DJIA

DJIA Update

Hamilton

S&P July 28 2010

Just a quick update. The red and purple possibilities shown earlier on either the Dow Jones or the S&P are both in the running (the blue one is dead). Essentially this cannot any longer be a series of 1-2s considering the overlaps, but depending how wave one down occured we could be looking at a big  a-b-c counter trend correction (red) in which the c wave is becoming a wedge (which has to be 5 –waves). In the purple scenario wave one is at least a month longer in duration and the a-b-c correction correspondingly shorter. Here the c wave also need 5 subdivisions. So , in both these scenarios we should top out soon. 10625 , or thereabouts is a good target as it represents a 62% retracement (more or less) for both waves one. Given the proximity of the month end etc.etc. the possibility that we already reached the high should not be excluded!

The DAX is just a hundred points from its all time high. Perhaps the recent drop in the level of the Euro has made this country’s economy that much more attractive (they are at least untill recently, the worlds largest exporter) . Others, like the FTSE or the STOX50 and many others are similar to the DJIA

DJIA the three possibilities

Hamilton

djia july 21 2010 3

This is 1-2, 1-2, 1-2 scenario. You cannot trade above 10400 or so. This is like the blue one on the SPX

DJIA july21 2010 2

This would be the most bullish temporarily, it is similar to the purple one on the SPX

DJIA July 21 2010 

This is the most “elegant”, you can trade to 10400 + where you hit the trend-line, a little higher is possible but not by much. All told this is probably the best scenario. It is similar to the red one on the SPX. Shown below once again for pedagogic reasons.

SPX JULY20 2010

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

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;

Euro July 17 2010

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;

Bovespa

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!

DJIA july 2010 1 djia juli 2010 2

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

Hamilton

Obviously not a triangle!

TSE March 26 2010 DJIA March 26 2010

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.

Can Dollar , March 26, 2010

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.