Month: September 2013

XLE, S&P Energy sector etf.

Hamilton

xle sept 10 2013xle sept 10 2013 s

Things have changed a lot in the last so many years. Good used to be good and bad was bad. No longer. Bad is good and good is bad, or also good. Saudi Arabia used to be in middle east, now it is in the middle of Canada. The price of oil, if it rose too high, was always considered a deterrent for manufacturing and farming as it was a major input factor. Not any more perhaps because so much manufacturing has been outsourced. One thing has stayed the same, a wedge is still a wedge!! One way or another this is a wedge. The message is always the same and that is step aside. When exactly is a little more complicated, but a good rule of thumb is that you should do so before the top and bottom boundary lines intersect. In the most extreme case that would be within a year. Another good point is when something else trumps the wedge. At about $90 we will be double topping (by the way, after a whole year has passed) so should it ever get to that you should be out. Keep an eye on the RSI and MACD. Since February or even earlier, both have been ringing the proverbial bell on the exchange. They are not perfect but after a while their message becomes a lot clearer, we would suggest it already is. A sell.

RUT, Russell 2000 small cap index, repeat.

Hamilton

rut sept 2013 arut sept 2013 sl

Speaking of patterns that were not recognized by Elliot, here is a variant on the theme of “running” triangles, in this instance an expanding one. The entire pattern could be construed as a wave 4. But there is no need to bend over backwards to accommodate unusual patterns, just juggle the letters a little. Call a 4, b 1, c 2,d 3 , e 4 and 5 5 and you have a perfectly good looking expanding diagonal triangle. On an arithmetic basis we are already there, on a semi-log scale we could have one more push up. Either way the next big move looks pretty ugly regardless of what kind of EW you subscribe to.

These charts are particularly instructive as they illustrate very well the absurdity of pumping up the stock market. Each successive leg up was (much) larger than the one  preceding it. What we need now is a Bernanke2 and one day we will all be rich.

NFLX update

Hamilton

nflx sept 2013lnflx sept 2013 s

We would sell. Not only is this stock rapidly approaching the double top level where it almost always a good idea to sell, the last leg up, either a c wave or a 5th wave is wedging very nicely but something more intriguing has happened. The 3d wave is shorter than the 1st wave and as the 3d wave can never be the shortest, it follows that the 5th wave can not be longer than the third! It is presently just shy of equalling wave 3 and consequently CANNOT go any higher (than roughly $298.93). Why anybody would want to own a stock with a p/e of 347 is beyond me, faith in Bernanke et al does not explain it. A short plain and simple.

CIX, CI Financial

Hamilton

cix sept 2013

We have been wrong on this once before, but that was then, three years ago and this is now. We would sell the stock immediately, if for no other reason than that it is about to double top, always a good place to step aside for a little while. This wealth manager is, of course, 36% owned by the Bank of Nova Scotia. In the background there is always talk that they may want to own all of it. We have no idea and in any event that would be a fundamental issue which really is not our cup of tea anyway.

Elliot, the guy that summarized all the different patterns observed – there are only 13 of them – never endorsed the existence of “running” triangles. However other practitioners have subsequently found pragmatic reasons to add the odd “new” pattern. To me what matters is that it works, that we will soon find out. Assuming this thing exists than the above chart is that of an A-B-C wave B where the  middle B is such a running triangle. If so you do not want to own this stock any longer.