WFC, update

WFC mar 2012wfc may 20 2013

Then and now charts, then being 11th March, 2012, more than a year ago. We thought $40 would be good enough, of course it has gone well beyond that by about $ 10. But absolutely nothing has changed in the wave count and with it the expectation that the stock will soon decline, perhaps when it hits the lower trend line.  This one, like JPM, is one of the few big banks that is actually trading at new highs. Why is not entirely clear.

Here is a more comparable chart;

wfc may 21 2013

JPM update

jpm may 20 2013

We did not expect this stock to trade above $45 or so because, among other things, there appeared to be a very distinct B-wave triangle (not shown). The stock failed to drop and consequently a different scenario is playing itself out. In fact there are two such scenarios. The most bullish one would have the ups and downs over the past 13 years form a single triangle wave 4 which calls for a top potentially as high as $70. The problem with this scenario is that it will probable take too long. The other scenario, which is much more in line with the market overall, also sports a triangle but a much smaller one that is a wave B within a much larger degree wave B (in blue). If C equals A in this configuration the stock would peak at just over $60, which, coincidentally would equate to the levels reached in 2000 and would form a “double top”. The entire structure from 2000 onwards would then become wave 4. Time wise this process could be complete in a matter of months, perhaps even weeks if the present central banks orgy continues to propel the market into the next bubble. There was, of course, a time that JP Morgan was itself viewed as the central bank, which may explain why it has benefitted proportionately so much more than the few other too-big-to-bail/fail financial institutions in the US. The thrust, or wave c of B requires another 4-5 as far as we can tell. To play it safe we would, if we owned the stock, start selling at around $55 or at the very least put in a close stop-loss order. Ultimately the target would be around $20 if this is indeed going to be a wave 4.

RUT, Russell 2000 p.s.

rut may 18 log 2013

Further to the previous blog of the Russell 2000, we have added a semi-log chart simple because it shows the relative proportions of each leg much better and as a result makes the notion of an expanding triangle all the more palatable  and/or convincing. For comparison purposes we have added the DAX below, also on a semi-log scale. As mentioned before, the Dax is a total return index and therefore should not be compared directly with indices that are not also constructed on a total return basis. Nevertheless it is interesting that the DAX sports the exact same diagonal but instead of expanding it contracts. (the time scales are different!).

dax log 18 may 2013