Year: 2016

FTSE, London update

Hamilton

ftse jan 28 2016 bftse jan 28 2016

The FTSE is one of the worst major stock indices in the world, down about 21% which is not really all that surprising when you consider that it contains a good number of the large integrated oils like Royal Dutch and British Petroleum. Beyond that there are also a good number of banks that have fared only so so.

At the lows we were where we were 3 years ago, and we are pretty sure that we are on our way to, at the very least, 4800 as that is the start of this last leg up (wave C of an A-B-C off the lows of 2009). The question is simple how we are going to do that. I suspect that any moment now we could enter into a 3d wave and accelerate down. That would be my most favoured outcome.

There is , however, also a possibility that the downward acceleration will be delayed by several months as we complete a much more complex wave 2 or B. In that scenario a series of 1-2s would become a b wave in an a-b-c for wave 2. An upside target would be around 6300. Then the index should resume its drop. A similar delay is possible in the DAX.

Recent experience with Mr. Draghi suggests that market participants still firmly cling to the myth of Central Bank omnipotence. Perhaps just a few words are needed to extend the “good” times. We do prefer the straight down from here scenario (in blue).

DJT and Baltic Dry Index.

Hamilton

DJT may 21 2014 arithdjt jan 28 2016

Then, May 21, 2014 and now charts as usual. Since the high the transportation index has dropped about 30% or so. It is now approaching the channel , or is right on the upper side. Normal regression to the mean, together with the pendulum almost always swinging too far, virtually guarantees that we will visit the other side or even lower.

In DOW theory terms this is a huge “non-confirmation” between the transports and the industrials. It is the writing on the wall for everybody to see. Ignore it at your own peril. Now the transports do not do this just to be recalcitrant. Things are actually not that good as is evidenced by the BDI, or Baltic Dry Index which basically measures the costs of shipping dry goods globally. Read, roughly, costs of container transport. Here is a longer term (hard to find) chart;

baltic jan 28 2016

It is showing a new low value just above 300 today, it comes from 10,000. To me it looks a lot like a diagonal or wedge. If correct we will soon complete wave 3, bounce up in wave 4 and then make new lows again. You do not want to be the owner of a large fleet of VLCs with a few more coming from the yard soon. See also Boeing. which has just announced a 50% reduction in its building schedule for one of the large jets. It is down almost $34 since the start of the year!

AAPL update

Hamilton

aapl dec 20 2015aapl jan 27 2016

I think $ 92 was my first target, you can check my blogs. Of course the “rounding top” has little to do with EW but that does not mean that they are not an intrinsic part of the prediction. In fact, to my knowledge, I was the only serious prognosticator to call for AAPL to go down early in 2015. We are now in a wave 3. If you enjoy this kind of stuff it has a lot further to go. Some blame China, I would put it to a relatively useless watch. We are going very fast and a bounce is not out of the question, but it has a lot more downside.

POT update

Hamilton

pot jan 25 2016 bpot jan 25 2016 s

Potash is down another $9 or so since our last blog. We are not yet at an ideal target but we would not want to outstay our welcome either. Here or at about $18 a neutral stance is warranted even if we believe the stock might drop all the way to $10 or even lower. All the requirements of a large a-b-c and a 5-wave sequence in that c wave have been met. Even the 5th wave, shown on the right has the right number of subdivisions (but RSI is not yet oversold).

Farm income has dropped to about 55% of what it was in 2013. Potash is bought when there is money, not when it is needed, so there is no reason to get bullish.