Month: March 2015

TM, Toyota (ADR’s)

Hamilton

TM march 17 2015

For at least the length of this chart Toyota has performed exceptionally well. The Corolla is one of the most durable and uncomplicated vehicles that you can find. In the last 10+ years they have received an enormous boost from China which is now the World’s largest car market. As always for 1000 years nothing happens and then in a very short time period 1/4 of the population makes the transition from bicycle to Lexus and there is no end in sight (except if and when congestion rekindles the popularity of the bike).

Looking at this chart what strikes me most is the consistency or persistency of this stock which has adhered to the channel , between the black arrows, for almost the entire time. Only seven years out of 36 does the stock venture above the channel and, equally interestingly, never below it! The count that we show here has the top in 06/07, followed by an A down and  B up. However the B is not very clearly a three wave affaire , in fact one could argue that there are 5-waves. That really doesn’t matter as all it does is put the top right at the end. Double-topping – where we are now – is then probable going to give way to a new high at around $150+. After that it should go to the lower channel line at about $70 by that time or even below that. A sell now and a short at $150+.

OIL update

Hamilton

oil march 17 2015

Oil is not doing what was expected. The rise to , say, $60, the top of the triangle , did not occur even though the structure was acceptable as an a-b-c. All this could still be part of a more complex wave 4 (an irregular flat?) but if we go much further down that interpretation will be plain wrong. In the mean time we are not even sure of the degree of this wave 4 ( 4 of 3 or 4 of the whole thing?). So we will wait un till such time that we can predict the past rather than the future. See also RDS.B.

DAX vs EURO

Hamilton

dax vs euro

We happened upon this particular chart on Bloomberg that we thought is instructive in these modern times in which QE, in one form or another, is the rage. Currency swings have been around for a long time and were often larger in magnitude than they are now. For instance in the mid-eighties US$/DeutschMark moved from 3.50 to 1.50 and back again in a little over a year. Sterling had similar swings earlier and our own Canadian dollar has moved from 1.04 to .61 to 1.10 against the US$, albeit over an appreciable longer period of time. Yet the respective stock markets did not appear to have the large gyrations they do today. Perhaps this time is different as most capital mobility constraints have long gone and we now have a huge pool of “homeless” (hot if you prefer) money sloshing around.

    The recent  rise in the Swiss Franc caused by the Central Bank abandoning the currency peg, led, initially at least, to a corresponding drop in their stock market, see below;

smi march 17 2015Swiss franc march 17 2015

Because one event occurs immediately after the other we will use the post hoc ergo ….. fallacy to assume there is not just correlation but causation, even if in this particular example it seems to dissipate rather rapidly to contradict that same assumption. Debasing the currency is, by the way, an excellent way of making the rich richer and the locals poorer.

Back to the DAX. If you are wondering what the leading stocks were to push the Dax up, they are Volkswagen, BMW and Daimler (Mercedes), all three big exporters and all three from an industry that was down and out not too long ago. Time to buy Peabody Energy (BTU) perhaps???

RDS.B encore

Hamilton

rbs.b march 16 2015

Just a quick encore on Royal Dutch, this time using the b shares (the difference between b and a has to do with withhold taxes on dividends). This is the longest chart I could find. In most if not all 5-wave sequences there is normally one wave that is extended. That is longer than it “should” be. Here we assume it is wave 3 of 3, but we are not sure where it ends, that is it could be bigger than you think hence the alternate count. What it does is push the top from 2007 to 2014. That does not change the target as it matters little as in both cases the target is the 4th of previous degree or, alternatively the 4th of 3 (see the two horizontal lines). What does matter, however is how you get there. If a C wave in the very large flat it has to be 5-waves straight down, but if the top was in 2014 a large A-B-C may only just be starting and you could get the pause or intermission somewhere around here (instead of a wave 2 of C).