CAN $

July 22, 2010July 22, 2010 Hamilton

Triangles only occur in two different positions, either a B-wave in an A-B-C correction (the top one), or in a 4th wave position, i.e. one leg (thrust) below and upcoming top (of sorts). We also know that the distance travelled is often equal to the size of the mouth of the triangle, about 8 cents in the top (bearish) case and 11/12 cents in the bottom (bullish) one. In the top bearish scenario 97 is about as far as e can go which suggests a target of 89. In the bullish bottom case e may have ended at 94 implying a possible target around 106. Of course these targets can be exceeded on either side. Furthermore we know that as often as not the targets are reached at around the apex of the triangle, say early September! Within the triangle every leg must be a 3-wave affaire, this is the case at least for the first 3 legs, thereafter it gets too small to tell. Also there should be an a-b-c-d-e sequence within the triangle, however in certain extreme cases the whole thing extends to an a-b-c-d-e-f-g .

Looking at the bigger picture , I suspect that the move will be down but it is just a very educated guess. Perhaps a break of either 97 or 94 would reveal the next big move. Also , once the move has taken place by reaching either 89 or 106, the whole process should reverse with a very high degree of probability, so waiting for that may be a better trade.

By the way, this may not be a triangle at all!

Euro/US$ July 17,2010. Bovespa etc. etc.

July 18, 2010July 18, 2010 Hamilton

A month ago I suggested that the Euro would turn at around 116 or so, this on the simple basis of symmetry in the down legs. It actually had hit the low at around 118 a couple of days earlier. Here is the chart again;

The symmetry, using vectors, is best found using the green lines, any point on the circle representing the vector of the first green line a. which is why we did not quite reach 116. Anyway, here we are at 130 – up a cool 10% – for a currency that was supposed to be wiped off the face of the earth. The next stopping point is around 136 where there was a congestion area and where the 50 day moving average resides.

Interestingly there is a way of double checking this thesis; as it happens the Bovespa , the main index in Brazil , is (at least for the past few years) almost perfectly inversely correlated with the Euro/ US$ exchange rate. So if the US$ goes up the BVSP should go down. Here it is;

Clearly the Bovespa attempted a double top but failed marginally. From there it has broken down quite sharply and is consolidating. My best guess is that we need AT LEAST one other leg down as a best case scenario (as drawn in blue). Should that happen the outlook for the Euro strengthening to at least 136 makes a lot of sense.

A drop in the Dow Jones would further strengthen this outlook ( these charts are not on the same scale!

Here is the best count I could come up with at this time. Similar counts can be made using the FTSE, S&P, CAC and a whole host of other indexes (except the DAX!) As a minimum a second down-leg should occur soon ( even if this count is not correct as most alternatives are equally bearish). The Canadian dollar (against the US$), is, by the way triangulating implying that a fairly substantial and fast move could occur straight ahead. Given the BRIC/commodities/ exchange rate interdependencies, my guess would be down. Remember that all though we do not speak Portuguese here our dollar is now a commodity dollar and behaves much like the currencies of the BRIC.

TSE, March 26, 2010

May 26, 2010 Hamilton

Obviously not a triangle!

The TSE did not follow the expected script, so the triangle is definitely out, also we have now retraced a respectable 50% on the TSE and are overlapping previous downlegs which could mean that the entire thing is over ending a very simple a-b-c down flat correction.However it is not entirely clear how this would fit the bigger picture. Looking at the DOW for comparison purposes this is not yet the case and a variety of bearish scenarios are still valid. One thing is clear and that is that the TSE is more volatile than even the DOW

It might help to also look at the Canadian dollar (against the US). A few weeks ago everybody and their brother and uncle simple knew that the Can. $ would go up and could reach 1.10 or even 1.20 easily. The obvious part , at the time, was that it was a very crowded trade and therefore did not work, in fact the dollar lost 7+ cents in an equal number of days, pretty well repeating what it had done a week or so earlier. Here is the chart.

Notice that this too (for the moment) looks like a simple flat correction a-b-c with a 3-3-5 structure. Again it is a little difficult to fit this in the bigger picture!, so the situation is that we remain bearish but with a little more caution.

Canadian dollar/ US Jan 2010 (or Fibonacci 3x in a row-will it be 4?)

January 29, 2010January 29, 2010 Hamilton

Most of my life was spent consulting on or trading in FX, literally billions of dollars worth. Since arriving in Canada some 32 years ago most of this related to the Canadian dollar. Furthermore, being familiar with EW and Fibonacci series, Oct of 2002 was a great month for me as I could unequivocally pronounce the imminent rise of the Canadian $ at a presentation we were doing at the Nat. Club. To make things even better the chief economist of one of our most highly regarded investment firms voiced as her opinion that the C$ would drop at least to 50 cents. Here is the chart:

The rates on the right hand are from the Bank of Canada statitics (both pictures can be enlarged).

Notice that the low was at 0.619, very very close to the usual 61.8 ratio. Notice also that the move from 104 to 62 occurs in two legs, drawn as parallel legs in green and almost precisely pinpointing the low point (high on the chart). So what now?

This chart is quoted in the opposite way from the one above, just to confuse a little. For the moment one has to conclude that the Canadian dollar is NOT on its way to parity plus as the general consensus seems to indicate. Back to 80cents is almost a given, back to 77 cents or further entirely possible! Think what that means for gold, materials etc.etc.

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