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Even the permabears seem to think storm is passing
By Peter Brimelow, MarketWatch
27 June 2011
NEW YORK (MarketWatch) — Another down week, but now even permabears think the storm may be passing.
Two weeks ago, these letters had real fear of another 2008-style Crash ( See June 6 column. ) They’re still not happy, but they’re impressed that the world has not ended.
Dow Theory Letters’ Richard Russell wrote on Friday morning: “From a Dow Theory standpoint, I thought the action of the Dow Jones Transportation Average (DJI:DJT) was significant. Not only did the Transports refuse to follow the Dow Jones Industrial Average (DJI:DJIA) down, but the Transports actually rallied. …Thus, the Transports are giving the lie to the frightening performance of the Industrials.”
Even after Friday’s bad break, he merely wrote: “Dow at new low for the move, unconfirmed by the Transports. … I’m keeping my eyes on those March lows. One or the other (Industrials or Transports) better hold.”
Dennis Slothower of Stealth Stocks Daily was out of the market for the 2008 Crash and is 100% in cash now. But on Friday, he was relatively optimistic, by Slothower standards, if characteristically conspiratorial:
“While it might be easy to fall into the trap that the next recession will soon be here, let’s not get too spooked. With prices staying above the 200-day moving averages after multiple tests by the bears, it suggests that the dealer banks may merely be letting the spooked traders give up their shares at this currently discounted level before the banks push it up one more time.”
“The [200-day moving average] has to be breached if the bears are going to take control. Since that hasn’t happened yet, it suggests the fear level is being contained.”
Slothower’s cynical, but short-term-bullish conclusion: “The bulls (i.e., the banks) could quite easily push during this end of June / early July window-dressing period to fake out traders and get them to jump on the train that would clearly look like it is leaving the station. After all, the banks can create another dump in July, after the July payroll report, if they choose to — where I am leaning.”
One letter with a strong post-Crash record that has shown itself capable of both bullishness and bearishness is New World Investor, edited by Michael Murphy. ( See March 10 column. )
Last week, he made a similar argument: “One reason I am still bullish is that the long-term weekly chart still looks great. … I know other newsletter writers are trying to scare you with stories about the terrible stuff that will happen when QE2 ends next week. But I think that’s been the main worry since March, and the bears have not been able to break this market below the S&P 500 Index (SNC:SPX) 1,230-1,250 area, or even the 200-day moving average, now at 1,260.”
In a striking move, Murphy is getting out of gold, although he makes it clear in chart-speak that this is purely tactical: “Gold moves in daily, intermediate and four-year cycles, and follows a very clear A-up, B-down (but not below where A started), C-big up and D-sharply down wave structure. I expect two or three more of these cycles before the whole move is over in 2016-2018. It is always easier to catch the bottoms than the tops of the A- and C-waves, so I expect we’ll be back in these ETFs very near the bottom.”
“For now, sell the Market Vectors ETF Trust Market Vectors Gold Miners (NAR:GDX) , Market Vectors Junior Gold Miners ETF (NAR:GDXJ) and the Global X Silver Miners ETF (NAR:SIL) for gains, and ProShares Ultra Silver (NAR:AGQ) for a loss. You do not need to sell our individual miners, which have news coming to drive them higher.”