Month: February 2015

Brussels’ stock index

Hamilton

Brussels is the capital of Flanders, a lovely city and a good place to eat mussels. It is also the capital of the European Union and as all capitals, they wouldn’t be chosen otherwise, nice but rather dull.  At least they do speak Dutch.

If you look at a map of the EU and compare it to a map of the Roman Empire you will notice that they are very similar except that the North African rim  and the Levant was, and  much of Germany was not, part of the Roman Empire. Anyway Brussels is now the new Rome and, as is usual in capitals, it is a hotbed of political intrigue. They are the cognoscenti of what goes on day to day or, if you prefer, the insiders. This may explain why the Brussels’ stock exchange – not everybody knows one even exists! – was one of the best performers lately. They knew all along that they would pretend that Greece would stay! Here are the usual charts;

Brussels feb 21 2015 mbrussels feb 21 2015 s

We struggle trying to find the right count, but an expanding diagonal triangle, shown in pink as the alternate, seems to fit best as each leg consists of just three waves. Alternatively, in black, it is a normal 5th wave with the normal 5 wave subdivision. In the former case we are there, in the latter we could go one little step higher. This is based on the expanding triangle , always a 4th wave in the middle of the chart on the right. This, by the way, is a pattern that is sometimes referred to, incorrectly as it has no place in EW, as the Jaws of Death, and in this case amazingly  just keeps on going

Practically speaking we always knew that the Belgian dentists, the deus ex machina of the investing world, were a financial force to be reckoned with but the best?? Up 29.02% in just over 4 months?? This is Brussels, not Zimbabwe. Our guess is that this is as good as it gets.

Hollands AEX is up 27.02% and the DAX 32.27%. The Dax does not count as it is a total return index. Italy, Draghi’s home, is up just 24.41% and the STOX50 25.13%. Athens (Greece) itself is virtually flat over this period.

AAPL, the apple of our eye.

Hamilton

It sure seems to be, and now the biggest company on earth at 748 Bln. cap.

aapl feb 21 2015 baapl feb 21 2015 s

Arguable only a fool would go against the grain and suggest that this stock is a sell. But then, on the other hand, this stock did drop by more than 50% over the past seven years, twice in fact. If it did that again it would be down to about $60. Suppose the stock ignores its channel and manages another $20 or so to the upside, it would still drop back to $75 under these circumstances. Only if the stock manages to climb to $240 would you be indifferent to holding or selling if another 50% drop lies in the near future. Seen this way, only a fool would continue holding it. And that is precisely what momentum stocks get their energy from, the ingrained notion that there will always be a greater fool to take the stock off your hands at a higher price.

    In EW terms we can count a clean 5 wave sequence from the bottom (but not necessarily from the start of the company in 1976). So it is reasonable to expect a pull back somewhere around here that would correct this entire move, that is down 50 to 62% or to wave 4 of previous degree. Even wave 5 itself subdivides nicely into 5 waves. The RSI is not supporting the recent, almost perpendicular moves up and, the MACD is hitting its head against the ceiling. For those that ever wonder about “fractals” the two charts provide an excellent example, essentially the are self-similar patterns that occur at different degrees. You will notice that the 5th wave looks pretty well identical to the whole thing.

    Fundamentally, and we pay very little attention to this, success is invariable the basis for a downfall. It has a blinding effect on management at all levels and tends to close the mind. In this case none of that is readily apparent but there are rumours of starting a car manufacturing line of business, perhaps even an instant one as in buying Tesla. Apart from that, AAPL now represents something like 10% of Nasdaq , nowhere near the 30% that Nortel represented on the TSE or the 60+% of Nokia on the Finnish index, but still a pretty respectable amount. With Nasdaq less than 200 points away from the 5132 intraday high of 15 years ago (see below and previous blogs) things are getting a little stretched. We would definitely step aside.

Nasdaq feb 21 2015

Would 1000 points, or 25% in 5 months not be a decent gain and if it is why hold out for even more?

ELD, Eldorado

Hamilton

In our blog of June 6th, 2011, we established a reasonable target for this stock at about $5. Earlier we had a lower target and subsequently we suggested a target below $6 but above $4. (see all those blogs). We seem to have reached that target over the last few days, here are the charts;

eld feb 20 2015 beld feb 20 2015 s

Our best bet now is that the stock came down in a double zig-zag, that is an a-b-c X a-b-c where equality would have occurred at about $4. The low so far was at $5.45 after going nowhere for almost two years. It is still possible that the stock would go lower but this company recently reported improved results, a rare event in this business, so the risk of waiting might be greater than buying here. Otherwise, by all means wait for $4 and if it does get there buy it then.