Hamilton's E-Wave Analysis

TSX update & Merry X-Mas

tsx dec 25 2012 b

If you look closely (by all means enlarge the charts-click on it), you will notice that the TSX is not all that much higher now than in 2000. On a year-over-year basis, the year is not over yet, the gain is a mere 3+%. That is very disappointing as the last few years supposedly had the commodity boom and/or the China factor working on overtime for us. What happens when that stops? Moreover have never been so low for so long. Using the discounted cash-flow pricing model stocks (and everything else) should be worth 2 to 3 times what they were 10+ years ago. Real estate is, stocks are definitely not! Looking at the short-term chart a fairly clear triangle appears to exist for the past year and a bit. This is a “consolidation” pattern that is normally resolved in the same direction as it started, down in this case. The problem with that is that the big picture cannot have a triangle in this position (wave 2), therefore we may be looking at either a very protracted wave 2 (of 3), or a series of 1-2s. The best possible outcome is for another 300 points up and then down hard, not very likely. In the extremely remote event that a huge 10 year triangle is forming starting at the 2008 top, a drop to about 9000 is still plausible. In short, we remain bearish.

All though I do not know who you are, I do know that there are about 100 different people looking at this blog every day. I appreciate that. In the future I hope to be more actionable in the recommendations, perhaps by using the green, red and amber categories. The challenge there is that what is a good trade for one , may not be a good trade for the other. Success, in my opinion, is based on a combination of insight and discipline. A trade may work well when both are applied and not at all if only one is. Furthermore the “philosophy” used is fairly simple, like a cat on a tree branch we wait for the prey to pass below us, then we pounce on it, very opportunistic if you wish. If it works we are happy with 25/30%, if it does not we are out with a 10% loss. There is absolutely no need to be fully invested! A recommendation positive or negative has nothing whatsoever to do with the quality of the company or it’s management, all stocks have their seasons. The main input will continue to be Elliott Wave but not necessarily in a pure form. The sole purpose of all this is for me to be right on a call and for you to make money on it. Once I have everybody completely dependent on this blog and fully aware of the gains that can be derived from it – this is still further in the future – I am contemplating charging a modest fee to cover costs. Also I am not presently licensed to give advice to the public, so none of this blog should be misconstrued as advice. You are completely on your own.

See you in the new year.