Year: 2010

MFC again

Hamilton

Earlier this month I wondered if Manulife might not actually be a buy. It has since gone about a dollar deeper but has come back almost all the way. To be bullish on MFC could be suicidal considering the company’s vulnerability to the stock market through many of its variable annuities, that effectively guarantee a return of your money at , at least, par at age 65 or after 10 years. This is one of those things that could not possible happen in a million years but actually did within a very short period of time after launching the Income Plus product, which was a great success at the time.

The other side of the coin is that when applying EW one should try not to think and keep an open mind. Most brokers are pretty good at the first but fail miserable at the second. It is very hard not to let prejudice enter into the equation but , in this case I will try not to let preconceived ideas influence the outcome.

Here are the charts again;

MFC july 22 20102 MFCJuly 22.2010

On the left is the shorter term chart and on the right the longer term. There are those that believe the correction from the lows may continue longer than we (I) think postponing the second down-leg to about June/July of 2011. It will still happen but just a little later in that scenario. Looking at MFC (and also POW, Power corp. and SLF, Sunlife) that may in fact be what is in store at least for this stock. Manulife is no slouch internationally and is one of the very few Canadian companies to have ventured abroad successfully. Particularly in the emerging markets of China and Indonesia. Insurance companies have also been more intensely regulated than banks and so far nothing has come out of the woodwork to suggest an imminent catastrophe. Its front lawn on Bloor street remains , as always, a dream to behold, not a single blade of grass is out of line.  Perhaps we should give this one the benefit of the doubt, albeit with a fairly tight stop!

DJIA the three possibilities

Hamilton

djia july 21 2010 3

This is 1-2, 1-2, 1-2 scenario. You cannot trade above 10400 or so. This is like the blue one on the SPX

DJIA july21 2010 2

This would be the most bullish temporarily, it is similar to the purple one on the SPX

DJIA July 21 2010 

This is the most “elegant”, you can trade to 10400 + where you hit the trend-line, a little higher is possible but not by much. All told this is probably the best scenario. It is similar to the red one on the SPX. Shown below once again for pedagogic reasons.

SPX JULY20 2010

$XAD , Aussie $$

Hamilton

Aussie $

The Aussie dollar may shed some light on the Canadian $.  It seems to be about to peak at about 90. The patterns are fairly clear and suggest a move down to follow. As both dollars have roughly moved in tandem a drop in the C $ should be viewed as the most likely outcome.

CAN $

Hamilton

CDN $ July 2010

Triangles only occur in two different positions, either a B-wave in an A-B-C correction (the top one), or in a 4th wave position, i.e. one leg (thrust) below and upcoming top (of sorts). We also know that the distance travelled is often equal to the size of the mouth of the triangle, about 8 cents in the top (bearish) case and 11/12 cents in the bottom (bullish) one. In the top bearish scenario 97 is about as  far as e can go which suggests a target of 89. In the bullish bottom case e may have ended at 94 implying a possible target around 106. Of course these targets can be exceeded on either side. Furthermore we know that as often as not the targets are reached at around the apex of the triangle, say early September! Within the triangle every leg must be a 3-wave affaire, this is the case at least for the first 3 legs, thereafter it gets too small to tell. Also there should be an a-b-c-d-e sequence within the triangle, however in certain extreme cases the whole thing extends to an a-b-c-d-e-f-g .

Looking at the bigger picture , I suspect that the move will be down but it is just a very educated guess. Perhaps a break of either 97 or 94 would reveal the next big move. Also , once the move has taken place by reaching either 89 or 106, the whole process should reverse with a very high degree of probability, so waiting for that may be a better trade.

By the way, this may not be a triangle at all!