Month: March 2011

CAC40 Paris

Hamilton

One can always count on the French to add a little elegance to a situation. This is the CAC forty and as European stock exchanges go, it is somewhere in the middle of the lot, well above Amsterdam but well below Frankfurt. Here is the chart;

CAC2011

This is almost as nice as listening to Edith Piaff sing “Non, je ne regrette rien”. Except, that with the benefit of hindsight, I certainly do regret getting the timing wrong on this retracement, not just the CAC but all of them. Notice that the drop into the lows of March took about a year. Given that it was reasonable to expect a retracement that would last about half as long or , at the worst, equally long (this is normal for counter-trends). Instead it took exactly twice as long, mostly courtesy the US Fed with QE2. But despite this meddling EW still seems to apply very gracefully, with the notable exception of the, somewhat awkward ,“megaphone” in the middle . Note that the recent high is a near perfect 62%. Note that C=B=A as vectors and that C travels about 61% as far as A. In addition both the RSI and MACD are dropping for quite some time.

   Still life has not been all that rosy for either bulls or bears. After the first 6/7 months of retracement this market, as of today, is pretty well where it was 17 months ago giving new meaning to the old adage timing is everything. Now might just be the right time to try the short side again.

TSX

Hamilton

tsx mar2011

This was a strange week. China’s export machine stuttered, Gadaffi won’t go away, confidence dropped and employment was less encouraging and then we get the Japan situation. Every time I have tried to analyze the TSE it does not do what I expect. Here we go again.

The drop so far appears to be 5-waves (in green) and now we should go up in an a-b-c with much of a complete. This is the simple 5-wave scenario. I prefer the purple one. The Canadian market loves doing one thousand points and we have not yet done that. Secondly , there is a gap. Often gaps occur in the middle and if that is going to be the case we need to go to about 13300, satisfying both conditions.      After wave 2 is complete we should at the very least get wave 3 or C of the correction. Of course we are probable correcting the 7 month persistent 3000 point rise from August, if not the whole thing from March 2009. In fact this may not be a correction at all. Instead it may be a continuation of the bear market from either 2000 or 2008. It is too early to jump to that conclusion.

HNU , Horizons Nat. Gas ETF. When markets do not make sense!

Hamilton

hnu mar 2011

There are probable few investments that have done a better job at emptying the pockets of brokers (and their clients) than HNU.  At the time of its debut many may have understood the dangers of commodity futures mandated to roll over at specific times in a market in contango. This is where the amateurs (retail), got taken to the cleaners by their more professional brethern. But aside from that this could not be happening. Anyway you sliced it natural gas ,on a caloric or British Thermal Unit basis, was grotesquely  undervalued relative to oil, and it was greener to boot. Yes there was talk about shipping the stuff by tanker from Marocco and other such places , but the sheer costs and also the not-in-my-backyard almost guaranteed that the problem would stay local. And this is now the problem, too much of the stuff is coming from fractured shale and it cannot all be stored. Like tomatoes half an hour before the close at the farmers market, the price stays low.

As always there was an analyst at , I believe, Dain Rauscher (RBC) who actually did real research and concluded that the stuff would gravitate to $4 for years. But , as always when there is a voice from the dark we do not listen! Here is the stuff;

Natgas 2011

The fracturing of shale apparently causes problems that were not fully understood. Ground water is easier contaminated, earth quakes are more likely etc. etc. Our Quebec provincial government is starting to push back a little. If this catches elsewhere perhaps nat. gas will get back to higher levels when nobody owns it anymore.

Today’s, March 12, Star has HNU and HND figuring prominently (at the top) of their list of best and worst performers. The bull has 605 mln. in assets (the largest among the worst)  and the bear 83.3. Of course these things are leveraged 2 to 1 as well. The 3 year return of the bull was -82.7% and the bear +87.4%

X, TSE update.

Hamilton

x mar 2011

We recommended getting out of this stock the day the “merger”was announced. It is some $5 lower and the can of worms that this has opened is getting exponentially more complex. The large Canadian banks have , and this is quite unusual, broken ranks with 3 against, one on the side (it is in an advisory capacity and should stay mum) even though the chief earlier favoured the deal conditionally. The Ontario Securities Commission has weighed in but has no authority. Mr Prentice, now vice chair at CIBC but a few weeks ago still a minister, rambled so much about it that no one nows where they stand. The former CEO, now CFO with RBC but already slated to “move on” favoured the deal. And so on and so forth. This is another BCE privatization in the making and my guess is that in the end, just like in a Agatha Christie who-dun-it, the gardener will show up 3 pages from the end. More important is why an investor would want this to go through. Below is the LSE and it is rather dismal.

lse

Should X follow this example it will trade substantially lower, more in line with most of the world indexes which fate it has, so far , been able to avoid to some extent.