Comments on: Did Richard Russell Capitulate?

by: Bob

Wed, 10 Mar 2010 22:50:50 +0000

I’m a subscriber with access to his archives. He makes it VERY clear that the market hit a sell and entered a major bear market in Dec of 2007, not far from the high. He cautioned investors to cash out and predicted a rather significant drop. He has not been bullish since! Didn’t get it wrong for me or his subscribers.

by: Babak

Fri, 16 Oct 2009 21:34:58 +0000

Wayne, as far as I know, and I’m no expert on Dow theory, the concept relies more on the relationship between the Industrials and the Transports. That is, the creation of goods, and their distribution to the consumer.

Dow theory has a very good track record of timing the market, but it isn’t perfect of course. And the confusion is compounded by the inability of ‘experts’ to agree with one another as Hulbert shows in his article today.

by: wayne

Fri, 16 Oct 2009 11:37:08 +0000

Babak,

I probably spent an hour or so perusing Dow Theory a couple of decades ago and do not profess to be a student or expert in the area. I certainly could be incorrect, but I surmised that it was likely that at the time Dow theory was in it’s genesis, there was not a full understanding or at least full appreciation for the relationship between the equity markets and interest rates. Since there is a strong correlation between interest rates and utilities, there ends up being a second degree correlation between utilities and the markets, thus the author’s of Dow theory probably indirectly and possibly unknowingly stumbled onto the market vs interest rate relationship via Dow Theory. I know that Dow index confirmation is one piece of Dow theory.

I concluded that, (at least for myself), it would probably be more prudent to simply spend one’s time studying the impact of interest rates on the market. But different strokes for different folks, and if it works for Richard, more power to him. As they say, the proof is in the pudding.

I mentioned about a week ago, in commenting on Precther’s use of Elliot Wave, that it is very beneficial in the newsletter business to possess a marketing angle that one can use to profess an insight into the market that is not available to the casual investor. It is my expectation that Russell, Prechter, etc, have a similar bag of support tools that they use in their analysis and it is my observation that the ones that have been in business for a couple of decades rarely deviate far from the price direction.

What do you think?

by: Tony Tibbitts

Fri, 16 Oct 2009 10:30:05 +0000

Two years later………………. Well what can I say? I almost fainted when Mr Russell went over to the bulls, but it turned out he was the last bear to cave……………………..

by: HP

Tue, 07 Oct 2008 05:18:21 +0000

Simply ask the “Venerable” Mr. Russell the same simple question you should ask any of your advisers: “Mr. Russell, over the course of your career as an investment guru, have you made more money off your newsletter or your investments?

If it’s the investments then why do you write?
If it’s the writing, you aren’t qualified.
My guess it’s the second.

Ask your money manager, your broker, etc a similar question sometime. The results are more instructive than any course or advice could possibly be.

by: Babak

Tue, 22 May 2007 01:55:12 +0000

Werner, you’re right. I suspect that he changed his mind because he saw a tenaciously bullish market. But most importantly, the value part of the Dow Theory kicked in. The permabears hate to be reminded of this or poo-pooh it but the P/E ratios are actually looking very reasonable. This is just guesswork though because unless you get inside his head, who knows why he didn’t go bullish earlier and why he did now.

Thanks for the link btw, I’ll check it out.

by: Werner Merthens

Tue, 22 May 2007 01:30:57 +0000

This is a very nice article. I agree with your comments about the chronic bears. The Dow Theory can be and probably should be interpreted mechanically. However, I doubt that Mr. Russell follows a strictly mechanical approach. If he did, he would have turned bullish somewhere around June 2003 and would not have turned bearish anytime in between now and then. How can I say that? Well, I have tested a computer model of the Dow Theory and June 2003 is pretty solid regardless of parameter settings.
So, I suspect that Mr. Russell does not follow a strictly mechanical approach and may use “other, proprietary indicators” for his predictions. This time around he got caught with his pants down and has missed a good part of the last bullmarket.
At any rate, I have documented my test methodology and test results. Reading it may be a bit tedious, but in case anybody cares here is a link to the report (pdf) [file removed]