Goldcorp has a very confusing structure. What we do know for certain is that 4th waves do not overlap with 2d waves (with one single exception). Goldcorp is up almost 305 from the lows and is about to move into the territory of the 2d waves at three different degrees, when and if it does the bull outcome would become more likely. For the moment, who knows.
During that same July, (14th to be exact) we posted this chart for G;
For a larger chart we refer to the blog itself. For the moment suffice it to say that given the “wedge” structure depicted in this chart the first target should be the level of the base, in this case $35. Today we have this;
We are at $38 , coming of a high of pretty well exactly $56 ,so we could be approaching an intermediate bottom of sorts soon. However if the big picture (see that blog) is anywhere near correct there could still be a long way to go ($19?). To simplify matters it is replicated below;
ABX has not moved an inch over the past ten years or so. Goldcorp has gained about $8 over the past 6 years, that is 17% absolute, and about 3% per annum compounded over those years (about the same as a ten year government bond!).This during a period that was generally recognized as the Great Recession and the end of the existing banking system as we had known it to that point. This is exactly what these stocks are supposed to protect you against but I know of a number of investors that were pretty well wiped out by G. Here are the charts;
Gold itself is trading close to $1600 US, that is nice but way short of the $2600 or so to keep you inflation protected (since 1980). So the simple fact that these stocks are not moving – and Goldcorp is one of the better ones – may be telling us that inflation is not around the corner, instead we should expect serious deflation.
Had one assumed, erroneously but understandable, that the top at 3 was the top, the double top line drawn in green through that point would have warned an investor to think twice. This line is touched or crossed about ten times only to have the stock fall back below it. If that is not a good warning I do not know what is. Also over the last 3 years there have been a number of cases of overlap, see more detailed chart below;
Overlap, with one exception, does not occur in bull market sequences. The exception is the “diagonal” or wedge which must be either a 5th wave or a C wave. In this case only the C wave makes any sense at all which then leads to the conclusion that the entire move up from the March ‘09 lows is a correction that is about to end. $56 is the maximum! And, of course at the present $52 level we are , once again, double topping. Time to get out.
Concerning deflation I have attempted earlier to explain that the “monetary” dogma as furthered by Keynes etc. is theoretically and pragmatically unsound and perhaps little more than rubbish, but it is mainstream and therein lies the problem.( A similar situation exists with the Efficient Market Theory, thoroughly discredited by those in the know and adored by those that are in the dark). If you think about it, the single most important input factor over the ages has been labor, not commodities, energy or any of those. The world is awash with under-employed and un–employed people. New entrants into the global workforce are showing up everywhere by the billions. Modern production methods also make things a lot easier. You do not need a 20 year apprenticeship anymore to grind out a camshaft on your own. All you need to be able to do is read, that is enter the coordinates into the machine, throw in a blank and switch it on. The machine will do the rest to tighter tolerances than ever before, in less time and without sick days. This “transformation” is also entering into areas outside of manufacturing such as the legal , medical and brokerage businesses. So it is amazing that nobody seems to think that deflation is a real possibility.
As a hedge, gold and gold stocks are practically useless despite the deeply entrenched myth to the contrary. In the main gold moves up when stocks move up and vice versa. This is only normal considering that they are both primarily real assets. In the event of deflation, both will go down.
A few weeks ago I suggested that ABX and Goldcorp were an outright sell given the pattern that they had then completed. The targets then (and now) were/are $36 and $35 resp. We are 3/4 along the way so what now? Here are the charts.
To see the previous blog go to the index at the top of the website, or enter the code.! So we dropped from $49 to $39, pretty drastic already but not yet at the target (lets use $36 to have a little margin). Will it actually get there? Do not know for sure but it is the target so no harm in waiting for it. Note the RSI is already at a one year extreme and so is the MACD. But the count does not appear complete.
Looking at the warrants, I have no idea what the strike or expiration date is, but for these purposes that is not immediately relevant, it is clear that they dropped from $6 to $2 in the last leg down. That is more than 60% against 20% for the stock itself, or about 3x as fast.
Suppose the stock does go to $36, it would then probable rebound about half of what it lost, about $6 to $7 (to about $42/43). The warrant will drop to about $1 and rebound to $3, a much better return – with a lot less risk! Do sell when that happens as this warrant has an awful time-decay.