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Peter Brimelow Archives | Email alerts
Nov. 28, 2011, 2:43 a.m. EST
By Peter Brimelow, MarketWatch
NEW YORK (MarketWatch) "” A withering week leaves the bears rampant, and breaks a brave bull.
Dow Theory Letter's Richard Russell is in rehab for a broken hip and in a foul mood. Reporting that his son Ryan, who briefly collaborated with him a couple of years ago, is now "building a self-sustaining farm," he writes in an apocalyptic tone I've rarely seen since the 1970s:
"I told him he's in the right business for the future, which is a survival business. Stock market is just beginning to hint of the hard times that I see ahead. The almost insane world of debt is rolling close to the cliff, and I see increasingly hard times ahead."
"Crumbling debt will act like a cement roller, crushing everything in its path. The occasional rebound or bounces on the lows will be sudden and short-lived. As of now, both the Dow Jones Industrial Average /quotes/zigman/627449/delayed DJIA -0.23% and the S&P 500 Index /quotes/zigman/3870025 SPX -0.27% are down for the year. I call this Stage One. Stage Two will occur if the Dow sinks into the 10,000. Stage Two Point Five will occur if the Dow starts trading below 10,000. I think if the Dow trades under 10,000, consumer sentiment will change from hope to fear and anxiety. "¦ Next week, I will go into detail as to why a giant storm is brewing."
Dennis Slothower of Stealth Stocks Daily Alert has been having a great year "” i.e. it's been a horrible year for everyone else. ( See Oct. 6 column. )
Although bearish, Slothower is very conscious of possible twitches. He wrote last week: "I could easily see a short-covering rally take prices for the S&P 500 to the 1,220 level, near the early November lows. "¦ I wouldn't put much faith in any kind of rally here, though. At best, it might present a great shorting opportunity, given the quickening financial darkness covering Europe."
Slothower is 100% in cash.
Cabot Market Letter had been having a great post-Crash-of-2008 rebound, which it boldly predicted and bravely stuck with. ( See Sept. 29 column. )
But now Cabot is 73% in cash. It wrote wistfully after Monday's murderous action: "We are still optimistic that the market is transitioning from bear to bull, but today's action tells us more patience is needed."
And on Wednesday night: "The order of the day is protecting your capital, as the European debt crisis is now threatening even Germany. The major indexes are all taking on water, although they are all holding well above their August-through-October lows. We're heavily in cash now, with all the hatches battened down for as long as this correction lasts."
Nevertheless, Cabot still recommends three buys:
Cabot Oil & Gas Corp. /quotes/zigman/221094/quotes/nls/cog COG +1.87%
("Taken some damage from the market, but is still above its 50-day moving average. The position is now down a little less than 8% from our buy price. There should be some support at 75.")
GNC Holdings Inc. /quotes/zigman/4587360/quotes/nls/gnc GNC +1.18%
("Holding up beautifully in this chaotic environment, holding flat under resistance at 27. This is just the kind of calm base-building that can lead to further advances.")
Under Armour Inc. /quotes/zigman/388552/quotes/nls/ua UA -2.28%
("Looks to have found support at 75. The chart shows a series of higher lows for the stock of this ambitious sportswear company, which is a technical plus.")
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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."
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