue-eyed son ?

And where have you been my darling young one ?

I've stumbled on the side of twelve misty mountains

I've walked and I've crawled on six crooked highways

I've stepped in the middle of seven sad forests

I've been out in front of a dozen dead oceans

I've been ten thousand miles in the mouth of a graveyard

And it's a hard, it's a hard, it's a hard, and it's a hard

It's a hard rain's a-gonna fall. (courtesy of Bob Dylan)

December 19, 2011

The New America -- "We are heading into what may be the dirtiest presidential campaign in history. The Obama campaign is planning to use the one billion it hopes to raise to portray the Republican nominee as a dangerous, heartless radical. That nominee is sure to respond with a withering counter-assault." from The Week magazine.

"Just to replace all the jobs lost in the recession and keep up with the population growth, the economy would have to add 275,000 jobs a month for the next five years." NY Times.

"The Postal service announced this week that it would dramatically scale back services in a bid to save itself from bankruptcy. The USPS wants to shut over half of its 247 mail processing centers and eliminate 28,000 jobs." William Falk in The Week.

...............................................

With the stock market acting poorly, commentators are constantly searching for good news or encouraging statistics in a bid to stir up bullishness. They are wasting their time. The markets do not move on current news.

The real story is in the action of the stock market itself. I refer to the Lowry's statistics. They show that the urge to buy stocks (demand) is weak and sluggish. Conversely, the urge to sell stocks (supply) is strong and surpasses the desire (demand) to buy. These are not guesses. The Lowry's figures are derived from the actual daily transactions, based on daily volume and total points gained or lost each day, on the NYSE.

Selling Pressure Index crossed above the Buying Power Index in early September. This was a very significant event showing that we were seeing an important technical CHANGE. Following the cross-over, the peak of weakness occurs when the distance between the higher Selling Pressure Index and the lower Buying Power Index is at its widest spread. On December 7 the negative spread between the two indices hit its widest spread of weakness at 168 points.

The spread allows us to measure the extent of the growing weakness in the bear market. On Dec. 7 the negative spread was 168. By Dec. 16 the spread had widened to 207.

I talked with my good friend, Joe Granville, over the weekend, and Joe is as bearish as I've ever seen or heard him, based on his OBV volume figures. This checks with my own work and studies.

While fundamentalists scour the news for indications of bullish news, the internals of the stock market continue to deteriorate. Even the action of the stock market is bearish as the market rallies on dull volume but declines on higher volume. Furthermore, rising breadth is narrow on rallies while declining breadth is broad when the market heads down.

I don't know what more I can do or say to convince subscribers that we are seeing the resumption of the bear market. This means that we should be OUT of all stocks. As for gold mining stocks, this is a personal choice. In due time, I expect gold to fully express itself with a huge upside blow-off. At that time I expect gold mining stocks to follow, but between now and then gold mining shares will probably be hit like every thing else by the fury of the bear market.

I should add that I am expecting this bear market to be far worse than most people expect or are prepared for. The fact is that I don't believe that Americans expect any thing more than a temporary spate of difficult times, an annoying patch that should be over in a year or so. This is not what I am expecting or predicting.

Once the Dow breaks under 10,000, I believe that the analysts and the PUBLIC will become frightened and start to cut back on their buying. The newspapers will halt their bullish stance, and a great stillness will envelope that land. That stillness will be the result of shock as it dawns on Americans that they are seeing something far different than what they were expecting.

By the way, the Dow is now trading below its 200-day moving average, which stands at 11,938. The 50-day MA is bearishly below the 200-day MA (50-day is 11,811).

Spiritual -- While in rehab and after my hip operation I had a lot of time to think. And I wondered why I was still alive. I had survived combat in World War II. I had survived two heart attacks and a stroke. I had survived a mastoid infection and operation. I had survived 50 years of riding motorcycles with one dangerous crash. I had survived two divorces. I have survived (and believe me it was survival) a severely autistic daughter who almost drove me mad. I have survived the years, since I will be 88 (the Chinese lucky number is 8).

So why, I ask myself, am I still here with my brain still functioning. My conclusion, arrived at after a lot of hard thinking, is that I'm supposed to be the messenger of changing times. I have 8,034 subscribers. What percentage of these ladies and gentlemen take me seriously and follow my advice, and what percentage of this group think I am a self-opinionated loonie I don't know.

In other words, some body wants me to hang around. I know this based on e-mails and kind letters I have received from many subscribers. My advice over the years on gold and various bull and bear markets has resulted in changing some lives for the better. Which is a source of great satisfaction to me.

So that's my story. I'm afraid it may sound prideful or mystical, but it is what I think, and when a man is 87 years old, he's long past the need or the desire to lie.

I know this based on e-mails and kind letters I have received over the year.

The 50-day MA of the Dow is now trading below the 200-day MA, and the Dow is bearishly trading below both. Today's action was very poor with the Dow closing near its low. My message to subscribers, hope for the best (you know what I think of hope in this business) and prepare for the worst.

So long for Monday,

Russell

I continue to warn that with all the international "money" printing, inflation lies ahead. This also means higher interest rates. Subscribers must remember the interest rates are abnormally low today, which means that trillions of dollars are being rolled over at almost negative rates. But when rates begin to advance, the compounding effect comes into play. This will present problems beyond anything ever seen by Americans and a massive slowdown in business. The slowdown will be addressed by the central banks by printing, printing and more printing!

The following is from the early December issue of the authoritative Bank Credit Analyst -- "Thus far, the US economy has remained resilient despite the turmoil overseas. However, European banks are major players in the US, and if the euro crisis remains unchecked, the maelstrom will eventually engulf the US economy. In addition, the failure of the Super Committee to reach an agreement increases the odds of more front-loaded fiscal cuts over the next two years, which will further weigh down growth."

The ease with which the Dow cut thru the 12,000 level and back into the 11,000 was I thought ominous. Instructions: Be out of ALL stocks including mining stocks if you've not done so already. As I see it, the bear market is now continuing from where it left off in 2009. I expect the Fed to start printing again within the next few months. I see major danger ahead and a further collapse in housing prices.

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Richard Russell
website: Dow Theory Letters
email: Dow Theory Letters
Russell Archives

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