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Peter Brimelow
April 11, 2011, 2:21 a.m. EDT
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Buffett fan barreling along
First Take "º
NYSE stands its ground, investors wince
By Peter Brimelow , MarketWatch
NEW YORK (MarketWatch) "” Stocks stall scarily at post-Crash highs "” but top-performing veteran bears and gold bugs still respect this bull market.
Dow Theory Letters' Richard Russell posed the problem Friday night:
"Everyone wants to know whether the stock market is on the edge of a correction. Maybe the Trannies are providing a hint. The daily chart below shows the Dow Jones Transportation Average /quotes/comstock/10w!i:djt (DJT 5,231, +1.45, +0.03%) breaking down badly and now below its February peak. I'm thinking that if the Industrials rally to a new high, there's a good chance the Transports won't be able to confirm."
But Russell also provided an answer, sort of, in his artful way: "Overall, however, remember that this is still a bull market "” and that consideration overrides everything else."
Pamela and Mary Anne Aden, Russell's friends at the Aden Forecast "” all these battle-scarred gold bugs know each other "” have the same liquidity-driven analysis. But in their just-released current issue, they come to a more daring, if short-term, conclusion.
They write in their current issue: "There's little question that big inflation is coming due to the Fed's efforts to save the economy. Will it? No. "¦ As long-term market observers know, this can last longer than you'd think. But eventually, the day of reckoning will come."
This prospect makes the Aden sisters as nervous as cats. But they are also as brave as lion(esses) "” they think profits can be snatched from the jaws of the bear. ( See Dec. 13, 2010, column. )
They write: "So how high could stocks go? Again, we'll see. But "¦ if stocks keep reaching new bull market highs, there's a good chance the major stock indices will test their record highs of 2000 and/or 2007. If they do, then the Dow Industrials /quotes/comstock/10w!i:dji/delayed (DJIA 12,401, +20.78, +0.17%) could rise to as high as the 14,000 level, while the S&P 500 /quotes/comstock/21z!i1:in\x (SPX 1,327, -1.63, -0.12%) could get to around the 1,500 area."
"Interestingly, if we look at the Dow Industrials going back to 1965, you'll see some amazing similarities between what's currently happening and the action in the 1960s, 70s and early 80s. "¦ At that time, the Dow basically went sideways throughout the 70s, and the 1,000 level was a very strong resistance level."
"In the current case, the Dow has been doing the same since 2000. It's gone sideways since then, and the market has been unable to break above those 2000-2007 high resistance areas."
"Could it do so this time around? There are no guarantees, but as long as the major trends remain up, these are our next target levels."
The Adens do add: "This could change, however, especially considering the balancing act currently taking place around the world. We don't know exactly when that'll be, but the markets will tell us and again, we'll just go with what they say."
Nevertheless, this is the first time I have seen a bearish letter broach the idea that the post-2000 resistance level may be broken "” albeit in the context of ultimate catastrophe.
Similarly, another stock-suspicious veteran gold bug, James Dines of The Dines Letter, has just written in his most recent monthly issue: "While we are not prepared to flash a "?sell' signal yet, there are some things that do concern us, especially the frenzy of banks, wealthy clients, and institutions clamoring to buy into start-ups, especially in the high-tech arena, triggering memories of the Internet boom and crash over a decade ago "¦"
Still, Dines concludes: "Recent new highs in the Dow Jones Industrial Average tend to validate the tidal major uptrend for the market as a whole."
Peter Brimelow has been an editor at Barron's, Fortune and Forbes and is the author of "The Wall Street Gurus: How You Can Profit From Investment Newsletters."
Investors don't seem to have much hope that the Nasdaq can sweeten its offer for NYSE Euronext, writes David Weidner.
11:53 a.m. Today11:53 a.m. April 11, 2011
"Peter Brimelow: Bears, bugs still respect the bull http://on.mktw.net/igGkUo" 4:52 a.m. EDT, April 11, 2011 from MKTWBrimelow
"Peter Brimelow: Buffett fan barreling along http://on.mktw.net/f9rgPk" 3:06 a.m. EDT, April 6, 2011 from MKTWBrimelow
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"Peter Brimelow: $2,000 gold by year's end? http://on.mktw.net/icPvYW" 11:59 p.m. EDT, March 27, 2011 from MKTWBrimelow
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