SHLD Sears Holdings

January 23, 2012January 23, 2012 Hamilton

See previous blog. We expected the stock to drop to roughly $20. It did but stopped dead in it’s tracks. Reason to perhaps change the count as follows;

In the big picture the stock drops from $200 to just over $20, that, by any measure is a bear market and it could possible be all of it! If that were the case we would now be in a new bull having completed an initial first wave up followed by a deep correction, so deep that it almost retraces the whole first wave up. This is not at all unusual. The retracement would have to be an A-B-C which we have. Better yet C=A in terms of vertical distance travelled. The interesting part is the C wave, shown below in detail;

This is an almost picture perfect expanding diagonal triangle (3-3-3-3-3). Each leg, both up and down consists of 3 separate legs. There is always a lot of overlap and alternation between 2 and 4 occurs often. Once complete the rebound tends to be violent and takes the form of either a new bull market or, at the very least an A-B-C up that should retrace the entire diagonal. Soon, perhaps at around $60 the A should stop and a pause should happen, often as a triangle. Should this in fact occur, the stock should be a screaming buy. Always use a stop just in case something else is going on. F, Ford is a good example of this particular pattern.

AEX, Amsterdam and Stoxx600 (Europe top 600)

January 20, 2012January 20, 2012 Hamilton

On the left the AEX, the Amsterdam index, the world’s oldest, and on the right the STOXX600 which is essentially a basket of the largest 600 stocks in Europe. For the first time in a period slightly shorter than two years the RSI (Relative Strength Index) is registering a value above 70, normally assumed to be a sign that the market is somewhat overbought. The Dutch hit that level about three months ago and have fallen off.

In all other respects the charts are virtually identical. On the AEX 5 waves down are readily counted, which is not the case with the Stoxx600. But from that point on things are identical. First of all the retracement levels of 327 and 259 respectively, representing roughly the 61.8% level, which levels are never meant to be precise targets, just rough estimate where things might go, have been reached or will be soon. The structure of both corrections are identical, that is they are A-B-C’s, 5-3-5’s with the C wave as a wedge. C and A are roughly equal, either absolutely as in the STOX or as vectors as in the AEX. The MACD is warning that things might turn soon.

Pretty well identical patterns exist in the DAX (see latest blog) , the FTSE, and others. The exceptions are in the “basket” cases, Italy (see previous blog) , Spain’s IBEX and , of course, Athens. The conclusion is that all markets, more or less, are now ready to go down again. Also, all this intervention and “kicking the can down the road” and so on does little for the markets. After three months of noise , the ECB lending through the exchange mechanism of nearly 3 trillion, the IMF going to 1 trillion, Greek bonds going to 70% haircuts but miraculously no default, the FED helping out (illegally) through central bank to central bank swap arrangements and the list is endless, the AEX is less than 1% higher than back in late October. The STOX did a little better, a bit more than 2%. This is true also for the S&P whose chart is similar as well, except that it is much closer to the spring highs.

FCX Freeport McMoran

January 19, 2012 Hamilton

This mine is the largest gold mine and third largest copper mine. It is situated in Papua province of Indonesia, almost on a par with the Congo as a vacation destination except that there are still real head hunters. This thing is pretty big;

The mine, situated on the Grasberg, or better yet , in it, is huge and the grass long gone. There have been disputes with the locals which in Indonesia is pretty well chronic. Due partly to strikes etc. the latest quarter’s earnings were down by 59%. The stock this year is down 50% at the lows. Looking at the chart more of that should be anticipated. Here are the details;

A argument could be made that the second top is the real one, if so it would be a “failed” top. It is not a great concern either way except if the stock rises any higher than today as that would make the initial drop an a-b-c instead of a first wave. The stock has regained about 60% by way of an a, triangle b and c. If we use the second, failed top the stock could still go a little higher but it certainly does not have to, seeing that it is at the 200 day moving average. If long we would sell here.

The triangles, MIB Italy and MS Morgan Stanley.

January 19, 2012 Hamilton

The triangle in the MIB, Italian Index is holding up so far despite some initial reservations. On MS the triangle is completely negated by today’s rise above the preceding leg. It does not , however , then follow that the stock will keep shooting up.There are a number of other counts that are still bearish. Considering that we are looking to buy this stock, the action is annoying to say the least.

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