TSX

TSX update.

Hamilton

TSX1

This is the bullish case, it is an A-B-C correction and by definition should be followed by a new high. The C is an expanding diagonal that should be retraced entirely (which must happen in order to get a new high). The critical point is the upper trend-line around 13600. This also corresponds with a 50% retracement of the entire drop of about 1500 points. Given the large number of stocks that have clear B-waves I doubt that this is the correct count.

tsx2 tsx3

On the bearish side there are a variety of 1-2, 1-2 scenarios that could apply. As the last down leg is from 13900 to 12750, or roughly 1150 points a 62% retracement would lead to 13500, close to today’s high. A little higher is still possible but beyond that the immediate  bear case gets very dicey. Look for an update soon.

TSX

Hamilton

tsx mar2011

This was a strange week. China’s export machine stuttered, Gadaffi won’t go away, confidence dropped and employment was less encouraging and then we get the Japan situation. Every time I have tried to analyze the TSE it does not do what I expect. Here we go again.

The drop so far appears to be 5-waves (in green) and now we should go up in an a-b-c with much of a complete. This is the simple 5-wave scenario. I prefer the purple one. The Canadian market loves doing one thousand points and we have not yet done that. Secondly , there is a gap. Often gaps occur in the middle and if that is going to be the case we need to go to about 13300, satisfying both conditions.      After wave 2 is complete we should at the very least get wave 3 or C of the correction. Of course we are probable correcting the 7 month persistent 3000 point rise from August, if not the whole thing from March 2009. In fact this may not be a correction at all. Instead it may be a continuation of the bear market from either 2000 or 2008. It is too early to jump to that conclusion.

TSX, update.

Hamilton

Here is the TSX again, just as a reminder where we are in the big picture. tsx march 2011

According to Bloomberg/Businessweek the S&P, based on one measure of volatility, hasn’t risen this much amid price swings this narrow since 1971. We had ourselves observed earlier that the TSX had never in it’s entire history, had an absolute move this size, and that was a hundred points ago.

This alone should be a warning that things may just be a little ahead of themselves. The Fed. has been behind much of this by way of QE2 and more importantly coercing the market .Their word has been gobbled up like gospel, but in the end they are powerless to change market forces. So, where are we now on the TSX? Here is the same chart of a few weeks ago updated to today. I am , of course, surprised that we got above the 12000 level, but now that we are here it is good to see where this might go. The purple circle in the above chart represents a “cluster” of different measurements that could ultimately determine where this is going, that is if the whole thing is not already turning today. The cluster consists of:

       1.The parallel trend-line through the top of wave 3, where we are now at about 14200.   

       2.The double-top on a monthly basis, about 14500.

       3. The all time high at around 15150.

       4. The point where c equals a in an a-b-c B-wave, about 15100.

       5. The point where S = R= Q (light blue) at around 15200

       6. The parallel trend-line through the top of wave 5, also at 15200

       7. The next higher point would be where waves 5 and B are vector equal at 16500 if straight up. More logical would be to have some time go by which would lower that point (move along the red circle). This is highly unlikely as the intersection of the red circle with either parallel trend-line is at least 2 years away! To make a long story short, this market realistically has 7% max. to the upside. Time to buy HXD.

Without all the clutter, here is the DOW as well.

DOW march 2011

Notice that of the , give or take, 70 years that is covered by this chart all of 1 1/2 were spent at levels higher than we are today.

The importance of Fibo 0.618, TSX, Dax, S&P.

Hamilton

One should never underestimate the value of Fibo ratios in this business or, for that matter any other (Google the fellow from Pisa and you will be amazed at all the mathematical properties of this “golden “ ratio.  Any way to try this out once again I have taken the 5 year charts of the TSX, the Dax, and the S&P. Here they are (click on them to enlarge).

tsx may 19 2010 DAX May 19 2010

S&P May 19 2010

For all three I have taken the high, the low and taken 61.8% of the difference and added that back to the low.  For the TSX the high was 14969, the low 7591 and the difference 7378.^61.8%of that is 4559 added back to the low gives 12150.

For the DAX the numbers are 8092, 3666, 2735 which yields 6401

And for the S&P 1557, 683,874,540 and 1223.

Please note that these numbers do not correspond precisely with the actual highs or lows as these may not reflect the intraday trades or may suffer from other, minor deficiencies. The point here is that all three came within 1/10%-2.5% of these targets. For the TSX the target of 12150 was slightly exceeded as the high was 12280 (off by about 1%), the Dax with a target of 6401 hit 6249 or short by about 2 %, and the S&P with a target of 1223 made 1217 off by only a miniscule amount. Just for the record, these targets were calculated a very long time ago! the main frustration was the time it took to get there.

    So what do the TSX, Dax and S&P have in common? Precious little except that in bear markets the correlations between asset classes tend to approach 1, and the more the world globalizes and we all read the same stuff, the faster this is happening.