The usual then, Jan. 20, 2017, and now charts;

It has taken all of this year for the stock to reach the upper trend line, but now it is there. A throw-over is always a possibility but apart from that the stock – according to EW principals – should be ready to go down. Since wave 4 retraced about 55% of the value, the coming drop should normally exceed that percentage. In fact, in the worst case, a drop to the 4th wave of previous degree should be anticipated. That is in the neighbourhood of $75 or $40 (the stock must have split 3 for 2 sometime this year).

The chart of this 5th wave looks exceptionally good. There is alteration and every wave subdivides properly into 5 waves themselves. We are not trying to knock the Oracle of Omaha’s investment abilities, but given the 55% drop in the Great Recession we do not believe there is any difference between the performance of this stock and the market in general. What will be different is the sense of disappointment experienced with the crowd that still believes in the myth.

The Globe and Mail charts are no longer available for free, so I had to use Bigcharts.

As mentioned on an earlier comment chances are that Berkshire has a little more to go, to more or less the 40000 level where “the fourth wave of previous degree” resides. The companies earnings dropped by a perfect Fibo 62% in the last quarter. An unforced error in tennis lingo essentially means an error that cannot be attributed to any other factor than poor  judgment and execution by the player. Hats of to Buffett for such an introspective mea culpa.

    This all raises the question if we are not , collectively, making a type 2 error by not rejecting a number of economic hypothesis that appear to be on very shaky foundations (and always have) such as the “efficient market theory” , diversification and other silly notions like “dollar-cost averaging” which is simple a tautology if ever there was one. Soon some of these will go the way of the dodo bird.

Most investors and brokers love to bask in the shadow of Mr. Buffett in the belief that his acumen and or wisdom will somehow, by osmosis if you will, rub of on them. Before you get too close , you may want to consider that Mr. Buffett once observed that having an IQ score above 115 is detrimental to good investing, even suggesting (jokingly) that the relevant regulatory bodies in the US and Canada should ban brokers that scored above that level. I leave it to the individual reader to wonder if they should worry.

    Getting to the point, see the charts , note that Berkshire Hathaway stock dropped almost precisely by that ubiquitous 50% Fibonacci ratio. Not good if you consider that the benchmark whatever, S&P for the sake of argument, also did 50%. However not in two months! What is not crystal clear in EW terms is where the top actually is. Obviously it is the first top but EW rules (all pragmatic/ inductive) are not that obvious- it could be the second top (that failed by a few thousand dollars to make a new high. This leaves us with the possibility of 120k to the upside and 60k to the downside and perhaps both. Personally,  looking at the Bigchart an ultimate target of 40k is certainly a possibility. If you are smart, but not too smart, you may want to keep a close eye on this one!