Month: September 2010

CMI , Cummings, Diesel engines.

Hamilton

 cmi sep 20 2010 cmi sept 20 2010

Who would have thought that the diesel engine, first invented by Rudolph Diesel back in 1892, would become the subject of the “new normal” stock market poster child stocks like CMI, but also CAT, which is a few dollars away from double topping.

From here anything can , of course , happen but, applying the “buy low, sell high” philosophy it is patently obvious that this is not the time to buy, ergo it must be time to sell. A few other reasons to do this are that the stocks P/E is at a lofty 22, the MACD and RSI have turned down and are not conforming and , last but not least, CAT is close to a double top. Afew dollars to the upside is still possible so you may just want to wait a few days (the upper trend-line is around $93) but you do risk missing the proverbial boat.

TSE , S&P

Hamilton

TSE seot 15 2010

Just to belabor the point, above are charts of the TSE (blue) and the S&P (purple). If we did or did not have a wedge is immaterial to the outcome. Nevertheless it is clear that on the S&P it is possible to assume either that there is a wedge or, by subdividing wave 3, a simple 5 wave wave 1. On the TSE this is not possible due to overlap that would than occur, ergo the TSE must have been a wedge, the S&P may have been a wedge.

Notice that the TSE is very close to the critical negation point, whereas the S&P is still quite a distance away; the result of POT, maybe?

FTSE update.

Hamilton

FTSE july2010 FTSE 15 sept 2010

I am using the FTSE as the best proxy for all the markets. It takes, sort of, the middle position and is easily labeled. The chart on the left (click to enlarge) is from June 20th, so about 2 months ago. The preferred count at that time was that the entire drop into the low was a single wave! The “logical” argument for that was that the low corresponded perfectly with the low called for by the preceding “expanding diagonal triangle”, at about 4800. From that point an a-b-c should be expected (as already labeled in the alternative). Normally one would expect the a-b-c to retrace about 61% on average, so , given the 1000 point drop that would take the FTSE to about 4800 + 0.61x 1000 = (about) 5400. We are presently about 160 points above this level but a retracement of 76% or even more of a wave one (of 3 of C) is certainly not unusual, which is where we are right now!

Compared to the TSE(see previous blog below), which is more “compressed” in its structure having probable traced out a wedge type 2 wave one, and compared to the S&P where either a wedge or a simple 5-wave move is possible depending on how you label the subdivisions(see blog on June 20th), the FTSE is the clearest and easiest to read. All have the same message and that is that soon , if not now, the counter-trend of the last two months must stop, otherwise these scenarios are negated!