Hamilton's E-Wave Analysis

RBC Focus List

RBC Focus List

This is from the Globe and Mail website. Recently this Focus List was the subject of an entry to this blog (Jan 24), but it is so interesting because it is truly the pick of the litter. The list consists of 20 stocks, chosen in such a way that they broadly represent the market as a whole so it is well diversified. Of course, diversification is the defense of the ignorant, but there are so many believers why fight with motherhood and apple pie?  This thing has been around for a long time, but in the dry swimming/daydreaming virtual format only. It’s real world version, first through First Trust, just for half a decade or so. Up to about 2006 the advertised rate of return was in the order of 17/18% per annum and had outperformed the benchmark TSE by something like 9%, or so.

Today the pattern is crystal clear, a first wave down that takes $10,000 of the value leaving you with $12,000. Then back up a precise 62% (at $19,60/unit) to $18,000. Next should be another down-leg, which , if equal to the first, would take the fund to $8000, which presumable corresponds with a 4th wave of previous degree. All this , of course, according to EW. Ironically, one of the best performers is VRX, Valeant, formerly known and detested as Biovail. Perhaps there was nothing else in that space. Note that over the past 5 years the fund has underperformed the index and its peers by an impressive margin. This is all the more surprising once one considers the high level of self-fulfilling that is ,arguable, attributable to a fund that is so much used in so many different ways.