Month: April 2018

S&P 500, SOX semi-conductor index and Alphabet GOOG

Hamilton

We showed the S&P triangle give or take ten days ago. First it went a little higher than expected but then it did start going down again and now even looks better than ever before;

s&p april 24 2018

Not only does it look good, but waves b, c and d are clearly 3-wave structures as they should all be. Wave a is a little less clear and d has yet to be completed. In any event it could definitely be a triangle. To my knowledge triangles are 4th wave structures that are continuation patterns and ALWAYS continue in the same direction as the triangle was entered! The only exception would be when the triangle was misdiagnosed in the first place (as in 1-2, 1-2 etc.) which proves the rule anyway.

The SOX or semi-conductor index is great for playing with options. It moves relatively fast and for no discernable sensible reason. The large fluctuations are evident in the following chart;

sox april 24 2018

This is essentially an unstable situation. The swings get bigger over time and here it is very easy to conflate different parts of different structures to come up with the desired result. Some even go so far as to refer to this pattern, incorrectly, as the jaws of death. Whatever the case, this one looks to be near perfect and just like the contracting triangle this expanding triangle should be resolved by a spurt up ( and very fast) to more or less meet the upper extended line (about 1550, almost 30%). Wave e, by the way, need not travel all the way to the lower line.

That brings us to some of the tech stocks. Alphabet – what an idiotic name – or Google (GOOG) is a perfect example of the previously discussed “flat” only this one is absolutely perfect and beyond reproach;

goog april 24 2018goog april 24 2018 b

A flat is called a flat because, in its perfect iteration, it is exactly that, flat. The c tends to be equal to the a and the intervening a-b-c is often well proportioned. It too is a correction so once it is complete the stock should go to a new high. It has a 5-3-5 structure. We have added a longer chart going back beyond the lows of 2009. I have used a semi-log setting as that results in a straight line if the rate of growth is constant. I do not recall ever seeing a nine year long trend continuing so precisely. If we do indeed have a flat, and all indications are that we do, then we should make at least one more high. My guess would be around 1270 where the upper line resides. I am not sure what the little triangle in wave 1 up is doing.

One of the other “problems” with the bear case is that gold and silver are not reacting as they should and show no signs of moving up.

INTC update

Hamilton

intc april 22 2018

Just a quick update from the 16th. Looks like the diagonal may be complete, that is if you exclude the outlier of wave 3 in the diagonal. In any event this should drop to the $42/$41 level as diagonals are mostly completely retraced AND because that would close a previous gap which is also a common occurrence. In the end we expect a lot more than that. It should take about 2 months.

GE new take

Hamilton

ge april 21 2018

We thought GE might have hit bottom a little while ago. That might have been incorrect but it does not matter as you could get out of the trade breaking even, which I would not recommend under $16 to $19 or so.

There is something wrong with the count last time but I may be over-thinking this. There are a number of reasons why this may not be the bottom. The low back in 2009 was around $5 so this stock has risen $31-5=$26. It is “normal” for second wave corrections to retrace as much as 78% or even more of wave 1. In this case that would suggest a low of around $11. Next the count does not add up. My educated guess here is that we just completed waves 1,2 and 3 and therefore need to add a 4 and 5 before hitting bottom. Alternation here would favour a flat or triangle, which is an elongated flat, as shown. The third argument is the gap in the middle theory. There is no gap in this chart but the “thinnest” point is at about the $21 mark, or $10 from the top. A similar distance down again would bring us to $11 as well. Then wave 3 up can start.

Fundamentally GE cannot go bankrupt. It is at least as important as GM which did go bankrupt but was bailed out. It is too important militarily and it just will not happen. Which does not mean that you cannot lose a lot of money but it does mean that things are ok at the other side of the valley. Good luck.

Dow on the edge

Hamilton

dow april 18 2018

It has taken almost two months, longer than we would have thought, but now it certainly looks like this index is ready to go. Today we overlapped in such a way that we have to assume that this last corrective move is over. This implies that we are in the third wave which is normally the most exciting part. Given that wave one was roughly 3000 points we would expect wave 3 to travel more than that. We will see what happens.