NYA, New York stock exchange index

January 7, 2015 Hamilton

This is pretty messy. Too many lines and too much stuff. Anyway this is the broadest index and should therefore be representative of the US market, at least more so than the Dow. Initially we thought there was a 5-wave sequence down in Sept. and Oct. from the high (by 3 ticks) in early Sept. That was pretty well retraced ,just short by about 40 points. Then we do the whole thing again and may be halfway in doing once again after that. All that could be construed as a series of 3 1-2’s of different degrees. This is extremely bearish as once this bounce is done a wave 3 will start and that is where the real damage will happen. And if you have not noticed, this index managed to gain all of 200 points over an entire year which is about 2%. The Russell 2000 (RUT) the CAC (Paris) and GDOW have similar charts but there is more of a downward slope and they all lost over the year. All this despite a lot of massaging by the Fed. et al.

If you look closely through all the clutter , there is a very nice inverse head and shoulder pattern. I have no expertise in that area so I looked it up and below is an example of such a pattern;

The inverse H&S pattern is a continuation pattern and if that is the case here it should be quite bullish, good for at least another 1000 points. We do not believe it but just present this possibility to show that anything is still possible.

G, Goldcorp (in CAN$$!) update.

January 6, 2015January 6, 2015 Hamilton

Goldcorp’s chart is different when looked at in US$$, this is perhaps due to the rapid and large changes in the currencies lately. The top in the short term chart where the number 2 is, is actually 0.11 higher than the top preceding it, technically invalidating the count as shown. In light of the near perfection of the A-B-C wave four (in purple) preceding it we have no qualms about bending the rules.

Here again we have to be alert to the possibility that the drop is not entirely over. A logical target is often wave 4 of previous degree but equally often the target is wave 4 of 3 of previous degree, in this case potentially at $15. This could be accomplished by assuming that we are presently in a wedge shaped 5th wave of C down that still needs it’s 5th wave. Alternatively we will get simple 5-wave sequence down that despite the optics may not have been done yet. Presently the stock is rebounding in what, so far at least, can only be described as a corrective wave 4. At $25+ overlap starts, equality between waves c and a of 4 occurs, and the RSI will move into overbought territory. It will also have retraced about 76% of its value should it drop to about $15.

HGU and ZJG, see also Nov 11, 2014 blog. ABX may be in same camp.

January 6, 2015January 6, 2015 Hamilton

and shorter term;

From Nov. 11, 2014, you are up about 25/30% so there is room to manoeuver. At the time we preferred the triangle idea which would have needed a single thrust down consisting of 5 sub-waves. We got that in both the HGU and the ZJG and then started to turn up quite smartly. Now that both those upturns have very distinct signatures that might suggest that they are corrections, 3 –3 – 5 or a-b-c’s we are not so sure anymore. It is entirely possible that there never was a triangle. Instead it might have been a running flat which would imply that the thrust is not a thrust but a wave 3 instead, 3 of 5 to be exact.. We then still need a 5th wave down, either in a conventional 5th wave without overlap, as shown in the HGU chart, or in a diagonal or wedge, also shown in the ZJG chart.

Gold stocks have performed well recently but very few show perfectly formed initial 5 waves up and therefore some caution is still called for. Below is the chart for ABX;

Here we have a similar but different situation. There obviously never was a triangle but there was a perfectly clear eight month long A-B-C correction (which, by the way, we caught in real time), that presumable would have been a wave 4. After such a correction you need 5 sub-waves down which arguable we had in the form of a wedge. The rather feeble rise from those lows suggest that this 5-wave sequence is not complete. If so we are now in c of 4 and could drop down again. This scenario would be negated by overlap at around $16.50 It could still become a wedge of sorts so the low need not be much below $10.50 or so. You risk a dollar by staying in.

AC, Air Canada (previously AC.A)

January 4, 2015January 4, 2015 Hamilton

We had a good call in the past on this stock, all though not wholeheartedly. It is by its very nature a terrible business given all the variables of nationalism, monopolies, regulation and high capital costs. Fuel costs are also a large component in the overall operating costs and now that crude has dropped significantly it is assumed that these companies will start making a lot of money. Pan Am went bankrupt when oil was at around $24 and dropping and using that example it would appear that capacity utilization, or the lack of it, was a more serious critical factor.

In any event we , potentially, have a clean 5-wave move up from just under a single dollar to the present almost $13. The 5th wave of this sequence is probably not yet complete. It would appear that we are in a minor 5th of 5. Either way, $13 to $13,20/40 is where the upper trend line runs, depending on when it is reached. Once it has reached these heights it should drop back to $5.13 at the very least. We would not wait much longer to sell. The RSI and MACD confirm that a turn is just around the corner.

There is an alternative and that is that wave 4 ended at the $5.13 level and that from there a large wedge started. This scenario would allow for a rise to about $14, not worth the wait.

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