Month: September 2011

MFC and SLF, Manulife and Sunlife.

Hamilton

Sunlife and Manulife are both  relatively “sleepy” insurance companies. Manu is the bigger of the two at about 22 bln whereas Sun clocks in at about 15 bln. Both demutualizes perhaps 10 years ago or so and, as is almost invariable the case, it is after all in the nature of man to be more reckless with other people’s money than their own, both got a wee bit more aggressive, but Manu much more so. We all know that morbidity and mortality only change with the speed of a glacier so there was no need to call the home office to check the latest premium, the big mistake, on the part of Manu, was to assume that this might also apply to stock markets. Quite amazing considering that the market had just before the introduction of their “prime plus” product experienced a whopping loss during the tech implosion. Anyway, here are both charts;

slf mfc sept 2011

Sunlife is on the left and Manu on the right. The counts shown are neither perfect or beyond doubt, but that of Sunlife follows the pattern observed with many other financials, that is an A-B-C up followed by a drop back to the level of the B-leg (not quite) Manu should have had the same count, which arguable it did except that the whole thing is distorted and skewed to the downside. The C wave failed miserable (we warned about this several times!) and with the stock at $11.12 we are within spitting distance of the lows at $9+. The problem is that the last down-leg cannot possible be complete. Barring some miracle the stock is going in the direction of $5-6. Could we possible be looking at SuMa as the next big event after Confed??

FRX Forest Labs

Hamilton

Forest Labs has been mentioned in this blog, but quite some time ago. I had completely forgotten about it. Here is the chart of March 9, 2009;

FRX arithmatic march 9

If you go to the blog you will see that this stock was recommended as a buy, for the rather obvious reason that the A-B-C looked pretty nice and symmetric.Here is what happens next;

frx

You would have doubled your money, and even if you sell now you are still up 50%. So what is next. The big A-B-C says that the $18 low should be the low for a long time, yet the small A-B-C says that the $40 high is the top of a counter-trend rally and consequently we should go to new lows, particularly since there is already overlap and the 3-waves cannot, anymore, morph  into a 5-wave sequence. When two outlooks are not reconcilable obviously one must be wrong. So when in doubt get out, take the 50% and move on.

FCX, Freeport.

Hamilton

 

fcx aug 2011

This was the picture for Freeport McMoran on August 8 . In the meantime the employees at the Greenberg operation in Indonesia went on strike and are asking for pay increases in the order of 1000%. My initial target then was $30. We hit that today. Here is the chart;fcx sept 2011

This is not the only EW count that can be put on this stock, but it is quite credible. The $6/7 or so target suggested in August may come across as too extreme or downright ridiculous to some, but I am not making this up! This is well tested pragmatic stuff.

Using the “gap in the middle” concept gets us exactly to that price level. This would imply that we are also in the middle of the 3 of 3. No doubt there are alternative counts that are not quite as dismal (for instance a large A-B-C correction that is almost over), but I would not bet my money on it.

FDX, Fedex.

Hamilton

This company provides a good cross section of the US economy. First of all it is big. Like UPX it has a fleet of aircraft second only to the pentagon, and they use theirs all the time burning more jet fuel than anyone else. Also they transport huge quantities of finished or semi-finished goods, those that due to their value can bear the cost of freight. In this sense they have their finger on the US pulse. It used to be what is good for GM is good for the US, that is now China and the adage should really be , what is good for Fedex is good for the US. Here are the charts;

fed 1 fed2

The stock got pounded in the 2008/2009 great recession and bottomed perfectly in synch with the rest of the world of stocks. The way down is debatable with respect to whether or not it is a 5-wave sequence or an A-B-C. For the moment it is immaterial. The rebound was more robust reaching about 76% ( a Fibo ratio ) and , at least on the monthly chart , triple-topped, a dead give-away for trouble ahead.

fdx 1 fdx2

And that we got, down 35% in little more than 2 months! The question now is how does it continue? We have already surpassed the B-wave level, usually the first target. The count allows for two scenarios (my charts are not detailed enough to distinguish them properly). These two scenarios apply to many other stocks as well!

The one on the right is where we will complete wave 1 down soon. Wave 2 would then take , say two months and frustrate both bulls and bears. In this instance a small triangle is assumed as wave 4 of 3, today’s action, including the gap, is much , perhaps even all of wave 5.

The one on the left assumes that wave one was complete sometime in August and the action since then was a small 1 and 2 and we started 3 a few days ago. In this scenario the stock will continue to drop without much of a pause. This is why, as mentioned earlier (see DAX) it is very dangerous to play short term rebounds. You may find yourself under water much faster than you bargained for. First target now would be around $50 and then below $35.Not good for the US!