TSE

Pattern recognition March 4, or why diversify?

Hamilton

All learning is pattern recognition as in “monkey see monkey do”. That is how we learn to talk, learn to walk and nearly everything else. Here are two charts to make the point.

nikkei march 4

Tse march 4

At first ,and superficial, blush these two charts are pretty well identical. They break down at about the same time, have their largest move , wave 3, between about September and November/December, then are a little unsure and do show some divergence but after all is said and done they are very,very similar. In fact numerically they are almost in tune, both having started at about 15000 and having dropped 50% to 7000. One has just made a marginal new low, the other may soon do so.

   There is nevertheless a slight difference, one of these two will make a new 25 year low tonight, while the other is only in the 9th month of a bear market. One comes from a high of 38000, now down 81% or so, whereas the other is just down 50% and only 9 months old. They are half a world apart, one is the second largest economy and the other an auto plant for the United States.

   What we learn from this, if we chose to do so, is that , first of all , “diversification” does not work as we live in a global world where correlations approach 1 for just about everything, certainly in a bear market, and secondly that as these patterns do not just occur simultaneously in different markets but also sequentially, it helps if you recognize the pattern early while it still has a predictive value. This is what E-wave is all about!

The top chart is the Nikkei 225 index, the bottom one the TSE, just in case. Click to enlarge.

TSE and capped financial sub index.

Hamilton

TSE Capped fin sub index Feb 27 The TSE financial sub index suggests that some temporary low may have been put in a few days ago, we erased all gains after 2003. After making a very nice , and rare, expanding triangle 4th wave. Click on chart to enlarge!

TSE long feb 27 The TSE itself is not quite at it’s logical target. The wave 4 on the way up is at about 6000 (this is the 2003 low). The lower point of the “box” at 61.8% down would work out to about 5750, but this is a little too low as it assumes the entire multi year up move started from 0, which is obviously not the case.

Are we there yet?? DJI and TSE ——————– MFC is done.

Hamilton

Today’s action was pretty good and very close or even at buying points for a number of stocks, like the banks, Manulife, Ge etc. So are we there ? Not sure, as I mentioned you run the risk of missing the boat, but then again you may get a better deal.

Tse feb 24

Starting with the TSE it looks like we are NOT there yet. Typically in time the low occurs straight under the triangle apex, which means we have another week or two to go. Secondly it is short in size. Typically a 5th is equal to wave one (green) AND the triangle itself measures a greater distance (blue). Also there is barely a discernable  structure, let alone a 5-wave one.

INDU feb 24

The DOW also is a little stunted at this point. The normal distance, (blue arrow) has not happened yet and as there is no triangle here the 5th wave so far is an a-b-c which is incomplete. Either a d-e should be added over the next little while or we might actually be in a diagonal, that is a wedge that needs another week or two. Time will tell. Manulife , of course, is done with a low of 12.25 today at the lower end of the 14/12 suggested range.

TSE Feb 17 (written 11th.)

Hamilton

TSE feb 11

The action today was wild but consistent with the triangle idea, now more than 4 months old but also with the alternative that may fit the S&P slightly better. Either way we should start our serious decent soon as we only have 3 weeks plus left to get to about 6500 (still above the 2003 low!) Lets see what happens in the next few days. The last two or three days we did a first little leg down that was corrected late in the day, perhaps tomorrow with the holidays etc. the market will want to be flat and we could see a little more downside.