Hang Seng, TSX, XFN and RY

November 27, 2011 Hamilton

Superficially, all four, the Hang Seng, TSE, Capped Financial ETF and the Royal, have done roughly the same thing, but if you drill down a bit there are some differences. For instance, the Hang Seng starts tanking a full six months before the others topping in Nov. of ‘09. The others wait till March or even April of ‘10. From hi to low the HSI loses the most at about 34%, RY 30% and the TSX 24%. The XFN only manages about 20% The path for all four follows a neat EW pattern, 1-2-3-4-5, except that the wave 2 is very messy and so is the 4-5. In fact it is not even clear if a 5 wave sequence is indeed complete. The only one of the four that, so far at least, adheres strictly to a clean channel is the HSI. In all cases we cannot be completely sure that the recent rebound is a wave 2 ,or part of that, or a wave 4, and consequently we do not know if the most recent down leg was a wave b, or wave 5 of 1 , or wave 1 of 3. Fortunately b-waves are followed by c, a 4 by 5 and a 1 by 2. On average the Royal should be a screaming buy anywhere between here and $41, at least for a trade. (see previous blog).

The Banks again.

November 25, 2011November 25, 2011 Hamilton

Rather than take an individual bank, I have used the TSX capped financial index in this Yahoo chart. I am not entirely happy with the count but , at the very least it is plausible. If correct most of the Canadian banks (and other financials) should, barring any idiosyncratic anomalies, follow this basic pattern as they are, after all, joined at the hip and listen to the same drummer.

BNS, Scotiabank, follows the pattern to a t . The whole thing could be compressed to make a triangle out of all the up and down action over the past 4 months and the conclusion would be about the same. A 5th wave is still required and seems to be targeting a level of about $46 (which is still high relative to the “logical” level of $41 (as explained in previous blogs).

We missed the $5 up and down trade by being too flatfooted and indecisive. But now there is so much more clarity. The stock could trade towards $40 after which there should be about a $10 rebound. Essentially you can buy the stock even now and still make a good return!

SunLife, has been a little annoying. Like the energizer bunny it just keeps going and going. It is now down an unusual eight dollars in one go. But on the positive side the RSI is as low as ever and a turn should occur soon. Even Manulife has stopped going down the last few days.

THI, Tim Hortens

November 25, 2011 Hamilton

The stock is well above the old high of about $40 in 2008. Between $49 and $41 there is a large 3 month correction that is probable a 4th wave. From that level a wedge might be forming. In any event the upper trend line at about $54 should hold the stock. Why wait?

MS, Morgan Stanley

November 25, 2011November 25, 2011 Hamilton

Both MS and GS have recently gone through a rather wild roundtrip. In the vase of Goldman it was up some $30/35 and then back down again. Morgan Stanley did a little less but on a proportionate basis , quite a bit more. Up $8/9 and back down again, almost. Those are like 80% moves, at least on the upside and we almost caught it but unfortunately did not jump on the situation wholeheartedly. MS is now again approaching that $10 level, after moving down in a relatively clean 5-waves. The initial move up looks to be an a-b-c so it is probably counter-trend which does not bode well for the long term. But it is worth remembering that the price paid for Bear Sterns was upped from an original $4 to $10. For a classier outfit like MS that may well be a bottom of sorts. Perhaps we are in a large flat of sorts and we could again double in value in a very short period of time if things go right.

GS is in a similar position but at $87 it is not that obviously at “rock-bottom”.

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