Year: 2014

DOW again, another wedge perhaps?

Hamilton

dow july 23 2014 bdow july 23 2014 s

EW, apart from all the rules and guidelines , should adhere to the aesthetic requirement that the patterns should look good. Earlier this month we had a chart of Citigroup and offered the opinion that the two down legs in respectively 2000 and 2007 might just be parts of one and  the same complex correction. This may be true for the Dow as well which would then make this leg up a wave 5, which is often a wedge. This sure looks like one, both on the larger scale starting at the lows of 2009 and the smaller scale starting this February. Assuming that it is a wedge of sorts it should end before the upper and lower boundary lines intersect, there just isn’t any room left there after. As the upper line rises by about 130 Dow points a month 17360 is roughly as far as it can go, but do not expect it to get there simple because these structures stop well before the theoretical end, the apex.

Greenspan, we were told, owned exclusively T-bills. Bernanke was apparently equally conservative but Yellen owns a lot of stock (about $4mln or so) by way of individual names or ETFs. Most are up by at least 50% or more over the past year and perhaps someday we will hear if there was a conflict of interest. Socialism is nice but capitalism even nicer.

BTU, Peabody update

Hamilton

Then – Oct. 24 2012 – and now;

btu oct 24 2012 bBTU july 23 2014

Are we there yet? Depends how good you are at drawing a circle. The low so far was just over $15. Perhaps another dollar or two or three but clearly it is not a time to be short! The 5th wave of C is getting close to equality wave wave 1 of C.

HLF, update

Hamilton

hlf jul 23 2014

When in doubt, stay out. We did after the a-b-c down in 2012 was complete. The problem was that it was near impossible to determine what degree that correction was. As it turns out it was most probable a wave 4 in a 5 wave sequence that was completed, we think, at the $84 high. That happens to be where the channel upper side runs.  The initial move down to $50 would then be wave 1, or a, of a new bear market. The problem is that that move could, repeat could, be interpreted as a completed a-b-c correction. That is then contradicted by the very clear a-b-c wave back up to nearly $70 ( yesterday’s idiotic move would be the c of that wave 2). On balance we suspect that this latest move may have a few more dollars to go but will then peter out perhaps at, say $72 or so. At that point the shorts will have covered and the whole process is ready to start all over. Short at $72 with a tight stop for a target of $25. Below is a more detailed chart, also showing an alternative A-B-C down. That would then be a flat so paradoxically the stock could rise to a higher level before the C-leg starts!

hlf july 23 2014 s

RY, Royal Bank update #52

Hamilton

ry july 21 2014 b

If you predict, do it often!

The Royal started in 1856 but only took on its present name in 1901. It is from Halifax. In 2007 this bank was 106 years old and assuming it started at ground level had a stock valued roughly at $60 higher or about $0.57 per year. The low in 2009 we correctly pinpointed in advance (see old blogs) as $26. From there it has gained roughly $54 over 5 1/2 years which works out to $9.82 per year. This, of course, in the aftermath of the great recession which really wasn’t in Canada.

The count is not clear and differs for the 5 big banks in the country. So we just look for what normally would happen. The stock would trade within a , usually well, defined channel.  Here in blue. Having passed $70 or so we are above it. Then there is the possibility of a large wave 4 triangle, very compressed but a triangle nevertheless. None of the others have this. The triangle typically targets a level that can be found by connecting a previous top through the top of the b-leg. That works out to about $77 and we broke that. Measuring the “mouth” of the triangle gives about $35 and added to the low of e of $45 comes to about $80 or perhaps a little higher. Basically we are there! If we use the B-wave concept and , as always, look for equality we would find that at $81 give or take. There is only one line left, connecting the tops, in turquoise, that might point to a higher level around $92. But, looking at a detailed picture;

ry july 21 2014 s

We see that wave 3 is smaller than wave 1, therefore in order that wave 3 does not become the shortest wave, wave 5 logically has to be shorter than 3. In this case that works out to less than $82.50. On top of that, the RSI which for this particular stock has had very good predictive powers, is at its most overbought for the past three years or more. This is a sell and I hope that call will be as correct as the $26 buy in 2009. Good luck.

Below is that blog of Jan. 22nd 2009 , still done by hand. Notice that that chart is pretty well the mirror of the Bigchart above albeit on a different scale;

ry 22 jan 2009

It called for a rise to at least $38. Today I would change the count to an A-B-C instead of a 5-wave sequence. The C is a diagonal and normally is retraced entirely which would have given an initial target around $52. By the way $26 was a 50% correction of the entire value and a 61% correction of wave 3 from ‘89.