Month: May 2012

DELL, Dell Inc.

Hamilton

DELL may 2012

What farmers have known for ages, most brokers do not know. Just as there is a time to sow, and a time to reap, there is a time to buy and there is a time to sell. Stockbrokers have this notion that every second your money is not invested you miss out on this lucrative journey guided by his or her investment acumen, so the right time to buy is when you have the money. Conversely there really is never a good time to sell as stocks are assumed to be on this constant upward trajectory. Only when the crop is rotting in the field and the embarrassment  becomes too great will the broker sell (and , of course at the end of the month when there is a need for food on the table). We believe that the best way to make money, presumable that is the purpose of the exercise, is to be rather circumspect about both the buy and the sell. There are 560 different entries on this website, some individual stocks have as many as 40 entries (RY) so it is near impossible to keep track all the time. That is why I like to work with a “first”, if it reaches that you either sell or are on your own (if not stopped out).

Dell is a good example where both sides worked. For whatever reason (see previous blogs) we recommended buying Dell at about $12. A week too late we noticed the triangle and immediately suggested a sell. So far you are up $5 (or $10 if you also short)on a base of $12. If your broker is like the one described above, you have made absolutely nothing.

EEM, Ishares Emerging Markets

Hamilton

eem may 2012

We correctly (within a single dollar) anticipated the high point of the “right shoulder” and the subsequent drop (so far at least). So it is a good time to have another look. In EW terms the Great Recession drop was wave A, the very large rebound wave B that did not double–top by a mere $5 or so, and now we are in wave C. Wave C should unfold in 5 separate waves so that the entire structure becomes a flat, which, as the name more or less suggests is a mostly sideways structure which subdivides as a 3-3-5. The C-wave, more often than not is the longest, perhaps as a result of the investor having to go through the same humiliating experience twice, usually having learned nothing the first time which gives the structure a slightly downward skew.

EW , which, for the most part, is pattern recognition does not use the H&S pattern as such. It, the H&S pattern, has its origins in the DOW theory, but a pattern is a pattern and the predictive value is recognizing it before everybody else does. Using this in the above chart we have draw the “neckline” horizontally at about $35. Neckline is a bit of a misnomer, armpit line would describe it better. In any event that is the level of support, when it is broken there is a void underneath and the stock should drop by an amount equal to the amount the head sticks out above the neckline. In this case that is at the $20 level. EW has the point of recognition which is where the bulls realise that the are barking up the wrong tree. This point usually lies at the mid-point of the 3d wave. Whatever approach one prefers, all hell should break lose at about $34. Add it all up one should look for a target between $20 and $10 and a time of arrival between early 2013 and 2014

For those that are interested, it is possible to scroll down two blogs and enlarge the chart of the TSX60 Capped index. It can then be dragged up (takes a little dexterity) and then put next to this chart when that too is enlarged. After playing around with those two charts for a little while one is tempted to conclude that Canada too is an emerging market, or alternatively and more kindly, that the world has become one.

NDAQ , Nasdaq Exchange, DB and X, TMX group.

Hamilton

NDAQ MAY 2012

This is the Nasdaq Exchange. Lately they have been accused, among many others, of bungling the Facebook IPO. The top for this stock (and most other exchanges) was back in 2007. To date it has retraced just 42% and appears to be ready to go down again. The pattern is a  simple A-B-C (in blue) or a little more complicated one with a triangle in the B-wave position. Either way the stock should go down further, perhaps even to about $5. If that sounds a tad extreme, have a quick peek at the Deutsche Börse (Frankfurt);

DB may 2012

Despite the fact that the DAX retraced much of their losses from the Great Recession , this exchange is still only trading at 1/5 of its peak value. On a comparative basis that would put the NDAQ at $10.

The big exception to this theme is. of course, our own X, TMX group or Toronto Exchange. Caught up in the bidding war the stock has been suspended in thin air for the last year.x may 2012

We would have sold it quite a while ago and would still do so today. It is not yet clear that the deal will pas scrutiny with the two dozen or so agencies, committees and so on that have a say in the matter. Should the deal pass, then at least the stock will cease to exist, a fate it would then share with a whole slew of other companies that did not consider the unintended consequences of demutualization . If it does not pass the stock will probable crater and join the other exchanges at the bottom of the charts instead of the top.

TSX60C, TSX 60 Capped index.

Hamilton

TSX capped may 2012

Here is the TSX 60 capped index, indistinguishable from the “normal” TSX but the weightings of the individual stocks do not change. As an aside, you will notice that even if different, it looks an awful  lot like Potash below! This index makes calculations a lot easier. From 1000 to 500 is 50%, back to 900 is 80%. The ideal EW target is at 350, the 4th wave of previous degree, also about where C=A even if that point lies 100 points higher depending on when this might happen. Our Head & Shoulder friends should be delighted by this chart. Each shoulder takes a little more than a year (so we may just have a little bounce, in wave 2 of 3 of C). Also the top line and the bottom line are at respectively 62 and 38 percent of the decline in A. 750 would be the dead centre of the whole H&S structure. The pattern targets 600 as a minimum, which point is also found by connecting the lows of ‘02 and ‘09, but if symmetry holds we should be at 500 in about a year. Time will tell.

Originally we would have expected the retracement to stop, on average, at the 62% line from where we would have expected the decline to resume. So , in effect we are wrong by 2 years, but now we are back at the same point equally convinced that the bear will soon grind this market lower.