RUSSELL

Yesterday he flip flopped and claims to have mistakenly called this a bear market rally in a secular bear market.

Could it be the legend has finally thrown in the towel at precisely the wrong time??

 

April 6, 2011 -- Operating in the markets often comes down to managing your risks. I've made mistakes in the past, and doubtless I'll be making mistakes in the future. Whenever I recommend anything on these sites I always gauge the risks, just in case I turn out to be wrong. In other words, what are the consequences if I am wrong.

There are two kinds of mistakes. One is to be wrong about the market or a stock and to miss a profitable advance. By far, the worst kind of mistake is to be wrong about an impending or ongoing decline, and then to fail to correct your mistake. This kind of mistake is the costly kind, and, in a way, it's stupid and unforgivable.

It irks me to make a mistake, any kind of a mistake. Thus, I keep mulling over my mistake in not "ordering" my subscribers to buy the DIAs back at around the November low of 2009. What was I thinking? I had my mind fixed on the great post-1929 recovery which followed the crash, a recovery which saw the Dow climbing back to within shooting distance of its 1929 high. That rally turned out to be a false move that had many investors thinking that it was a return of the bull market. In the end, when the market turned down in 1930 the market (it was a bear market) embarked on a vicious decline: More people were hurt in the 1930 bear market decline than were hurt during the 1929 crash.

I've often stated that my PTI "is smarter than I am." Subscribers may remember that my PTI never broke down and then headed persistently lower during the 2007 to 2009 market collapse. I ignored my PTI, and I ignored the persistently bullish Lowry's statistics during the 2007-2009 collapse. My mind was centered on the 1929-1930 situation, and I did not think buying at the 2009 low was worth the potential risk.

Happily, in another area my subscribers were building profits in the precious metals bull market all during 2007 to 2009, and that helped to assuage my damaged ego.

Correction lows can materialize suddenly, often in a single day, at a time when literally everything plunges to frightening lows. But major tops are another species. Tops are usually characterized by extended periods of distribution. Unlike bottoms, tops are seldom identified by a single upside climactic day. Tops are formed through a process that sees stock after stock top out, until such time as the entire structure of the market gives way, and the big stocks (the Dow) finally join the majority of falling stocks as the top is completed.

Where are we now? My studies tell me that we are still in a primary bull market. True, there is a good deal of deterioration going on, but I see nothing to suggest that the bull market is actually over.

If this market is going to turn primary bearish, I would want to see an orthodox Dow Theory bear signal. This would include a secondary decline, a good after-bounce, and then a second decline in which the two Averages (Industrials and Transports) smash below their preceding secondary lows, preferably on expanding volume.

TODAY"S MARKET ACTION:

My PTI was up 6 at 6270. The moving average at 6216, so my PTI is bullish by 54.