Russell gained wide recognition via a series of over 30 Dow Theory and technical articles that he wrote for Barron’s during the late ’50s through the ’90s. Through Barron’s and via word of mouth, he gained a wide following. Russell was the first (in 1960) to recommend gold stocks. He called the top of the 1949-’66 bull market. And almost to the day he called the bottom of the great 1972-’74 bear market, and the beginning of the great bull market which started in December 1974. Here are a few of his recent insights from the Dow Theory Letters.

ON THE DOLLAR

“It’s clear (at least to me) that Obama is following the path Roosevelt took during the Great Depression.

In 1933, the government devalued the dollar by 41% by raising the official price of gold from $20.67 to $35 an ounce. Devaluation makes debt easier to handle. In devaluation, the dollar value of debt remains the same, but all other assets would be worth more (in nominal terms) whether it was a house, a stock, a car or an ounce of gold.

How our creditors who own trillions of dollars in their reserves will react to dollar devaluation I really don’t know, but a devalued dollar is a lot better than nothing. The Bernanke Fed is trying desperately to bring back inflation, and devaluing the dollar is the surest and quickest way to inflate.”

ON THE STOCK MARKET 

“We tend to forget that every move, large or small, in the stock market is entitled to a correction. I believe that the rise from the March lows is simply a correction of the huge bear market decline which preceded it.

Normally, a secondary correction will recoup one-third to two-thirds of the ground lost during the preceding bear leg. To refresh your memory, the preceding bear leg carried from 14164.58 on October 9, 2007 to 6547.05 on March 9, 2009 — a total loss of 7617 points. A one-third correction would carry the Dow to 9083. A two-thirds recoup of the bear market losses could take the Dow back to 11619.

Subscribers should know that following the famous 1929 crash which took the Dow from 381 to 198, a correction took the Dow back to 294 in early 1930. That correction turned the entire investment community bullish. The public piled back into the market. However, the correction had nothing to do with an improving economy. In fact, the great 1929-1930 correction was followed by the greatest market wipe-out and economic depression in history.”

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Although I am more inclined to trade commodities with more of a trend following systematic approach, I realize everyone is different. The Elliott Wave Theory is predictive in nature, and looks at market cycles in terms of wave structures that come in five parts. Five waves up followed by five waves down.

Robert Prechter is president of Elliott Wave International and is a widely followed technical analyst. He is probably the authority on The Elliott Wave Principal in the country.

I thought this would make a decent addition to the blog if only to hear different points of view from different traders. According to Prechter, we are at important points in the wave structures of some serious markets like the Dollar and stocks. Enjoy.

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