“Last week saw the D-J Industrial Average and the D-J Transportation Average hit joint new highs. Ordinarily, that action should present a valid signal for further highs. Only two items give me pause. The first is the advance-decline line for the NYSE. The chart below shows this A-D line running into resistance at a triple-top delineated by the horizontal blue line, which I have drawn in on the chart.
The second questionable item is the D-J Utility Average. This average appeared in 1929, so it was never incorporated into classic Dow Theory. Nevertheless, the Utility Average has a history of topping out three months ahead of the rest of the market. Although, on occasion the Utilities have topped out simultaneously with the rest of the market. I show the Utility Average below, and it does indeed appear to have topped out.
I almost hesitate to write the following, but I will report that after reading the latest edition of Barron’s from cover to cover, there was no mention of the possibility of the stock market having topped out last week, even with the surprise report that the Fed was not tapering. I’m not going to go into the “why’s” or “how comes” of the Fed’s decision, let’s just watch the market and see how it acts.
On the day the non-tapering was announced, the Dow ended the session up 147 points. The following day the Dow was down 40 points. My reaction was, “Maybe the ‘smart boys’ are selling into the bullish action created by the non-tapering news.” I wondered if the rally would resume on Friday, but no such luck. On Friday the Dow dropped 185 points. This second day of selling had me sitting up and paying attention. Could the pros be selling into the good news? And if that was the case, what can we expect this week?
So how are things at the company level? For the answer to this, I turn to mighty Walmart, the nation’s biggest employer and the nation’s largest retailer. The recent action of WMT has my attention. The long rising trendline has been violated and now WMT has rallied back to contact the underside of the trendline. So far, so good?
Below is Apple, the glamour stock of 2013. They’re out with their new iPhones, but the stock acts “funny.” In the most recent action the stock sank below its down-pointing trendline, and then it gapped down from there. Apple was up big today on news of great weekend sales from the new iPhones.
Can’t forget gold. I continue to believe that gold is building a powerful base. Note the rising bottoms on the chart.
Big Picture — The US doesn’t pay off its debts, it simply rolls them over. Since the US continually runs deficits, it rolls over its debts on an ever-larger compounded basis.
The debt of the US Government is now $17 trillion. The debt is increasing exponentially, and we can assume that it will double in about 7.4 years. Furthermore, unfunded liabilities such as Social Security and Medicare mean that the total debt is closer to $100 trillion, and some say $200 trillion.
It’s an amazing Ponzi scheme run by a government that has run out of answers. The current players in this sad scenario are all over 50 years of age, so they will not be around when the national debt runs into a stone wall. I believe the current thinking is that we can roll over our national debt forever, and there will never come a time when we will be forced to “settle up.”
As I see it, ultimately, a totally new monetary system will have to come into being. And there may have to be a moratorium on all world debt. At that time the last man standing will be tangible wealth — gold, silver, gems, great works of art and collectibles — but these are just my guesses, since we are moving into a world of unknowns; the only known factor being that the nation’s debt is compounding into a monster that defies financial description.
Russell opinion — Barrack Obama’s presidency is effectively finished as is Ben Bernanke’s Fed career … I think Bernanke just wants to get out of Washington alive. Now he can make real money giving speeches, and maybe writing a tell-all book for five million dollars in advance.”
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About Richard Russell
Russell began publishing Dow Theory Letters in 1958, and he has been writing the Letters ever since (never once having skipped a Letter). Dow Theory Letters is the oldest service continuously written by one person in the business.
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.
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