Dow Theory >>> The Verdict Is In - It's a Bear

Dow Theory >>> The Verdict Is In - It's a Bear
The verdict, at long last, is in. The Dow Jones Industrial Average closed below its November 20 bear market low. In so doing, the Dow confirmed the prior breakdown of the Transportation Average. The two Averages jointly closed at new lows today, thereby signaling that the great bear market remains in force.
According to Dow Theory, neither the duration nor the extent of a bear market can be predicted in advance. However there are some useful hints. Most major bear markets end with stocks at "great values" or as some Dow Theorists put it, "below known values." This has meant in the past that price/earnings ratios for the Dow and the S&P have fallen to single digit numbers. It has also meant that dividend yields have moved into to the 5%-6% zone.According to the latest Barron's, the P/E ratio for the Dow is now 18.62, 17.90 for the S&P. The dividend rate for the Dow is now 3.98%, for the S&P it is 2.78%. These are hardly the kind of figures I'd expect at a great bear market low. With the bear market reconfirmed, I'd advise subscribers to be largely out of common stocks (not gold stocks) and in cash, T-bills or gold, physical gold if possible.The country is now at economic WAR. My objection to "paper gold" or listed gold items is that the government could halt trading in all gold items if it wishes to.

The government is at all-out WAR against deflation and possibly at war with rising gold.With a great bear market in force, we're forced to think in terms of individual or family survival. My subscribers and I are on our own now, dealing with a government that is attempting to print itself out of a bear market. More inflation on top of a bear market that was created out of debt and inflation will not work, at least I don't see it working (nor does the market). Gold will be "the last man standing," as has been the case for thousands of years.
GOLD TOUCHES $1000 FOR FIRST TIME IN A YEAR... A number of financial markets are testing important chart points. Let's start with gold. Bullion touched $1,000 today for the first time since last March. Chart 1 shows the streetTracks Gold Trust (GLD) very close to touching its March 2008 high at 100. On a short-term basis, however, the price of gold looks overbought. Some profit-taking from this level wouldn't be surprising. If that's true, some counter-trend moves may be seen in some other markets. The dollar may have also started one.

DOLLARS DIPS AS EURO BOUNCES ... The U.S. Dollar has been rising along with gold since December. Chart 2, however, shows the Power Shares DB US Dollar Index Fund (UUP) dropping today from chart resistance near its November high. Chart 3 shows the Euro bouncing off chart support along its November low. That suggests that some "short-term" market dynamics might be changing. A weaker dollar might contribute to some profit-taking in gold and buying in some oversold commodities. A bouncing Euro might suggest that the recent selloff in stocks is overdone as well. I've shown before that stocks have been trading in tandem with the Euro since midyear and opposite the dollar.