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To: ms.smartest.person who wrote (1532)	10/6/2006 2:49:29 PM
From: ms.smartest.person	Read Replies (1) \| Respond to of 3198

Gold bulls darkly determined to ride out storm Commentary: Despite stock market gains, veterans staying in precious metal By Peter Brimelow, MarketWatch Last Update: 12:01 AM ET Oct 5, 2006 NEW YORK (MarketWatch) -- Octogenarian superbear Richard Russell in his Dow Theory Letters hotline was inclined to disparage the Dow Jones Industrial Average's record close on Tuesday. "Frankly, it reminded me a lot of some of the new highs we saw during the period from 1966 to 1982, meaning non-confirmations, surges, big declines, frustrations, waiting," Russell wrote. One reason: the lagging Dow Jones Transportation Average, which Russell described as "one of the widest (in points) non-confirmations that I've ever witnessed." But Wednesday's action made a dramatic difference. Russell wrote: "OK, how's this for a contrary opinion. We all thought yesterday's new high in the Dow was a fake-out because it was so 'sloppy.' But it turns out the new high in the Dow was the real McCoy better known as an important breakout. And all we doubters and cynics cast our eyes away in shame. The market looked strong all around, and even the Transports, which still haven't confirmed the Industrials, surged over 100 points which is nothing to sneeze at." This STILL doesn't mean Russell is, well, bullish exactly. He concluded: "Stocks are too expensive for me I'll watch the show, but you guessed it I won't be short." Another veteran, Michael Burke of Investors Intelligence, has long agreed with Russell that post-2002 action is a cyclical rally within a secular bear market. Burke hasn't recanted that view that I can see, but he is now 85% invested in equities. Burke thinks he has detected some recent technical weaknesses: "The Point and Figure chart action was more typical of a big down day, with lots of declines and more sell signals than buy signals on the NYSE." But he concedes: "Medium term charts are still firmly bullish and the overall trend of the market is still up." I regularly consult a third veteran, Dan Sullivan of The Chartist, because he's an instructively nervous bull. See Sept. For the record, as of Wednesday night, Sullivan is 100% invested in equities. Like Russell, he is very interested in the savaging of the shorts: "The public is also shorting heavily and from a contrarian viewpoint this is a very bullish sign." In contrast, the gold bulls are darkly determined to ride out the storm. A fourth veteran, Harry Schultz, just wrote in his Gold Charts R Us service: "Be prepared to go with the flow on the breakout, as the move (up or down) will likely be substantial. i.e., a break below Dec 560 would open the trap door on a dive towards 500 with 470 as possible overshoot area. Breaking 578 is yellow alert and hedging could be increased here. If not, a rise above the May downtrend (Dec 620) would flip things positive, but be cautious going into Dec 648-660 resistance, as a setback is likely on the first test. Only above this level would the May correction be definitively behind us." Schultz even says he's shorting gold stocks. But he adds: "These shorts are only a fraction of my long coin/bullion/share positions so I don't mind if I lose money on them. Meantime they serve as partial insurance ... In any case, prepare for more rain on our parade." Dow Theory Letters' Russell provides insight into the gold bulls' thinking: "I'm guessing that roughly 10% of my current subscribers were with me during the 1970s as we sat with gold during that great and wild precious metals bull market. At one point in that bull market gold dropped almost 50%, and speaking for myself, it took all my inner strength to sit with my gold." Russell's conclusion: "Subscribers today have a great advantage ... the history of the 1970s bull market as a guide. Gold is highly emotional and is subject to brutal corrections, as the gold bull seeks to shake its riders off it back." marketwatch.com;