Via Dennis Gartman:
Finally, when it doubt we turn to the sage of the market, Mr. Richard Russel of the Dow Theory newsletter. Mr. Russel has been around for a very long while. He’s seen bull markets and he’s survived bear markets. Thus when he writes, we listen, and
yesterday he wrote:
OK, today I got three important bull signals, the great tide of the stock market has turned to bullish on the three counts I’ve been waiting for. The Dow closed at 10733.70 — at last above the critical 10725 level. This is a new high for the Dow, and it means that the Dow has finally confirmed the new high for the move on the part of the Transports. A Dow Theory bull signal — the primary trend of the market is bullish. At the same time, the great arm of the Dow has swung back above the 50% level. The Dow is now back in the bull zone above 10725. At the same time there were 627 new 52-week highs on the NYSE, a new high-total and well above the 523 new highs of January 11….An all-round historic day…
[So] what am I personally going to do about it? Honestly, nothing. Stocks are generally overvalued in this area…. Actually, the market is priced to produce losses over the years, particularly if you factor in inflation, commissions, dangerously low dividends and rising taxes.
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So he sees bullish signals but is backing away. If he’s held to such high esteem, surely that would make you think twice on whether we are in a secular bull.
What train are you all on? The Secular or just cyclical bull inside a secular bear?
Rodrigo, I am not into the name-the-cycle game. I tend to look at basic economic trends, monetary policies, profits and valuations, both macro and micro, and act accordingly. At present, I see the economy trying to find sustainable growth, monetary policies providing a willing helping hand, easy to do given current low inflationary pressures, rising profits and valuation that provides an adequate risk/reward ratio. I am therefore favorably disposed towards equities, keeping in mind that Americans are in a deep hole with numerous challenges for many years to come. Be nimble and flexible.