“Ownership of gold means you are your own central bank.” Jim Sinclair
On Monday, Richard Russell warned that the market was in very dangerous territory and that the Dow was flirting with danger as it approached the break-down from a long-building head-and-shoulders formation. Support was around 9800. Today, the Dow was down 268.22 to 9870.30. Here is Russell’s chart, once again. You can visualize what he is referring to…
What he wrote is so important; I will show it to you again. He said:
Why do I think the stock market will be so rotten? Here’s why. Look at the chart of the Dow in the current issue of Barron’s. Or study the chart of the Dow below. If this isn’t the mother of all head-and-shoulder top-formations, I’ve never seen one. If this formation falls apart, I expect the break to signal the start of a brutal decline in stocks. The first area of support is Dow 10,000. The base of the entire formation comes in at Dow 9800. If the formation breaks down, I think all previous plans, scenarios and strategies will hit a stone wall. Wall Street and public sentiment will turn black-bearish. Consumers will head for the storm cellars and once in, they’ll shut the door above them and lock it.
Another day like today and the Dow will breach the neck-line support at 9800. Why is that so important? Because most of the action in the stock market is program trading by large funds. Their computers are programmed to buy and sell at certain strategic points like moving averages, previous highs and lows and Fibonacci points. Whether this information is actually significant is not important. What is important is that the funds and their computers think it is and act accordingly. A break-down from a long-term head and shoulders is a big sell signal to most of the computer algorithms. It is like fulfilling your own prophecy. They expect the market to continue to fall, so they sell which forces the market lower which re-enforces the validity of their programmed trading platforms. Once this waterfall drop starts, it can go a LONG way. This is what Russell is alerting you to.
GLD options expire on the close on Tuesday, June 29th.
http://finance.yahoo.com/q/op?s=GLD+Options That is motivation enough for the banking cartel (JPMorgan, HSBC) to knock the price down. They almost always do. Gold dropped to $1,226 but recovered by the end of the day and closed at $1,242. A lot of those calls conveniently fell out of the money with Monday’s drop. To me, this is the real reason gold got attacked today.
You can almost feel the pressure building up beneath gold – and on top of the stock market. It feels like something is about to break lose. The markets are acting like they sense it. The market discounts the FUTURE, not the past. What is it trying to tell us? Whatever it is, it isn’t good.
Richard Russell had just a few words to say today, but they are important
Today it finally happened. My PTI turned bearish by 1 point. Stock market acted in harmony. Both the Dow and Transports down triple digits with the Dow again under 10,000. Investor sentiment turning increasingly gloomy. This isn’t a case of rising unemployment or vanishing consumer buying. The market is looking ahead to hard times in the future.
Russell’s “PTI” is his bible, his Primary Trend Index. It finally went negative, after many months of being positive. The PTI never lets him down and is his most useful metric for signaling the trend or direction of the stock market.