Year: 2011

MS Morgan Stanley update.

Hamilton

For more than a month now, MS has followed our script quite nicely so here is another update most of which can be found in the previous eight blogs. First the “big” picture. The charts that are available to me are flawed in that when you look at things over a longer period of time the charts are based on daily or weekly values that often deviate substantially from reality. I will use MSN and Yahoo charts as follows;

MS dec 29 2011 msnMS dec 29 2011 Yahoo

Notice that in the MSN chart the high in 2001 is well in excess of $100, whereas in the Yahoo chart it is $90 at best. Similarly the lows shown in in the latter part of 2008 are about $15 on both charts. In reality the lows occurred at around $9.68 if I am not mistaken ( Mitsubishi bailed them out with $9 bln. at the time.) , so we have not broken that level since as the most recent low was $11,58. In any event it is rather obvious that we are dealing with a nine year time frame during which the stock dropped more than 90%. (Prior to 1986 the company was a partnership and consequently did not have stock.) We dropped below the fourth wave of previous degree (at about $20) and the whole structure appears to be rather symmetric. Therefore it is possible that the entire correction for this stock is over in which case the situation looks like this;

ms s dec 29 2011

It is normal for first waves in new bull markets to retrace almost the entire first leg so this count is totally credible particularly since it is a standard 3-wave a-b-c, the hallmark of a correction. The only problem is that there seems to be a triangle forming over the past three months!!! Here it is once again;

ms dec 29 triangle 2011

So far at least it is clearly a triangle. These structures can only occur in waves 4 or B positions, both of which are bearish. The former immediately and the latter after a corrective c-leg up. For our big picture scenario to hold the stock may not drop below the old low (of 8?) So if it gets there, buy it around $10. Alternatively there is no triangle and it would probable be a buy already.

SHLD, Sears Holdings.

Hamilton

shld

Sears, originally Sears Roebuck, has been around for more than 130 years. Once upon a time it was the largest retailer in the US. It’s catalogue once upon a time was almost 600 pages long. It has such in house brands as Kenmore, Craftsman and a dozen more. I used to own Allstate insurance , Discovery credit cards , Dean Witter and so on and so forth. When it merged with Kmart in 2005 the name changed. As is so often the case they build the largest office tower in the world in 1974,( it still is the largest in the US but is now renamed the Willis Tower) just before the gradual decline started to set in. The Eaton center has the largest store.

The chart is not entirely clear but we do need to make a new low, say at $20 to hit the trend-line. Then the C wave should become a 5-wave sequence which is virtually impossible without this stock going a lot lower from here. Sad when you think about it.

Gold by way of GLD ETF

Hamilton

gld dec 2011 lgld dec 2011 s

Despite a drop of roughly $400 for the stuff itself, from a little over $1900 to almost $1500 (the charts do not necessarily show this, as they are weekly), the direction of gold from here remains unclear. In the short-term chart there is an A-B-C pattern that could stop right here on the lower channel line. If it does we go up, if it does not we will go a lot lower, it is that simple. The trend line is just under $150.

NOK, Nokia

Hamilton

Once upon a time, not that long ago, Nortel Networks was worth 1/3 of the Toronto stock exchange. Nokia still is worth that much of the Helsinki exchange, even after dropping about 90%. It is Finland’s largest employer. The charts tell the story;

nok b 2011nok s 2011

The stock has gone down in two, more or less equal legs. The bottom part of the second leg looks like a wedge even if it is not, strictly speaking, a diagonal (no overlap). The low should be fairly close to $4. This symmetry is almost identical to what we observed with RIM, even if the time frames are substantially different. With a capitalization of about $18 bln. this company is almost 3x the size of RIM. Furthermore is was only recently dethroned as the largest cellphone manufacturer by Apple. Perhaps the Fins will prove to be less indifferent towards Nokia than the Canadians towards RIM and it will finish ahead.