Boeing stops flying. As per a week or so ago. It has already hit a low of $90 or so.

The chart on the right is from last January. We repeat it just to reiterate our sentiment that this stock may have gone too far to fast. Despite that, on April the 9nth we concluded that the drop was corrective and should therefore be followed by a new high, which we recently got by a few dollars.

Trump has been inconsistent in his treatment of this company. First he complains about the costs of his two replacement Air Force Ones, but after shaving off “billions” he celebrates his first party in the hangars of this company which must have been worth a tidy sum in free publicity. Then it occurs to him that Canada might deliberately be undermining the first military apparatus of the US by producing so much aluminum ( the correct “comparative advantage” to use standard trade lingo, is cheap hydro or electricity a major vanishing input. ) Yet in order to apply his notion of the art of the deal he has to tease a little so he postpones the actual implementation, which the market had anticipated anyway, so nothing happened. Then with the help of his new found friends Larry Kudlow and Peter Navarro he wakes up to find that our Prime Minister Justin is a backstabber etc. and at the same time that China, who everyone knows is the real enabler of the Kim-Trump photo opt, is still stealing the US blind. So the tariffs go back on and now they may actually be implemented even if that has not materialized yet. In these hard to follow twist and turns one thing that must have escaped the presidents attention, despite almost daily use of one or both 747s, is that these birds are actually made for a good part of aluminum. A 25% tariff, when none will apply to Airbus, can have rather significant competitive consequences. This is what you get with one-dimensional thinking.

This was one of the best on the way up which usually implies that it will also be one of the best going down. There are a lot of air pockets and we are nowhere near normal cruising altitude.

Here is Boeing once again. From $99 it moved to $371 in just two years. That is very impressive. For 2017 it was the best performing stock in the Dow, and because of its high cap. value it had a disproportionate impact on the index. Given all of this it does not seem unreasonable to think that the stock might need a correction, one of those “healthy” ones that in the end supposedly  rejuvenate the stock.

What we got so far is three months of ups and downs that barely make a dent in this rise. What is more worrying is that the pattern is not bearish, see below;

The second larger wedge is part of an irregular a-b-c. Both corrections are essentially complete so new highs, much to my surprise, might still be possible. I would not trade on it.

Boeing is actually the largest component of the ITA in our previous blog. The chart on the left is a year and a half old and despite getting it wrong we show it nevertheless as it illustrates what the right count might be. Whatever the case, we still feel that the 2009 low was somehow the end of a 4th wave. If correct the rest is a fifth wave which now, more clearly than before, is completing or, at the very least , very near to completion.

There is one little quirk with this company and that is their method of accounting, that is the “programme accounting method”. Essentially costs of manufacturing are allocated to production according to an estimated initial production run. Any costs above that, per unit, are simple capitalized to be spread out over future production. So far about $35 billion has been capitalized. To put that in perspective, that is about 5 to 10 years of profits. If the company fails to sell according to initial expectations there is a hefty price to pay further down the road. Beyond that the company is meeting its pension shortfall, one of the largest of any S&P companies, with its own shares, a dubious practice at best.

The stock is now going vertical. It is not clear how this is a Trump effect as the company was berated for charging way to much for the next set of Air Force One’s . Anyway it is all talk. EW wise this stock is a sell.

Below is an alternative count;