*Dow Theory Letters, by Richard Russell, July 9, 2012
‘A Critical Concept — I want my subscribers to be acutely aware of the very BIG picture. The big picture can be understood if you fully understand the yield cycle. Throughout stock market history, the yield on the Dow has run from tiny yields to high yields, and back to minuscule yields again, and then back to high yields. The yield on the Dow is now a minuscule 2.62% (indicative of a bull market top). Ultimately, in this bear market we will see the Dow decline to an area where the yield on the Dow is 6% or more (indicative of a bear market bottom). The only way we will see high yields on the Dow is for the Dow to head down. I don’t know HOW the Dow is going to go down. But I do know that the Dow will not head straight down. The Dow’s downward path to 6% or more yield will be erratic and difficult to follow. The downward path will probably include several cyclical (abbreviated) bull and bear markets. If you can understand what I write in this paragraph, you will know roughly what to expect in the (perhaps many) years ahead.”
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