Month: October 2013

RDS.A / CVX , Royal Dutch paired with Chevron, and Crude Oil

Hamilton

rds cvx pairs trade 29 10 2013

crude oil oct 29 2013

Royal Dutch  (the ADRs) and Chevron are about the same in size at roughly 225 bln. As you can see, we hope, Royal has followed the price of crude oil quite accurately whereas the Chevron guys have chosen to ignore the fundamentals almost entirely. Whether or not the various counts in these charts is correct is not all that important, but we do expect oil to drop back to the $40 level or so sometime in the future. The triangle, if there is one, would suggest that oil might actually go up, but the B-wave looks pretty compelling. In any event the extraordinary spread between the two integrated companies is, in our opinion, about to collapse. The spread now at about 100% since 2006 is probable as good as it gets. Sell one Chevron against a buy of two shares of Royal. Given the higher dividend on the Royal (by almost 2%) you actually will have a positive carry.

BBD.B update

Hamilton

Then  (July 2012) and now charts;

bbd.b jul 2012bbd.b 25 oct 2013

Even if bought at $4 or so (should be much lower in reality) you can sell now with a profit of 30%+. We would do so given the clean triangle the stock made recently. It should fall back to $4.34 before going higher. We remain constructive on the stock for the time being but there simple is no point in carrying it through the next valley.

RUT, Russell 2000 update

Hamilton

rut 24 10 2013 brut 24 10 2013 s

We are not entirely sure that this can actually be a 5th wave expanding diagonal but we sure do prefer that to Jaws of this or that. We have sharpened the pencil to the point where today we can say that ,also on a semi-log scale, the Russell 2000 has reached the upper trend line. As always, a slight throw-over should  be anticipated, but having said that, any sensible person should get out here and not  risk giving back a good part, or most likely all,  of this move from 350 to 1150.

STOXX, Euro Stoxx 50 index update

Hamilton

stoxx50 24 11 2013

We were dead wrong on this index, expecting the rebound to end approximately at the 50% retracement mark sometime in early 2011. The call would have been very profitable initially but nevertheless wrong. It took another 3 years for the (larger) B-wave to complete, if that is where it is now. That was a 30% down and 50% up move that accomplished little more than add a few marginal points. This index contains the top 50 companies from 12 different Euro countries. Included are names like Daimler (Mercedes), BMW, Bayer, Repsol, LVMH, Enel, Ing Group, BNP and many more. The question that begs an answer is why has this index barely managed to retrace 50% when the S&P, DOW, Russell etc. have all done more than 100%. Even the Nasdaq at close to 4000 has managed a greater rebound at about 80% from the 2003 lows. Perhaps it is indeed Fed. intervention. If so when tapering starts or the artificiality of the situation is removed and things are allowed to return to normal, de markets will be in serious trouble.