Month: January 2009

ROYAL BANK a buy at last???

Hamilton

 A long time ago, late 70-ties, I had the pleasure of having lunch with Walter Wriston in New York; we talked a little about banking (and how truly dumb it realy is). Today I was reading  James Grant’s book in which he quotes  John Reed, another chairman of FNCB, now CitiGroup (2x?),and tells the reader how  susceptible bankers are to the power of suggestion. i.e. groupthink (page 204 Mr Market). I bring these things up simple because there are  few animals , other than bankers, who live up to the (undeserved) reputation of Lemmings.  I used to be a loan officer so I know both the stupidity and the peer pressure first hand. Just as the precocious child  will, out of sheer boredom, get himself into trouble , so will  bankers. In fact they do it on a pretty well perfect cyclical sinus-curve of give or take 7 to 9 year duration. If you know this, you would definitely not have bought anything remotely resembling a  bank, that includes banks proper like Citigroup  (which is actually a motley group of disparite companies under a single umbrella, Travellers ,collected by  one of the largest and  most over- paid egos on this earth), aswell as things like Country Wide or even General Electric. I have warned about this to no end, to little avail.

     Now we get to the good part. Those of you that read the Gartman letter will know that he often refers to “the box”.  This box is nothing more or less than the 50 to 61% Fibonacci, or EW,  retracement level that one should ALWAYS look for when in doubt,  and even more so when not. The retracement level is not calculated from ground zero as I have done for convenience; it should be measured in terms of thelast major up-leg in which case we may already be closer to the 61% level! Below is the chart of RY.

royal-bank

   You will notice that today it trades at about $32, at the high it was $61,50  or somewhere around there. What this means is that we are close to the top of the “box” range. Also you will notice, unfortunately I cannot do this , but you clould draw a straight line through the lows that intersect somewhere around $31+. Technically, which this analysis by the way is definitely not, this may actually be a buy. Options are obviously a safer bet. And, just so there are no misunderstandings, with buy I do not mean Buy &  Hold as in AIC or Copernican or whatever it is called nowadays. A little patience may well be worth it as I think the line actually runs at around $29.  The misfortunes of that other royal, RBS , together with a 50/75 beep drop in our bank rate tomorrow may suffice to give that last little push. Ofcourse if they also come out with a 10% note ,as TD did, that would be the better deal at least in fully taxable accounts like RIFs and RRSPs! Happy trading, or should I say banking.?

TSE as of Jan. 18

Hamilton

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If only I had my own IT man here I could get this Java problem fixed,evenso for someone 4 years behind it is ok for the moment. The 2 identical charts are of the TSE. There are two possible counts, the one on the right with the triangle is more elegant ,so to speak, whereas the one on the left is EW slightly more kosher. In any case we try not to be perfectionistic in our approach, the purpose after all is to make money. Both counts point to an imminent drop of tradeable (and avoidable) size if you are in the market. About 2000 points down is a reasonable target from whatever the little e or 2 manages to eek out, and that is if wave 5 does not extend! S&P is, IMO at the same juncture. Why, no idea but as the saying goes, buy on rumour and sell on fact. The rumour ,ofcourse, is that Obama has devine powers and needs only wave his magic wand . Perhaps not true????????????????

NORTEL for old times sake

Hamilton

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Here is Nortel, 14th of July 2000, at $117.20   For even the most amateurish person the 5 wave move up is unmistakable. Even the target of $122 ( based on Fibo ratios )was not far off from the real thing at $124.55 I believe. Even with our new analyst, an 8 year veteran of Nortel , with a $150+ target it should have been clear that this thing was about to implode. Did anyone pay attention? Yes, one did. Today it filed. Click on chart to enlarge.

TSE once again , triangle working sofar

Hamilton

tse-jan14

My Java, not the coffe but the computer programme is still not working ok and as a result I cannot (yet) make annotations within the chart itself which would make things more readable. But this is a work in progress!  Both the TSE S&P and, for that matter , many others appear to be in their 4th waves which are frequently triangles, particularly if the second wave was a zig-zag and alternation should be anticipated. Triangles should be a-b-c-d-e affaires and each leg should be a 3-wave structure (as opposed to 5) and more often than not the alternatively relate to each other by a factor of 62%. So a is from8537 to 10199, b from there to the low of 7647, c the most complex back up to 9505 and most recently d down to todays low of 8650 or so. Probable it is not yet over, a little closer to 8000 would look better, then back up in e o roughly 9000. Then 5 starts down 2000 or so points! This wave could extend as neither of the others, that is 1 or 3 seem to have done so. Once the 5 subwaves of 5 of C are done this will be a screaming buy for a minimum of 30% up over 3/4 months. Again the HXU would be a good instrument for this.