Month: July 2011

QQQ (Nasdaq)

Hamilton

The Q-s have correlated well with both the TSX and the DAX, so they may help form an opinion with regard to the next move.

 QQQ  The QQQ had its low in late November of 2008, unlike most other markets. From there a clear A-B-C has developed even if the subdivisions are anything but clear. To get perfect symmetry the mid point must be where the star is. The circle represents the distance the C wave must still travel to end up with a C=A result, which, as mentioned earlier, is a very common event. Notice that the C leg is not that far from its ideal destination when drawn vector equal to the a-wave. Notice also that the double bottoms back in 2008 are about 4 months apart which would leave just one month for a new top. In more detail;

qqq s

On the right, outside the chart, I have drawn one of these megaphone patterns , which , of course , is just an expanding triangle. The lines fit perfectly but it would be lacking the e wave (in green). Only once that is complete can you get the last wave 5 up. This does not fit the emotional situation that we have with the debt ceiling, nor is there enough time and, wave d is pretty clearly a 5 wave structure so it has no place in a triangle. Consequently I prefer the count in the chart. We are already in the 5th wave and have completed 1,2,3 and 4, only the 5th leg is still required. A top could be reached near 62, in a very short time from now.

Obviously it does not imply that all other markets will follow immediately, but at least it will point in the right direction.

Also as neither the A or the C are countable, it is possible that the center should be 2 blocks to the right, I do not think so but it is possible. That would add 2 months which does not fit at all with the detailed chart.

IVN, Ivanhoe Mines Ltd. (when a triangle, is not a triangle).

Hamilton

Back in April (see blog) we recommended exiting this stock at around $24, but we did point out the possibility of a triangle which would imply a further rise.Here are the charts then and now.

ivn apr 2011 IVN july 2011

On the left is the old chart, the green arrow shows what to expect if that had been a triangle. Fortunately I had my doubts and did not embrace that scenario (the entire wave in front appeared complete, so a 4th wave triangle did not fit well) .On the right is what actually happened. Needless to say, the stock did not go up.

Triangles are supposed to be 3-3-3-3-3 structure (sometimes with even more legs) Each individual leg should be a 3-wave structure itself. More often than not it is impossible to discern .

TSE, Toronto Exchange Index

Hamilton

It is not the TSE, it is now the TSX, either way it is the Toronto stock exchange. It has been a great performer over the last ten years or so, outperforming most other markets. But we may also be at crossroads of our own and today our GDP growth rate of MINUS 0.3% may have put a little damper on the euphoria.

Today it was also the US borrowing limit that played a role. A few days ago it was Greece’s second bailout, now close to 250 bln Euro’s all told. Neither of these events have anything to do with reality. We know Greece is not going to pay its debts and we know that the US will, albeit with depreciated $$ , so the end result is the same. All this is just a side show in what will take at least another 10 years to resolve.

In the mean time where does our exchange stand? Here is the chart.

tsx july 29 2011 s

Remembering an analyst (I forget his name)  that was totally preoccupied with symmetry, I did the best I could to duplicate that approach , no doubt in a amateurish way. The X is at the center of the Canadian universe. Clearly there was an a-b-c of sorts from the lows of March 2009. I must confess that for the life of me I cannot count the individual sub divisions in such a way as to be sure that this is it. The C-wave does seem to have a neat 5-wave sub structure but Canada is unique in that regard. The DOW, the S&P and the FTSE  have been going side ways now for about six months. It is hard to get bearish immediately on those exchanges, after all , as the saying goes, “do not sell a dull market”.

Canada, almost invariable the laggard, may have changed it’s colors and may have become avant garde, as unbelievable as that sounds. But commodities are the last to peak and since our exchange is 30% commodities perhaps we will get hit first. The chart looks as if we are in the process of completing a wave 1 down soon. A rebound after that may well take us up 800 odd points in wave 2, but in all other respects there is not much to hope for here. Below is the pattern discussed earlier (see previous blogs) that could still be bullish, but time is running out. It is in purple with the purple circle. Symmetrically it would make a lot of sense if the low was , in fact , the Nov. 2008 low and not the March 2009 low.

tsx july 29 2011 s

These patterns, the expanding diagonal triangle can have a very violent resolution once complete. The sub divisions in each leg should be 3’s, if they are not it could all be a wave 1 down! Nothing “fits” , so play it safe.