Month: August 2010

TSE again, un till I get it right!

Hamilton

tse aug 30 2010

Just heard that the TSE, together with the Tel Aviv stock market, were the only ones to be up for the year and up for the month of August. Even the DAX, despite making a new high, has dropped so much since that it is not in this league. Not sure why Canada is different, perhaps we are more Pavlovian or something like that, perhaps it was Potash but it was only good for about 120 points.   In any case 2 scenarios are still operative, both start with a diagonal type 2, a not so common structure that does allow overlap. Which one is correct does not matter too much as in both cases we should have a wave 3 down ahead of us.

It is fairly common for the TSE to run behind everyone else, Nortel as an example peaked in September whereas the Composite Index in the US did so in May. The C$ had the worst month in a long time, suggesting that Canada too is in a bear.

For the DAX the picture is slightly different as it made (an irregular) new high, or simple a 3-wave 5th wave in a diagonal. The drop off from there is quite violent and this despite all the good news on the economy.

TSE

Hamilton

TSE AUG 2010

The TSE is potentially showing a very scary 1-2, 1-2 situation. Given the overlaps not too many alternatives present themselves. We should go down a little further tomorrow and then come back into Monday to keep the spirits going, thereafter it COULD be all downhill for a while. After hearing that our “authorities” are more concerned about losing the potash cartel than the price at which Potash Corp. might be taken over, I would not be surprised to see a backlash  against an economy that prides itself on torpedoing free-enterprise wherever it shows up.

SLF (same as MFC, maybe better)

Hamilton

 

slf aug 2010 slf aug 2010 2

Before the world of finance drops to zero, we may still have a solid up move into mid next year going by the charts of MFC and SLF, and many others. SLF earns 6% and is less vulnerable to the stock market overall even though it too is hurt by low interest rates just as every other insurance company. It is interesting that while attempting to save the banks, the authorities are willing to sacrifice the insurers! The chart on the right is stylized , in reality the vector is more or less equal and the low is a small throw-over of the lower trend-line. Again things may change rapidly but at the very least I would expect a $5 rebound before anything else happens. Below are details.

slf 4

F, Ford update.

Hamilton

Last May when the stock first reached $14 it was suggested that one step aside as the easy money was made and the stock could drop to about $7. Here is an update only for those that are interested in EW! Enlarge to read!

ford aug 2010

The blue was the original thought. It is an a-b-c as a minimum to get back to the top of the diagonal triangle that had preceded it. A drop back to the b wave is dead normal in that scenario hence the $7 target. Notice that a and c are of about the same size, about $7 each, and have similar structures with little triangles in the 4th wave position, a frequent occurrence. This is still a probable scenario but not the only one.

   The ideal target of $16/17 was never reached so it is still possible that we have to go one higher. The most elegant count to allow for this possibility is the green one. We just completed wave 4 and are already on our way up, or wave 4 will develop into a triangle first and then we move up. As wave 3 is slightly shorter than wave 1, and as wave 3 cannot be the shortest the maximum for this scenario is < $17. Breaking the channel makes this a low confidence scenario.

   Another possibility is (in pink) is that we had 5 waves into the high. This would itself be a first wave for the next major bull market. Not implausible considering the stock did drop to below $1 and has survived. As first waves are typically retraced quite deeply, often more than 62%, the $7 target is even a little optimistic but very realistic. Wave 2 should then take the form of two down legs with an intermission in the middle, i.e. an a-b-c. This seems to be the case and if c=a we would get close to the $7.

Putting all of this in the blender, the best thing to do is stay on the sidelines un till we get to $7 or one of the other scenarios becomes compelling.