Dow Theorist Richard Russell, a long-time bear on the markets, recognises that a Dow Theory buy signal has appeared.
But he has doubts.
“History was made when the Dow rose to a new record high and finally confirmed the prior record high put in by the Transports,” said Russell via KingWorldNews. “The question now becomes — what do we have here, a weird kind of bear market or a new bull market?
In a nutshell, the Dow Theory says that if Dow transportation stocks and Dow industrial stocks confirm each other’s movements high (or low), a buy signal (or sell signal) has been indicated.
But based on Russell’s rejection of the buy signal, it appears that he think Dow Theory is more art than science.
Here’s Russell via King World News:
Question — OK, Russell, then what about the record highs recorded by both the Dow and the Transports?
Answer — My only answer to this is that both D-J Averages produced something never seen before, namely new highs during a post-crash upward correction. My explanation of this unprecedented situation is that the advance to new highs was a direct result of never-before-seen manipulation by the Federal Reserve.
The Fed was able to engineer new post-crash highs in both D-J Averages. But I doubt if the Fed will be able to engineer a coming new era of prosperity in America. Thus, it will be an example of where the stock market will not be predicting the nation’s economic future.
As a matter of fact, I believe this stock market is predicting a very mixed and confusing economic future for the US. As far as I can see, the Fed will be pumping in QE-to infinity for as long as it can get away with it. The only thing that might halt the Fed is rebukes from voting members based on it’s outrageous 3 trillion dollar balance sheet. We’re in uncharted territory in my opinion, and I expect to see a number of events in both the stock market and the economy which will be both surprising and upsetting.
So, Russell is sticking to his bearish guns.
Read more at KingWorldNews.com where Russell also shares his thoughts on gold.