Stock may plunge big-time, so investors should get out of the market, says Richard Russell, editor of the Dow Theory Letters.
The important indicators are the Dow Jones industrial average and the Dow Jones transportation average, he wrote in a note to subscribers.
“If the two averages violate their May 7 lows, I see a major crash as the outcome,” Russell said, according to Bloomberg.
“Get out of stocks now (except for gold related shares), and I don’t give a damn whether you have paper losses or paper profits.”
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The May 7 low for the Dow industrials was 10,221, about 1.5 percent below recent levels.
And the low for the transportation average was 4,243, about 1.4 percent below recent levels.
“If I read the stock market correctly, it’s telling me that there is a surprise ahead,” Russell wrote. “And that surprise will be a reversal to the downside for the economy, plus a collection of other troubles ahead.”
Russell, 85, has put out his newsletter every three weeks for 52 years.
The market started signaling trouble in early April, when the number of stocks reaching 52-week highs began slipping and the number of falling stocks began to exceed rising ones, Russell says.
Money manager Barry Ritholtz also is bearish and recently sold all his stocks.
"This was strictly a technical call — market internals, sentiment, duration of rally, volume were amongst the factors that came in," he wrote in his blog.
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