Dow update

indu july 2 2018

This is the count that should be preferred. I understand that even the gurus in Gainsville have come around to this view. Not sure that that adds confidence.

So we just completed wave 2 of 3 and are now entering wave 3 of 3. That is usually where things start moving a little more rapidly which is about time since we are not even at the lows set in February. After 3 of 3 we would still need 4of 3 and 5 of 3 just to complete this third wave. Then another 4 and 5 to complete wave 1. By that time we should be well under 20000.

This is Trump economics at its best. Economics 101 will teach you, as mentioned in this blog before, that if a country’s government runs a budget deficit (that is pay for things with money created out of thin air) then in an open economy the excess purchasing power has to be satisfied from offshore sources. This is the economic equivalent of the gravitational forces on water, which always flows downhill. Larry Kudlow is not there yet and, more surprisingly, nor is Peter Navarro. They were probable AWOL for this lecture. The recent tax-bill basically guarantees larger trade deficits.

If you are living in the States, you should buy your Mercedes, Audi, Rolls Royce now rather than waiting because these cars will cost so much more. This itself will trigger a J-curve effect which simple states that things almost certainly get worse before they might get better.


Costco is ready to turn and both Intel and Boeing are already down appreciable. This is just the start.

INTC. Intel

intc june 21 2018

Back in the year 2000 this stock had peaked in the low seventies. Since then it has spent 18 years trying to get back up there. Since the initial low around $14 or so the stock has been working its way through an a-b-c correction. The b leg made a new low. What you are looking at above is a c wave diagonal or wedge.  It should normally break down right back to the start or even lower.

NFLX, Netflix revisited.

nflx june 20 2018nflx june 20 2018 log

Yes we did get this one completely wrong a few hundred dollars ago. Nevertheless we cannot resist the temptation to warn that this stock is vulnerable to a pull-back (to the other side of the channel would bring the stock to $41??). Have we seen this movie before? The p/e is running north of 279X if that helps.

By the way, this looks a little like Boeing in the previous blog, both may be flying high.

BA, Boeing update

BA  jan 2 2018ba june 20 2018

The chart on the right is from last January. We repeat it just to reiterate our sentiment that this stock may have gone too far to fast. Despite that, on April the 9nth we concluded that the drop was corrective and should therefore be followed by a new high, which we recently got by a few dollars.

Trump has been inconsistent in his treatment of this company. First he complains about the costs of his two replacement Air Force Ones, but after shaving off “billions” he celebrates his first party in the hangars of this company which must have been worth a tidy sum in free publicity. Then it occurs to him that Canada might deliberately be undermining the first military apparatus of the US by producing so much aluminum ( the correct “comparative advantage” to use standard trade lingo, is cheap hydro or electricity a major vanishing input. ) Yet in order to apply his notion of the art of the deal he has to tease a little so he postpones the actual implementation, which the market had anticipated anyway, so nothing happened. Then with the help of his new found friends Larry Kudlow and Peter Navarro he wakes up to find that our Prime Minister Justin is a backstabber etc. and at the same time that China, who everyone knows is the real enabler of the Kim-Trump photo opt, is still stealing the US blind. So the tariffs go back on and now they may actually be implemented even if that has not materialized yet. In these hard to follow twist and turns one thing that must have escaped the presidents attention, despite almost daily use of one or both 747s, is that these birds are actually made for a good part of aluminum. A 25% tariff, when none will apply to Airbus, can have rather significant competitive consequences. This is what you get with one-dimensional thinking.

This was one of the best on the way up which usually implies that it will also be one of the best going down. There are a lot of air pockets and we are nowhere near normal cruising altitude.