The Red Arrows
Richard Russell snippet
Dow Theory Letters
Jan 26, 2011
January 25, 2011 -- "Imagine telling Charles Dow
100 years ago about the inclusion of Disney, McDonald's, Wal-Mart,
Home Depot, Amex, BofA, & JP Morgan Chase representing American
industry for his index of 'industrial' giants'. Dow might have
asked, 'What do they produce?" Without realizing that he
was reacting like the Austrian school of economics that holds
that wealth must be produced: It can't be borrowed or printed."
From Ian McAvity's remarkable publication, Deliberations on
Gold has risen a fantastic ten years in succession. Gold,
of late, has been receiving a lot of interest and publicity and
advertising. Gold is probably overdue for a correction in this
ongoing bull market. Analysts are talking about "gold correcting
down to 1200 or even 1000." However, I believe that the
more important picture is that the gold bull market has much
further to go on the upside.
I've been reading the McClellan Market report for years.
It's one of the better and more intelligent reports that I read.
McClellan does a good deal of research on cycles, and I must
say some of their cycle studies work out quite well.
McClellan has discovered that there's a cycle low appears
for gold roughly every 12.5 months. The cycle lows have run
as follows: Jan 6, '06, Jan 8, '07, Jan 7, '08, Jan 5, '09, Jan.
4, '10, Dec. 31, '10. McClellan puts the next cycle bottom for
gold at February 8, 2011. Which means that the cycle low for
gold should arrive at any time between now and February 8, give
or take a few weeks before or after that date.
Interestingly, the McClellan cycle bottom for gold is due to
arrive amid a good deal of professional bearishness regarding
gold ("gold overdue for a major correction"). Thus,
many traders have traded out of their gold positions, just as
we near the date for the McClellan cycle bottom.
Below, the red arrows mark the McClellan cycle lows.
The Russell view
-- It's virtually impossible to successfully time in-and-out
trades during an ongoing primary bull market. Usually what happens
is that the trader has moved out of the market just as the bull
trend resumes. Thus, the bull market does what it's supposed
to do - advance while leaving most traders and Johnny-Come-Latelies
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