Month: March 2011

The World, still up?

Hamilton

aexworld ftseworld

bvspworld rutworld

daxworld tsxworld

induworld spxworld

stoxworld cacworld

nikkeiworld swissworld

australiaworld milanworld

Above are charts of 14 different indices , Italy, Holland, Switzerland, France , Germany, the DJ, the Russell2000, Brazil, Australia, England, Japan’s Nikkei and the Stoxx50, not in that order. I have deliberately used a different chart setting that is less articulate, more like what you get in the papers. This has the effect of smoothing things out a bit and making it easier to count. The one thing that is immediately clear is that they are all going in the same direction. Furthermore at least 10 out of 14 appear to be 3 wave affaires, not 5. This means that we are either in a wave 4 to be followed by a  new low for 5, or we are not going to get that and we are simple not yet in a bear market.

The Bovespa, (#3) looks much more like an a-b-c completed correction, ready to go to a new high. The Russell2000 (#4) is less pronounced but seems to want to say the same thing. The fellows in Milan are straddling the fence, either up or down is possible from here.

The TSX is fairly unique in this parade in that it can be counted as 5 waves down (see previous, more detailed blogs). But that still may not define a new impulse wave down as the leg up before it is not 5 but 6 waves and consequently the following 5 wave down could simple be a c of a larger irregular a-b-c. Canada with a minority “Harper Government” has been creeping towards a republic as opposed to a parliamentary democracy , and a few sordid little scandals involving doctored papers, 22 year escort girls and a rather dismissive attitude by our own Berlusconi may just be a little too much for the average Canadian, who patently lacks the savoir vivre of his latin counterpart. This government could fall in the coming weeks, which is fine except that there is no real alternative. This could become a game of Russian roulette with not one but three chambers loaded. (Our outlook on the Can$ also suggest a big problem around the corner, see a few blogs ago)

The last few months have revealed so many B waves that I am very much of the opinion that this market is ready to go south in a hurry. But I would just wait a week , perhaps two , to see if by some miracle this market still has an up-leg in it.

The charts may be difficult to read, but by putting your cursor on an individual one it will tell you what it is, by clicking it will enlarge itself)

Can $$$

Hamilton

Can $$$ mar 2011

Currencies are always a little trickier than stocks. First of all they are not expected to climb forever (as stocks essentially are), and secondly the 5 up 3 down sequence in EW cannot possible apply as one currency up is another currency down, exactly the inverse so one cannot be 5 and the other 3! Nevertheless often, patterns reveal themselves that can have a great deal of predictive value. We recently saw the Yen and now the Can $ has a very clear wedge.

This pattern has a 3-3-3-3-3 pattern (for this purpose a triangle is viewed as an elongated flat and also counted as a 3), making higher highs and higher lows with , perhaps, a throw-over at the end. They only occur in 5th (that is just before the end), and C positions. Typically the individual legs look like they are falling like dominos in reverse. Wave 3 may not be the shortest.     This one is a gem. They invariable retrace right down to the base or lower, in this case about 92. Perhaps time to buy a few US dollars!

ABX Barrick

Hamilton

Abx mar 2011

The golds are behaving rather badly. Goldcorp , unexpectedly made a new high albeit with a miniscule fraction and American Barrick certainly wants to take its time. In this case the wedge is pretty clear (wave 3 is longer than 5 , by the way) and consequently the target remains the same, $36.

FM , First Quantum Minerals

Hamilton

My attention was drawn to this company by chance, as I do not know anything about them , but after having confirmed that they operate in Africa , are in the mining business and prefer Latin to Afrikaans , no doubt to add a little veneer of sophistication to their name , I am just a wee bit suspicious. Looking at the chart I would sell NOW, at this very moment without the slightest hesitation. Here is that chart;

FM2011

This is a very rare example of a near perfect B-wave, an irregular B-wave to be a bit more precise. This is the ONLY correction within the EW approach that is allowed to rise above its starting point. This is counter-intuitive as one might argue that it is then not a correction, but in this case EW looks more at the nature (it is way more bullish than a bull market and therefore must be a bear) of the thing than the distance travelled. In any case these B-waves, like all others must consist of 3-waves and should not go much more than 30% or so above the preceding top. Typically they constitute the mid-wave of a “flat” (but can ,occasionally, become irregular triangles), having essentially a 3-3-5 structure where the first 3 is the A, the second 3 the B-wave, and the last 5 the C wave to follow and complete this whole thing.

fm22011

Notice that the construct of the B-wave is balanced and symmetric. These pretty ones are fairly rare. Loewen, the funeral home guys had a real beauty just before it got pulverized by a Mississippi  court judge ; Merck had one right in the peak of 1999. They do not occur often but when they do they are highly reliable. This one is going to a new low.