Month: October 2012

DJIA, Imitation is the best form of flattery

Hamilton

dow aug 2012 logEW Dow oct 2012

On August 16 of this year I put the chart on the left in a blog, one used primarily to explain how ridiculous Keynesian policies have become. 3 months later the Gainesville boys, in their latest forecast, have the chart on the right as the first picture. They even show the top, just as I do, in 2007, contrary to their contention that 2000 might fit better. I show their chart hoping I am not infringing on their copyrights and that they will not mind. I am very flattered. It is either a case of great minds thinking alike, or, and this is more probable, a case of many roads leading to Rome but only one EW path.

Now that we are on topic here are two more charts;

Dow oct 2012Dow 20 oct 2012

The Dow on the left is no different than the chart above but for greater clarity I show the channel that the Dow has been in since the great depression. The channel is , of course, drawn by connecting the lows of 2 and 4 and then drawing a parallel line through the top of wave one. In this case that line also happens to run through the top of wave 3, and the lows of 2003. Quite amazing actually. On the right is the Dow over the past year or two. The clear wedge here is what matters. The top channel line on the left corresponds with the top line of the wedge. (the angles are different but that is because one chart is semi-log and the other is not). To put it in plain English the Dow (and the S&P and Nasdaq, see previous blogs), have been bumping their heads against the ceiling, 3 times now. Wedges occur in 5th or C waves. In this case it is the c of a large B from the lows of March 2009. Time to reef your sails, better yet get out of the boat.

Normal EW targets would be the top of wave 1 of 5 as wave 5 is extended. That would be where the market was at its high exactly 25 years ago, about 2700. Next is wave 4 of previous degree the top of which is 1000.

RIM , update

Hamilton

RIM oct 2012

Fortunately we recommended an exit a few blogs ago. The stock is now, once again at tempting levels. The stock has now dropped proportionally even more than it had back in 2000/2001, the big tech wreck. Otherwise the action now is pretty well a repeat of what happened then which, of course , is the main characteristic of fractals . As vectors go the A and C in the chart are now equal, which then becomes a function of the sharpness of the pencil that you use.  If history does repeat the stock should muddle along the bottom for a little while and then shoot up, not necessarily the way it did last time but at least for a good rebound.   If you are one of those people that knew it was a buy at $6, and to this day still lament the fact that you could not do it, I am talking about Apple of course, here is a second chance, perhaps.

V, Visa

Hamilton

v b 2012v s 2012

According to Bigcharts this stock is trading at a p/e of 98.35. Yahoo Finance has that ratio at 68.31. Whatever. At least p/e expansion is very unlikely from here on for this stock. The EW count is not at all clear except that the last leg can be counted as a 5 wave sequence and that, if there is a channel of we are about to hit the top. Additionally the RSI and MACD are not confirming the new highs. Simple put this is where one should apply the “buy low, sell high” adage even if you miss the absolute top by 10 dollars or so. The chart on the left is on semi-log scale. If one were to use a normal, arithmetic, scale the stock price is at the upper trend line as well.

It is not clear what exactly has propelled this stock up so much but charging 19% and paying 1% must be a good part of it. Loans losses to date have miraculously been somewhat subdued but that may start to change soon. A dispute over merchant’s fees is about to be settled in court and may cost the company about $4 bln.

MCD, The hamburger joint, update.

Hamilton

mcd dec 2011 bigchartsmcd oct 2012

The Bigchart on the left dates back to the 18th of December 2011. The chart on the right is as of today. The stock peaked in January at about $100. It has taken all this time to do wave 1 down and an a-b-c rebound in wave 2, precisely to the Fibo 61% level. The drop over the past day or two is the start of wave 3. The first target is at around $45 but much lower possibilities lie beyond that. If you bought the recommended put at that time you have lost about 1/2 of your money but you will soon cross over the strike price a second time and there are at least 3 months left to expiry! Buy more ?