Month: March 2016

GE and MS, and this time is different.

Hamilton

Economics is, if anything, a very dismal science. Yet you can prove anything you want with near certainty because the ceteris paribus, or all things being equal clause, that in reality never applies, is always assumed to apply. We now know, with certainty, that the biggest mistake the Fed. ever made was to increase interest rates too soon. Bernanke, who has studied this stuff ad nauseam, has told us so. Never mind that the World was between wars and about to be rearranged in geopolitical terms. Never mind that the Smoot-Hawley Tariff Act was signed into law by Hoover. Never mind a hundred other things. The FACT is now firmly established that you should not increase rates.

     History tends to repeat itself but nearly always in slightly different ways, or completely different ways if you look at causes  rather than outcomes. Elliot Wave analysis is concerned only with the reality of outcomes and does not pretend to address the true causes. So we have once again two charts that help explain this, I hope. As is always the case with charts, they show the history of a stock. Here we have GE, General Electric an industrial conglomerate, and MS, Morgan Stanley a financial institution that can thank its existence to Glass-Steagall , enacted in the wake of the great depression.

 ge mar 18 2016 MS mar 18 2016

Both these stocks were running ahead of the market in general by  about 8 to 10 years. One had a zig-zag correction and the other a “flat”. So we have two slightly different examples of what happened that may now tell us what will happen. It also shows that even the best of companies do, from time to time, lose 95% of their value due to seemingly very innocent changes. Enjoy.

Click on the charts to enlarge them and move them around. Also keep in mind that these are monthly charts that do not necessarily show the extreme high or low. For instance in GE’s case the two down legs are perfectly equal all though that is not clear from the chart. There are a lot of other stocks, we will show just one relatively obscure one to further the point, Kohls Corp. It is in our blog.

kss mar 18 2017

TSX update, a sell everything day for traders, except perhaps VRX

Hamilton

tsx mar 17 2016 btsx mar 17 2016 s

St. Patrick’ s day is as good a day as any to review the TSX. Many banker types downtown and elsewhere pretend to be Irish on this day simple to have a good excuse to have one too many. For those that watched Yellen’ s complete presentation and Q&A yesterday, one too many might not be enough. Each time there is another reason why the Fed will not do what it promised to do the previous meeting and collectively we simple cannot get it through our heads that the Fed is not at all interested in either employment or inflation. It’s raison d’etre always was, and always will be, to help out the banking system, period.

So now that things are so bad that we cannot move forward with “normalizing” the funds rate, oil and gold shoot up which used to be very bad but is now very good. The TSX shoots up in sympathy despite some lingering doubts with regard to our erstwhile favorite stock, VRX. The banks, at least TD and RY have or are about to make new highs so where are we??

Short-term we are completing a wedge, today, to be precise. There is no more room! We have done 2000 points in an equal number of months, about as good as it gets. At this very point overlap might occur depending on whether or not you use intra-day or closing prices, essentially this should not go any higher (there is an exception but we will not go into that). We are above the 50% and just below the 62% retracement levels, close to the wave 4 of previous degree level and both the RSI and MACD are ready to turn.

As an aside, for those that care, I must point out that the bear market in Canada started very close to the date predicted by Martin Armstrong, that is the year 2015.75 or October 1, 2015. Apart from his predictions, the story of his involvement with the Republic Bank of NY and the Safra family of Monaco, is fascinating and very real to me.

The TSX is not alone at being at a critical or interesting point. The Dow Industrials as well as the Transports , among many others including light crude oil and gold, are all approaching or at a major trend line;

dow mar 17 2016DJT mar 17 2016oil mar 17 2016gold mar 17 2016

DOL, Dollerama

Hamilton

dol mar 16 2016 bdol mar 16 2016 s

Somebody on BNN was telling the world that this is a clear buy, simple because they have the very best management team that you can possible get. I have no reason to doubt that they have and the chart alone is evidence enough that they have made a major accomplishment. But that is all in the past, and now the real question is what do you do for an encore? Every company, like humans and so on, grow in spurts and have successful periods that alternate with less successful periods. Starting in 2010 this company has only enjoyed increasingly better and better times. We would hope that that could be continued but reality suggests otherwise. So does EW.

It is not possible to count the waves up in any meaningful way, so we have broken it down to three periods that we then call waves 1, 3 and 5. The last little bit is almost vertical which is simple unsustainable. Then you see the crack in the armor appearing loud and clear, $24 on $94 or 25.5%. More importantly we think it is a 5-wave drop. That means there is more to come after a suitable period to regain it’s composure. We suspect that that might be at the $85 level where c=a and the retracement is about 62%. A sell at that level or a little lower.

HL, Hecla

Hamilton

hl mar 16 2016

Hecla is one of the few pure silver mining operations. It is always good for pretty wild moves. For some reason we haven’t paid much attention to it but today we noticed that it too is sporting a classic “diagonal” triangle, an expanding one. The characteristics are simple that all waves, both up and down are comprised of three wave structure, that is an a-b-c. This , of course, differs from normal impulse waves which are always 5-waves in the main direction and 3-waves in the opposite direction. Also this is the only pattern in which overlap may, and usually does, occur. Alternation, between waves 2 and 4 is often absent.

I have no idea how long the pause in the middle will take or what form it will have, but after it is over we should continue to move towards $4. That is a cool 60% even if it does not go any lower.