STJ, St. Jude Medical

stj aug 25 b 2016stj aug 25 s 2016

St. Jude Medical Inc. makes, as the name indicates, a whole range of medical devices particularly with regard to cardiovascular applications. On that account the future should be bright. However the fellows/girls over at Muddy Waters think otherwise. Their concern seems to have something to do with hacking, to be more precise some form of electronic interference with their pacemakers and other implants, but whatever the rational, the main point is that they think this thing is overvalued. Is it?

On the left we have a chart by Google going back all the way to 1978, roughly an investor’s lifetime. We think there are 5 waves up even if we are open to slightly different subdivisions in this count. A confirming aspect is that wave 5 is equal to waves 1 and 3 combined in terms of total travel, a common occurrence. In the more detailed chart on the right there is, potentially, a fairly uncommon, expanding triangle 4th wave ( not to be confused with the Jaws of death pattern that, IMO, does not exist). Note also that both the RSI and MACD have recently fallen out of bed. In short we wholeheartedly agree with Muddy Water’s opinion on this stock, albeit for different reasons. Our target is first the low of the triangle at about $50, and then the low point of wave 4 at just under $30.

For complete disclosure we note that this is not the first time that we cover this stock. Last time was in 2012 when we got it completely wrong.

Fed. on Facebook.

fed on facebook

As of two days ago, the Federal Reserve created its own Facebook pages. Apparently it was a complete disaster as they  once again demonstrated complete ignorance about the realities around them. Perhaps soon you will not have to listen to Yellen or any other fed regional president as they will give their guidance or propaganda through social media.

It is worth a quick read. Here is an amusing excerpt for starters;

Board of Governors of the Federal Reserve System

20 hrs ·

One of our 5 key functions is promoting consumer protection and community development.

We work to ensure that consumer and community perspectives inform Federal Reserve policy, research, and actions to promote a fair and transparent consumer financial services marketplace and effective community reinvestment.

More Information…

See more

Hope that this fourth mandate (??) is now perfectly clear. By the way, you are absolutely right that this has nothing to do with EW.

RY update

ry may 26 2016ry aug 24 2016

In our May 26, 2015 blog we discussed the possibility of this stock exceeding the old high which was recorded according to some chart providers as $83.30.  Today we almost got there and as Yellen is talking again at Jackson Hole this Friday, that may just be enough for a last hurrah. We had expected a wedge diagonal to form but instead we seem to have gotten a simple 5-wave 5th wave (maybe). In the extreme this could even go as high as $86.

RY has been impervious to anything potentially negative, low interest rates or flat yield curve, the collapse of oil, the overextended borrowings by large segments of the Canadian population, the (continued) extreme valuations of  housing, the regulatory suffocation environment as in Basel 3, Dodd Frank etc. etc., the recent introduction (but not yet fully implemented ) CRM2 rules for investment dealers and their advisors and so on. Apparently all this is easily offset by quasi monopoly power, the lack of other investments and so on, but perhaps not much longer.

The RSI, at both tops and bottoms has shown its reliability in spades. Also from the lows of Feb. this thing is up almost 40%. A prudent person should sell.

WMT, Wal-Mart Stores Inc.

wmt aug 23 2016 bwmt aug 23 2016

Walmart has not been a great winner for us, this time around we hope it will be. This stock is a sell!

It has a very distinct triangle and even if it is not in fact a triangle, it is still a ten year congestion period which in the end was resolved to the upside. Typically, after that, it should return to the lower end of that range, about $43. Obviously it has not done so. Usually that simple means that it will still do that. As it happens that level is pretty well exactly where the stock would go if it is presently in an A-B-C correction. The B of that structure has now retraced 61.8% or so of the initial drop and even though that does not mean that it cannot go higher this is nevertheless a reasonable point to expect a drop.

Fundamentally, something we give very little weight, the bottom 50% of the US population is close to being penniless and these are typically their clientele. Things are getting worse. Dividends for the past 3 or 4 years have been increased to keep the 43 year run going, but only by the smallest of margins. Stock buy-backs are what has kept this stock suspended at these levels, not a very robust situation.