Back in the good old days of 2008 this stock traded close to $125. In the great recession it dropped to almost $12 or so. It is difficult to get a good long term chart! In any event it would seem to be probable that a new bull started around 2009 and that the rise to $50 is a first leg up.

       From the $50 level there appears to be a single fast and furious 60% drop to $20. If that is correct it cannot be a complete corrective wave 2. Furthermore the bounce from the low of $20 is unfolding in an a, triangle b and c countertrend. Chances are that this countertrend has a little further to go before it is complete. Somewhere around $32/33 would be ideal in that it would close the gap and result in equality between waves a and c. But we are already close enough. This stock should be sold here.

     The diesel environmental problems are mostly behind Volkswagen. Perhaps Trumps 35% import duties are going to become a headwind for this company and others, or maybe car sales are going down across the board. We will see.

So Volkswagen stock traded as low as  Euro 102.20, coming from a high of Euro 254.99 that works out to a drop of 59.92%, very close to the 61.8% Fibonacci target. However it does not look like this is over. The bounce, so far at least, looks to be corrective. In addition the drop over the past few days is almost certainly, as we pointed out earlier, a 3d wave, implying that there must still be a 4 and 5 to come.

The company’s CEO is most likely going to lose his job. I cannot judge whether that is deserved or if he is just a scapegoat. No doubt he will be paid well if he leaves. The company has set aside something like 6 to 7 billion Euros to cover the damages. Estimates already go as high as $30 bln. but it will undoubtedly take years before the dust settles.

We show a picture of the ubiquitous and iconic bug. Just a few years ago it was still made in Mexico. A retro model is back in production. This particular model is not what the fuss is all about. It has an air-cooled petrol engine that sits in the trunk. It was developed in the pre-WW2 years by the Nazi regime as an economy or people’s car for the German roads. Together with the ten year newer (1948) Citroen Deux Chevaux (two horses) , it has been the transport of choice for the poorer classes. It has been the “brand” image of Volkswagen for almost 3/4 of a century. It is also used by others to conjure up a sense of economy. That brand is now seriously damaged and it remains to be seen how long it will take to recover.

The cheating was discovered by a small company, Curious Clean-Air Group, that found the gaming more or less by accident. This underlines once again how important sunlight is as an antidote to obfuscation in keeping us on the straight and narrow.

P.S. The CEO has resigned and reportedly had no knowledge of this matter. His pension at about US$ 32 mln. will start a little earlier and allegedly he could receive up to twice his annual salary of about US$ 16 mln. A free car is thrown in for good order. If this is your downside, risk taking does become a little easier.

This is Volkswagen as it trades in Frankfurt in Euros. The 52 week range was from a high of E254.99 to this morning’s low of E126.70. The high was on March 17, exactly 1/2 year ago. That is down slightly more than 50%. Today’s move alone was good for 23%.

The cause today is no doubt related to tinkering with the engine computer system in order to give better, much better, readings when emission control tests were conducted, but clearly there was a lot more going on well before this latest revelation. Volkswagen, the World’s no.2 automaker has been trying to grow at a very rapid pace in the US market. It has been a very ambitious goal which has allowed the company to stray from the straight and narrow much like a Tour de France cyclist using doping.

The message, of course, is that we are entering a bear market because the mood is bad. What might have been tolerated in upbeat times will not be condoned today. A policy of growth at any costs invites these moral infractions , as it blinds management to all the other things that are important.

In EW terms I suspect that we are in some 3d wave so there is more, perhaps a lot more, to go.