Richard Russell's Contributions

A leading analyst writes to tell me that we're seeing "the formation of the greatest top in stock market history." The "top" he's referring to is seen on the chart below. And sure enough, on the chart we can see the outline of a monster, multi-year head-and-shoulders pattern, with the head at the 2007 high and what appears to be a right shoulder now in the process of formation.

What we’ve been seeing over recent weeks is the slow, tedious process of distribution. It’s been happening under the subtle cover-up of a steadily rising Dow. Classically, when the stock market is in the process of topping out, the last group to decline is the blue-chip group that we call the Dow.

Silver, it's turned positive in relation to gold. The chart below tells the story. Back in October 2009 one ounce of gold would buy over 80 ounces of silver. From that point on the ratio of gold to silver changed in favor of silver.

VIX is the ticker symbol for the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of S&P 500 index options. Often referred to as the fear index or the fear gauge, it represents one measure of the market's expectation of stock market volatility over the next 30 day period. The VIX Index was introduced by Prof. Robert Whaley in 1993 while he was at Duke University.

BUBBLES — Back in the 1990’s, the Fed unloaded its liquidity bomb on the nation. The result was the insane tech bubble, which later collapsed. Next, the Fed unloaded its second liquidity bomb on the nation.

The yield curve (or spread) is the difference between the short rates (set by the Fed) and the yield on the longer-dated bond. The yield spread is now about its widest in 40 years. This is a boon to the banks, which can borrow for almost nothing and then buy the long-maturity bonds and rake in the money. This is what the Fed wants; when the banks become bloated with money, they have four choices -- they can make crazy investments (like they did with home mortgages), they can increase their dividends, they can pay the money out in bonuses, or they can lend the money to businesses who really need credit.

Suppose I told you that there was no device or method ever invented that will allow us to predict the course of the markets? Suppose I told myself the same thing (and I have) -- then what would be the point in studying the market and writing these sites? Actually, I do follow the action of the stock market, and I follow it closely. Here's the real story:

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.

Around 1999 and 2000 gold was selling at just above 260 an ounce. But more important, many well-known gold shares were selling like second-hand rain coats. These formerly much-loved gold shares were selling at such low or bargain prices that I thought one could buy thousands of shares and just "put 'em away" and forget about them. I knew gold wasn't going out of style, and it was just a matter of time before interest in gold returned, as it has in all history.