Month: September 2011

CRB Jefferies Reuters commodity index

Hamilton

CRB jan 2011

This was my take on the CRB index, the Jefferies Reuters one which is a little different from the “old”one we used to fret about, back in January of this year.

There are two things one must know about commodities. 

1. They are always the last to peak! Normally people do not play them, only when they are in an advanced state of euphoria, prodded along by there brokers.

2. Unlike stocks there are few idiosyncratic attributes that makes these things move. In the end they will gravitate to the marginal cost of production. 90% or so of traders consistently lose money, almost all of the time. (lack of discipline, market convictions).

In short, if my Jan views come true anyone owning oil, gold, coal etc. etc. stocks will get devastated. The TSX with its large exposure to these commodities will get creamed. Here is where we are now!

CRB sept 2011

I was wrong in assuming we might stop at the 50% line, we went a little further. But the large B-wave (the basis for this prediction), is a perfect text-book example. The C is equal to the A in both time and magnitude. There is no alternative count!!

250, the level of the B where the rally paused, is the first target level.That is down another 20% from where we are today. Just think what that does to your gold and oil stocks!

HXD

Hamilton

HXD sept 2011

Our favorite, first love if you wish, is of course the HXD. It is the inverse as well but leveraged two to one. We were pretty adamant that this was a screaming buy at around $8. (See previous blogs for the reasons). It is now up 42%. The count could be similar to the HIF but more importantly this thing has barely budged. There is no reason why this one could not go to $20 or higher in good time.

HIF, Betapro Inverse Capped Financial.

Hamilton

HIF hif s

The HIF came into existence around the time of the lows in the market, March 2009. This is an inverse ETF and consequently does the opposite of what the market does. As financials moved up to peak sometime in Q2 of 2011 this ETF hit it’s low.  From $21 to just under $8. There is no leverage. As we know the Royal just to pick on one of them is now down more than 20% from the highs, this one is up 9.40-7.90/ 7.90 = 19%, a fairly good hedge.

The wave count suggests that we are in a first up leg, perhaps in 5 of 3. An initial target is around $12 , but much higher levels are fairly reasonable. This ETF contains most financials which would include the insurers and the banks. If selling for tax reasons is not acceptable ( in my opinion something that is upon to debate depending on the expected size of the loss) this is a great instrument. You keep the dividend (where applicable) and avoid  the capital gains taxes.

CL, Colgate update

Hamilton

cl sept 21

It has always been our contention that Colgate  is the real canary in the coal mine. We got it wrong the other day thinking it was game over, instead the stock climbed almost two bucks. But then today it reversed down almost four dollars. This happens not surprisingly at a point in time where the C wave is precisely equal to the A wave of the larger counter trend B – wave rally. Measure it yourself if you doubt it.

Today’s almost $4 drop, unheard of for this blue-chip stock, tells us a lot. It tells us that not only is the Fed. incompetent but, and this is the real revelation at this time, it is impotent, plain and simple. Perhaps the market and the moronic advisors that serve it, is catching on.

Concerning Cl, it should drop to $70 for starters, a lot lower after that .