Month: May 2012

SXC Health Solutions Corp.

Hamilton

SXC Health Solutions Corp

At around $70 we thought this one was getting a little pricey.  Unless they have discovered some elixir than extends life itself we would suggest this is a sell. There are a few good reasons. There is, arguable a nice 5 wave move up from the lows in 2002 and from $70 onwards this one is climbing vertically. Waves 5 and 3 are about equal in length. The Mount Everest effect clearly played a role, the stocks high was at $99.56, can you get much closer to $100?? The p/e at $70 was already at 44x, today it is at  62.38X. This company is in the pharmacy benefit management business. The company was founded in 1993, started trading on the TSX in 1995 and went IPO in 2006  on Nasdaq.

If this call proves to be correct over time it should fall back to at least $40 and should do so in a matter of months!

HNU, update.

Hamilton

We recommended this leveraged ETF on natural gas on April 18th when it was trading at about $8.50. This is about the most trend-persistent commodity for a very long time. What that means is basically that analysts, brokers and other connoisseurs who have absolutely no idea what they are talking about parrot each other and keep repeating the same mantra. When it was around $6 on the commodity this just had to be bought and there was only one single analyst (at Dain Rauscher) that I am aware of who wrote a very good report arguing that natural gas would  go to about $4 and stay there for a long time. Going long the stuff too early has been extremely costly particularly for those that trade commodities without stops.

In any event sentiment has turned in a truly remarkable way and now we have the likes of Goldman Sachs and T. Boone Pickens firmly on the long side. It is all a bit too much. Here is the chart;

hnu may 2 2012

We do not care about the fundamentals. Natural gas is often a by product of oil and consequently it does not have its own demand and supply curves. Next it can not (yet) be moved around so it has a “regional” price. We look only at the EW patterns. Assuming this last leg down on HNU is a 5th wave, typically we should retrace back to about $14 as a minimum. Beyond that $23. In both cases at least a minimum of 3 waves up is required. Presently we are up about 29% and this ETF goes at twice the speed of the gas itself.

DOW, update

Hamilton

Using the same Bloomberg chart here is the DOW (industrial Average);

DOW may 2 2012

So far it is the only one that is making a new high. Why it is in this unique position is not entirely clear. Perhaps they have taken the strongest measures to pump up their stock market, using both transparent and not so transparent means. We do know that the US Fed. is actually targeting the stock market, at least that is implied if the level of the market is used as a measure of the “success” of the Fed’s interventions. From an EW standpoint this should not have happened, or, alternatively the count is wrong. A double zig-zag could explain away the inconsistency (see alt a-b-c X a-b-c) but it is not very convincing. In any event as long as the Dow stays below the 2008 highs it remains likely that it too will fall in line with the rest of the markets.

DAX, update

Hamilton

 

dax may 2012

The DAX also follows the same patterns but somehow manages to retrace 80+% of the preceding drop as if nothing has happened. Perhaps because they are sitting at the other end of the see-saw than the club Med countries. Germany’s neighbour , the Netherlands prefers to chug along the bottom, but the pattern is nevertheless , essentially, the same. Oddly enough, Holland and Australia, and  Germany and Canada twin up with each other the best.

aex may 2012