Zeev's Turnips Patch-No Politics (ZEEV)

[Ace Hanlon]

The Dow: I've changed my mind

Richard Russell
Dow Theory Letters
May 5, 2003

Extracted from the 03 May 2003 issue of Richard Russell's Dow Theory Remarks

The Dow-- Do I have the right to change my mind? Yes? No? Anyway, I'm doing it. I suggested on
Friday's site that, if you haven't already done so -- buy the QQQs and DIAs at the opening
Monday.

Well after doing a bit of thinking, I've changed my mind. I think you should hold off on any
buying. The reason I say that is that the market is now very overbought. The Dow confirmation
came very late. But most importantly, the McClellan Oscillator is in its seventh week of rise above
the zero line, and the Oscillator seldom goes for more than eight weeks above zero without
dropping back below the zero line.

Once below the zero line, the market corrects. The correction could be very minor or it could be
large and costly, but I don't want subscribers buying a few days to a week before a correction. If
this advance is fated to be extended or even a mini-bull market, we'll have plenty of time to buy
stocks. But it's discouraging to buy stocks and then have those stocks hit "stop loss" levels a few
days or a week later.

It wouldn't surprise me to see this rally continue well into next week, but I believe we saw the high
for the McClellan Oscillator on April 22 at 194, and since then the Oscillator has worked lower and
extended its time above the zero line. Within a week or so I expect the Oscillator to be below
zero. When it returns above zero it will be the time to buy.

Aside from the above, the market has stirred up an increasing amount of enthusiasm. The cover
of Monday's Barron's proclaims,

"THE BULL IS BACK, so say America's upbeat portfolio managers, who see the Dow rising nearly
10% by year-end. Their favorites, Citigroup and Pfizer."

The bull (let's call it a mini-bull) may indeed be back, but it's not going to run away in the next
week or 10 days -- so let's calm down, let's hold off, and await a more opportune time to jump on
the back of the "new bull."

Any buying that is done here should not be confused with investing. Believe me, it is just pure
speculation. Why do I say that? I say it because investment buying entails buying stocks when
they are on the bargain table. That isn't where stocks are today.

Last week closed with the S&P selling at 33.71 times earnings and with a dividend yield for the
S&P at 1.76%. Those are figures that suggest a highly speculative bull market top, rather than a
bargain area for buying stock values.