Richard Russell Warns of "Great Depression No. 2"

The S&P 500 is down 5.5% since the beginning of May. Today the index fell from 1300 to 1286, down about 1%. This is technically still just a correction, not a bear market. But there are key support levels around here that bulls need to hold.

Meanwhile, US jobs data is ugly, and getting uglier. The housing double dip has been confirmed. American homes have lost 33% of their value, on average, since the 2006 peak. That's worse than the drop during Great Depression No. 1, and the bottom is not even in yet.
Adding to economic turmoil is price inflation, which is picking up. So even if stocks and other assets stay flat, investors will lose purchasing power.

Richard Russell of the Dow Theory letter says that, for now, his technical indicators are holding up, "Frankly, it’s difficult to envision a bear market in the face of what my PTI [Proprietary Technical Indicator] is doing."
In his next sentence, however, Russell warns of a possible "Great Depression No. 2". From Marketwatch:

The whole current mess reminds me a lot of 1929-30. After the crash of ‘29, the stock market roared higher, even as the economy was simultaneously weakening. When the great post-crash rally died in April 1930, the market turned down with a vengeance, and the Great Depression began. …The market is probably now in the process of forming a complex top. If the market now turns down convincingly, we could see the beginning of Great Depression No. 2.

Top mutual fund manager Bob Rodriguez, who averaged 15% annually over the last 25 years, is also warning of another crash:

The Wall Street Journal pronounced Rodriguez one of the "doomsayers who got it right." Barron's labeled him a "prophet." MarketWatch described him as one of the "four horsemen of the market."

... His new prophecy: If we don't fix the budget – soon -- the economy faces disaster. "I believe that within two to five years we'll have a crisis of equal or greater magnitude of what we just went through," he says. "And it will emanate from the federal level."

Nouriel Roubini, who famously warned of a massive financial crisis in 2006, is also getting bearish. From BusinessWeek:

“Until now, equity prices were supported by better-than- expected earnings, sales and profit margins,” Roubini said. “But all three are under squeeze. With slow global economic growth, they’re going to surprise on the downside. We’re going to see the beginning of a correction that’s going to increase volatility and that’s going to increase risk aversion.”

See these recent articles on Mark Mobius, Jeremy Grantham, and John Taylor. All are warning that stocks are overvalued, and that another crash is inevitable.