TSX and SLB updates

October 9, 2015October 9, 2015 Hamilton

This week, in case you missed it, everything shot up in tandem presumable as a result of the Fed. not doing anything and even opening the door to never doing anything. Oil shot up 9% (see our blog), the Can. Dollar had a great week and everything else that was down between 30 t0 80% over the past year had a great day. Will it last? As always we have no idea but we do take our cue from the patterns, in this case the TSX and Schlumberger as a, random, proxy for the oil companies. There are very clear a-b-c’s, they are corrective and that does not bode well. Obviously that could change but for now we prefer the bear side. The TSX did the usual 1000 points, twice actually and the second time in little more than a week. That should do it give or take one little push after thanksgiving.

There are many others that follow this general pattern. Halliburton, HAL, is another excellent example.

FM, First Quantum Minerals update

October 9, 2015 Hamilton

We start with the usual then, June 2011, and now charts;

At the time we observed the near perfect B wave that created the top in 2011. This called for the C wave to be next. Normally it should create a new low below the lows of A and it should develop in 5 clear waves. So far it has done neither. That low was at $2.70 on Dec. 5th, 2008 which is stock split adjusted. The low of $4.52 recently is close but we could still go lower but the long-term trend line may be hard to cross. There is also no clear 5 waves down. If anything there is a pretty clean a-b-c both up and down. This suggest, potentially at least that some sort of double zig-zag is forming. That would argue that there never was a B-wave and that the real or orthodox top is actually the one in 2011, not 2007.

The stock has doubled from the recent lows at $4.52, no doubt on massive short covering. The same has occurred with TCK.B but in both cases we would caution the investor/gambler that the bottom may not yet be in. Overcapacity is rampant and much is financed with borrowed money. Demand is scaled down considerable and there does not appear to be much improvement in the near future.. This is your classic hog-cycle which may take a little longer. In the mean time you have saved nearly 80% of your money by not owning this stock.

HSI, Hong Kong’s Hang Seng update

October 7, 2015October 7, 2015 Hamilton

We start with the usual, then March 20, 2015 (there are earlier blogs!) and now charts;

We got the peak right within ten days, but not the height as the throw-over certainly did exceed our expectations. This, of course, is your standard wedge, pennant or diagonal. It is a classic pattern and is highly reliable in predicting what lies ahead, which is down to the base, 16000, as a minimum. Why should we here in Canada care? Well for one thing Vancouver is now North America’s costliest city according to a Bloomberg article, at 2.3 mln. C$ for your average detached home, a double since 2005! Partly this is due to the fact that this port city is surrounded by mountains and consequently the usual sprawling expansion in all directions is not available. More importantly it is the Chinese connection which goes back to the days of the railways. Much of the real estate is bought with offshore funds and much of that is from HK.

Vancouver proper with a population of about 600,000 is Canada’s 8th largest municipality, Toronto weighs in at about 2.6 mln. so at least 4x as big. Furthermore the climate is more agreeable and there is an abundance of nature in the area. So just imagine what happens when a few million people from China or Hong Kong decide to buy a pied a terre in this paradise for themselves or for their kids. There are 265,000 international students in Canada, 80,000 from China. The impact is bound to overwhelm the locals.

With stock indexes imploding, the Can.$ perhaps bottoming things may change in the near future. But first there is the J-curve effect which basically means that things initially go in the opposite direction of what one would expect because investors are trying to get in under the wire before things get seriously worse. For the Hang Sang index we expect a further drop to about 16,000 and ultimately perhaps to 8000;

Canadian Dollar

October 7, 2015October 9, 2015 Hamilton

The usual then, July 17, 2015, and now charts;

In the text of that blog (tag; Canadian dollar) a target of about 1.35 or 74 cents is suggested. This corresponds roughly to a 61% retracement of the bull move from 1.61 to 0.90 Fortunately I have a lot of experience trading currencies and that paid of in this case as well. Here it is in detail;

These are futures so they do deviate a little from the spot rate but at 1.3450 the prediction was essentially spot on, no pun intended. At the time a reporter at one of our largest papers had some real nasty stuff to say about the competence of our CB governor. Wisely they chose to ignore it rather than start a defamation suit which , no doubt, would have opened a whole new can of worms.

The improvement in the C$ has been fairly dramatic and coincides with moves in oil. Where it goes from here is not entirely clear but from an EW perspective a move back to parity is definitely a possibility and one that the market does not appear to consider. For completeness we add oil below. For the moment at least it seems to be making an a-b-c correction targeting about US$54 per barrel;

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