Year: 2013

ABX update

Hamilton

Then, April 26th , and now charts;

abx apr 26 2013abx may 8 2013

Try to envision the two charts flowing into each other. On the Tuesday of the 24th of April the stock actually traded with a $17 handle, close enough to our year plus ago target to buy. What is not (yet) clear is if this was actually THE low. If not we should expect an a-b-c rebound as shown in the two above charts. Today’s high at $22.55 is just touching on the gap that was formed on the way down. If you are nervous take the $3 profit. If not , just wait and see if the low was indeed the real one. After all it is hard to imagine a set of circumstances where so much bad news hits a stock in such a short time. Also they did issue debt going out some 30 years at reasonable yields of 5% or so which were well received.

S&P ,Walter Zimmermann’s 4th wave

Hamilton

zimmermann may 8 2013

This is the latest from Walter Zimmermann , a practising EWaver at United-ICAP. (see also S&P blog April 25th) His take on the matter is quite interesting as he sees it a little differently than most others. He thinks we are tracing out a fourth wave expanding (horizontal ) triangle. To my knowledge no one else is considering this possibility (and the Gainsville boys reject it on account of the wave c being 5, not 3 waves which, under EW rules is strictly verboten). This is, of course , the S&P, but similar patterns can be seen in the Dow. If correct a steep decline in wave e should start any moment and drop to about 540 in about 2 years. That would complete the entire pattern and the 4th wave. Following that a 5th wave should take it to new highs. By the way,  this is completely different from “the jaws of death” pattern suggested by some, all though the rather extreme gyrations will be quite comparable. On the S&P we seem to be pretty well there (Zimmermann makes allowances for 1665). Put in a larger context this would be what we are looking at;

s&P may 8 2013djia may 8 2013

Clearly there is not much room left, either for the S&P or the Dow. Whether or not correct is an entirely different matter. But using the language of physics, clearly we are at one set of boundaries as set by the “degrees of freedom”  that is presently available. Assuming that wave e is about to start a logical time for reaching the low would be about 2016 (it does not have to go all the way to the line!). By that time this wave 4 would have lasted 16+ years which just happens to correspond quite nicely with the 16 years that (presumable then) wave 2 took, from 1966 to 1982. Time will tell

DAX and EWG

Hamilton

dax may 7 2013EWG may 7 2013

Here are the DAX and the iShares EWG. Both represent the Frankfurt stock exchange. Last week we had the good employment stats and not one reporter informed you that almost 200,000 jobs were created by a fictive entry based on newly created companies that supposedly came into existence. Now you are told that the DAX has joined a number of other stock indices in making a new high. Again these type of reports are a little dubious when it comes to the message that is imparted. The DAX, unlike the others, is not a price index. Instead it is a total return index. The difference is that all dividend returns are added to the value over time. On the left chart you can see that the DAX is back at the 8000+ level where it was twice before. The EWG at about 26 is still down from a high of 36 5 years ago, the difference should roughly equate to the dividends, and other payments made over that timeframe. A new high, sure, but maybe not what you thought.

RCI.B, Roger Communications

Hamilton

rci.b may 2 2013

Back in Jan.  of 2011 we thought this was a sell. It was for a short while but the call was wrong for the simple reason that wave A is not a 5-wave structure, it is clearly only 3-waves. Flats, including very big ones, follow the 3-3-5 script whereas zig-zags follow the 5-3-5 pattern. Flats, as the word obviously implies, are more or less flat and zig-zags normally are fairly sharply down. After 6 years this is most likely a flat and not a zig-zag. Certainly the normal initial target of the 4th of previous degree, here at about $21 strengthens this view. In tennis this would be called an unforced error, in trading it is called stupid. But, if at first etc.  Here we are again with a delightfully beautiful B-wave, this time to 100% retracement levels instead of just 60, also known as a double top. Time to get out.

Fundamentally the communications companies in Canada enjoy a 3 party oligopoly with very strong regional concentrations. Our CRTC does very little to counteract this. In a manner of speaking these telecoms are better of than the banks and typically charge multiples of what is charged in other countries. Someday technology will catch up and undermine this MO, or perhaps the Canadian population will wake up one day, one can only hope. Without the legal protection these companies would lose a lot of their earnings power. We would therefore be sellers.