Month: June 2010

Euro/US$

Hamilton

Euro US$ june 2010

FX and logic do not go together all that well, which may explain why a good number of the participants used to be of English extraction and, more often than not, from the wrong side of the proverbial track.  Logic, intelligence and that sort of stuff just does not enter the picture. Technical considerations, on the other hand, are basically the only workable tools and do, in fact have a reasonable reliability.

Looking at the above chart 116 or so would be , if nothing else, an interesting point to keep an eye on. When everybody knew that the US$ was going straight down, it went equally fast the other way. Perhaps now that everyone knows that the Euro is on a path to extinction it too may surprise us all by going the other way.

OTC, Open Text

Hamilton

OTC june 2010

If you shorted this one at around $51 or so, as suggested some time ago, I would go for the bird in the hand being worth more than two in the bush and get out (buy back) at around $39 where the trend-line runs. The stock could go a lot lower but that is not perfectly clear at this time.

MFC, Manulife

Hamilton

These fellows had read that their were no 10-year periods this century that the markets were actually down (or something like that) so they did what they normally do and that is write insurance only to very quickly find out that death is a highly predictable thing but stock markets are not. This made the company a natural bear product as in when the stock market goes down, they go down even faster courtesy of the relatively large amount of insured variable annuities they took on through their very popular Income Plus product. Not surprisingly (see previous blogs) the stock dropped from $42 to just under $10, or 76% in a relatively short period of time. Since then it regained about 1/2 of that drop to around $26 only to lose about 60% of that gain, despite the fact that the market overall did nothing comparable! So what could be next? Here is the chart;

mfc june 2010

The initial drop from $42 to $9+ is not a single 5-wave move (in the chart only the C-wave is shown) but more likely an A-B-C. Ergo it is possible that the entire correction is over and that we are now in the next bull leg, having completed a first wave up and the correction of that wave. Even in the event that that is incorrect , we could still be in a much larger counter-trend that still requires a C wave up (in pink). It is difficult to count the action since last August as anything but corrective, nor is it at all clear why the stock is down 60% (since August last) whereas the market overall is is down less than 5% today and up about 10% since August. Perhaps the stock is telling us that the second leg down in the stock market is still a ways in the future. A quick look at POW (Power Corp) a different but similar type of company lends credibility to this possibility.

POW june 2010 

Note that this stock has more or less followed the same pattern as Goldman Sachs (GS), Morgan Stanley and a few others.

C, CitiGroup, Prince Al Waleed bin Talal a.k.a Arabian Warren Buffet

Hamilton

Typically the way the human mind seems to work is that first you make up your mind and only then do you try to find the evidence to prove the point. Particularly if using EW it can be very dangerous to follow this approach as a pattern is a pattern, end of story, pretty mindless but that is how it should work. Let the market, pattern, tell you what is going on and then make your conclusion accordingly

Applying this to Citi Group we should remind ourselves that CitiBank has been in big trouble before  as a result of  REITs, and that at the time (late eighties early nineties), Prince Al Laweed stepped up to the plate and bought a large chunk of Citi at between $2/3. As it happens this turned out to be a very good bet earning the Prince the moniker of Arabian WB. The question now is, will history repeat itself?

c june 2010 1 c june 2010

Throughout my working life City Bank was not only the largest but also the most aggressive and innovative banking operation in the world, by far. It is hard to believe that this bank will retreat into the background for long. Looking at the long-term chart a reasonable count would be a 9-year a-b-c correction, presumable complete as it already reached <$1. Of course Nortel type of action is possible but one would then still expect a half decent rally from the lows. Looking at the short-term chart this is entirely plausible given the pattern. As a minimum an a-b-c counter-trend rally should be expected and, so far at least, that may be exactly what we are getting. The first 4th wave is at $9 and then at $20+.  Buying this goes against my own interpretation of the bigger picture, but nevertheless this may just be what the chart is telling us.