Richard Russell:Rally is well within the confines of a bear market

Everyone has always heard about the day the market crashed in the Great Depression and how there were men jumping off tall buildings. We also were told that people lost everything and in fact the investors in the market did lose almost 90% of their money. BUT what most people don’t know is that the market rallied significantly after the crash and that people did not lose their fortunes until after the bear market rally. They had become bullish again and lured to stay in, even add more. Sound famliar?

Richard Russell, in his Dow Theory Letters has just stated:

“ We tend to forget that every move, large or small, in the stock market is entitled to a correction. I believe that the rise form the March lows is simply a correction of the huge bear market decline which preceded it.”

“Normally, a secondary correction will recoup one-third to two thirds of the ground lost during the preceding bear leg. To refresh your memory, the preceding bear leg carried from 14164.58 on October 9, 2007 to 6547.05 on March 9, 2009-- a total loss of 7617 points. A one-third correction would carry the Dow to 9083. A two-thirds recoup of the bear market losses could take the Dow back to 11619.”

“Subscribers should know that following the famous 1929 crash which took the Dow from 381 to 198, a correction took the Dow back to 294 in early 1930. That correction turned the entire investment community bullish. The public piled back into the market. However, the correction had nothing to do with an improving economy. In fact, the great 1929-1030 correction was followed by the greatest market-wipe-out and economic depression in history.”

So buyer beware. If you want to have your cake and eat it too, buy the right fixed, indexed annuity along with a basket of gold stocks. That is what I think. And may everyone be wise enough to take action.