I see the picture in the USA today?
Dow Theory Letters
March 8, 2004
How do I see the picture in
the USA today?
Two men, each desperate to prove something.
The President, George Bush Jr., took over the presidency still
seething over his father's "failures." Dad's first
failure was allowing Saddam to escape Scot-free during the Gulf
War. The second and even worse failure (for shame) was dad's
failure to win a second term as president. The second failure
was a result of the Fed clamping down on the money supply and
squeezing the economy. Result -- a little recession. That wasn't
going to happen this time, even if George Jr. has to personally
wring Alan Greenspan's scrawny little neck.
So George Jr. vowed to "repair" his dad's first failure.
From the beginning it was war with Iraq and capture Saddam. Now
we're in the second phase -- re-election. George Bush Jr. must,
at all costs, be re-elected to a second term. Failure is not
an option. He must not fail. He absolutely MUST be re-elected.
The other man I refer to is Fed Chairman Alan "Easy Al"
Greenspan. Greenspan is desperate to repair, or I should say
gloss over, his enormous failure to recognize the stock market
bubble of the late-90s. Now Greenspan must address his legacy.
So we hear the Greenspan nonsense which runs -- we can't recognize
a bubble until after it bursts; therefore we can't do anything
to halt a bubble. Our true job is to confront the damage a bubble
can do -- AFTER it bursts.
Thus we have the unprecedented spectacle of the Fed driving rates
down to a 45-year low while flooding the economy with liquidity
-- all in a desperate effort to thwart or at least hold back
the natural and normal forces of the bear. But the jobs, the
jobs, where are the blasted jobs? Alan can hear it in his tortured
sleep, "It's the jobs, stupid."
Result -- Over a trillion dollars in liquidity, federal deficits
of $1.7 billion a day, and a host of new Fed-created bubbles
-- bubbles in stocks, real estate, bonds, inflation and -- debt.
That's the world today as Richard Russell sees it. That's the
reality of USA 2004.
Next, let's take it through the weekend with two P&F charts.
The first is the Dow.
What we see is a consolidation (or is it a distribution?) pattern
A bullish upside breakout would entail the Dow climbing to the
10800 box. A bearish downside breakout would entail the Dow sinking
to the 10400 and more decisively to the 10350 box.
Meanwhile, stock volatility has collapsed. The seven-year low
level in the VIX hints that we may not see a breakout either
way -- for a while.
The second P&F chart depicts
HUI, the widely-followed
Gold Bugs Index. Like the Dow, HUI has been holding bullishly
above its blue rising trendline. HUI, like the Dow, is currently
in a consolidation pattern. A breakdown would entail HUI sinking
first to 216, then to 208 and more decisively to 204.
A bullish breakout to the upside would require HUI to rise first
to the 244 box, and then to a new high at the 260 box.
And that winds up my weekend
report (written at 4:00 AM, Saturday morning).
Now for 20 minutes on my StairMaster,
some breakfast with Faye at 6AM at "Harry's" restaurant,
maybe a quick trip to the cactus garden - and then I'm free for
the weekend. How about that?
- one more item.
My best to all my beloved subscribers.
Your buddy from lovely, exotic La Jolla,
The R man.
© Copyright 2004 Dow Theory Letters, Inc
Richard Russell began
publishing Dow Theory Letters in 1958, and he has been
writing the Letters ever since (never once having skipped a Letter).
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