This story from Bloomberg/BusinessWeek is getting a lot of attention today as octogenarian Dow Theorist Richard Russell  thinks that U.S. stock investors should high-tail it out of town if the Dow Jones Industrial Average falls another 100 points or so.

Russell: ‘Major Crash’ Likely If Stocks Break May 7 Lows

Investors should sell U.S. stocks because the market is at risk of a “major crash,” Richard Russell, editor of the Dow Theory Letters newsletter, said in a note to subscribers today.

The decline would follow should the Dow Jones Industrial Average and Dow Jones Industrial Average fall below their May 7 levels, he said.
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Dow Theory, which stems from observations made by Wall Street Journal founder Charles Dow during the late 1800s, holds that moves by the transportation average must be “confirmed” by the industrial measure, and vice versa, to be sustained.

The Dow Jones Industrial Average fell 6.9 percent during the four days that ended May 7, sinking to 10,380.43, the lowest level since Feb. 26. The transportation gauge closed at 4,298.12, down 11 percent in four days. Downgrades of Greece, Spain and Portugal helped trigger the decline as the prospect of a sovereign default in Europe undermined investor confidence.

“If the two averages violate their May 7 lows, I see a major crash as the outcome,” Russell wrote. With the exception of gold companies, Russell advised readers to “get out of stocks now, and I don’t give a damn whether you have paper losses or paper profits.”

Don’t get me wrong – I like Richard Russell a lot as he’s one of the more enlightened thinkers out there and has been for a long time. Dow Theory, on the other hand, seems to have flashed so many buy and sell signals over the last few years and seems to be open to interpretation almost as much as Elliott Wave Theory that, surely, it has lost some of its value as a predictive tool, regardless of how much respect people have for Russell.