Month: January 2011

SNC , CRB (Jeffries), AGU , RDS.a and the B-Wave.

Hamilton

In EW terms the B-wave is normally the mid-wave in an A-B-C, correction, (by definition 3-waves). They tend to have an inordinate amount of symmetry and seem to ignore all fundamental information being almost oblivious to the rest of the world. There are 2 basic problems with the B-wave. First of all what may be 3 waves now can always develop further into 5 –waves and thereby stops being a B-wave. Next they can, and often do, rise above the origin of the preceding A wave which, intuitively, seems to make no sense. Yet it happens like clockwork and sometimes with a margin of about 30%. Despite this , it still is a B-wave. Here are 4 examples (there are literally dozens of them right now).

snc jan 2011 CRB jan 2011

and AGU.

AGU jan 2011 b-wave RD jan 2011 2

Typically the B-wave will retrace 50% to 62% in most cases, sometimes more and , if it gets that far, it frequently double tops, as in SNC above. The symmetry is nearly always present for reasons I do not understand, markets just love symmetry. In most cases that means that waves c and a in the B wave are equal (as vectors). This is pretty much the case with all four examples. In some cases the symmetry goes further and all 3 sub-divisions in the B-wave are vector equal, as, again, is the case with SNC. Anytime you observe this symmetry it pays to be very careful as once the B wave is complete, it is right back down often to below the starting point. If by some oddity the top should occur at a rather precise Fibonacci number (61.8) as for instance with the Canadian dollar in Oct. of 2001 or 2002 and now with SNC, I would get out altogether.

ABX, G, FVI gold stocks big and small

Hamilton

abx jan 20 2011 g jan20 2011

Both these large cap. gold stocks developed rising wedges/flags, pennants, contracting triangles in EW speak or whatever you want to call it. More often than not these structures are erased in their entirety.Roughly that would take ABX down to $36 and G to $35. That is not all of it as, depending on how we get there, 3-waves as shown in the ABX chart, or 5-waves as in the G chart, these stocks COULD drop a lot further. Notice that on both these stocks the RSI and MACD were ringing the proverbial bell on the floor. Goldcorp rang the bell even louder having failed 5 times to rise measurable above it’s previous peak.

Small gold stocks have not done much better recently, see for instance ZJG which is a sort of small cap.index. Recently, November last year, right at the top, we pointed to FVI for the simple reason that it is called Fortuna and all though we do not speak Spanish ,we suspect that it translates , more or less as fortune. Of course it does not say which one – the one you are going to make or the one you are going to lose. Here is the (short-term) chart;

FVI jan 2011

We are trying to keep an open mind with regard to the count. The one used above is by no means the only one possible so we concede that it,and the conclusions drawn from it, may be dead wrong. On the other hand there are a few good reasons to assume it might be correct. For one thing , the upper-trend line is respected perfectly by each and every high in the stock, of which there are five or six. Also the 5th wave, which is the extended one, is pretty close to being equal to waves 1 to 3 combined, again a common occurrence, especially where commodities and/or commodity based stocks  are concerned. Furthermore the RSI and MACD started rolling over about half a year ago. If correct $2,50/ $2,00 are consistent with this count, which if you own it from the highs would mean the loss of , at least, half your fortune.

RDS.A , Royal Dutch again

Hamilton

rd jan 2011 RD jan 2011 2

There is no double Dutch here, just straight talk and it ain’t good. This thing is cooked. A clear 5 wave up over a generation , then a 50% tumble followed by a very clear a-b-c.  As always there could be alternatives but for now , one should be very careful.

Nikkei Index, update

Hamilton

Nikkei 225 Jan 2010

In Jan. last year we put this out as a possibility for Japan’s Nikkei index. As each down-leg in this wedge should consist of 3 waves one would expect an “intermission” so to speak approximately at the mid-point. From the short-term chart , this time from Yahoo, finance, below, it would appear that that is exactly what we have been getting.

Nikkei jan 2011

and Ford motor company using same Yahoo finance chart for that specific period.

F 2011 jan 2

Ford, of course shot up and now is over $18 but that is not the point. The pattern, that is the expanding diagonal triangle, is. With Ford I recognized the pattern well in advance of it’s completion but did not anticipate that it would go all the way to the lower trend-line and then some; $4 seemed low enough. Here we are at the exact same juncture with respect to the Nikkei. Looking also at other Japanese indexes as, for instance, EWJ, the movements for the past year or so look corrective supporting the notion that we are only in the b of wave 5 of this structure, so c is yet to come. Keep in mind, however , that you do not have to go to the trend-line, often as not the drop stops well before that!