BAD, Badger Daylighting

BAD Badger day 5 mar 2021BAD 2

As we pointed out before, this stock sucks, literally. Their equipment that you see more frequently nowadays consists of a very big vacuum cleaner on a truck frame. In a sense it is the modern version of the JVB backhoe. If you are in the country you do not need this modern equipment as the JVB would do just fine. However in the more civilized world of a city the vacuum system has a lot of advantages for the very simple reason that you are not as prone to cut through a gas line, electric cables or whatever. Essentially you liquify the soil and suck it up.

For almost 50 years now this stock has displayed  very strong adherence to Elliott Wave tenets and principals making it easier to predict what should happen next.  We have a very clear triangle, always a 4th wave in an uptrend, from 2014 to 2019 shown in green. This “anchors” the entire 3d wave from 2003 to 2019. The thrust from the triangle is equal to the mouth of the triangle, give or take. From 2019 to 2020 the stock drops very close to the “lowest point in the triangle” and as you can see in a glance it drops 6 blocks out of 10 which is somewhere in the order of 61.8%. By the way this drop is clearly a zig-zag which is an a-b-c in which the c is often equal to the a (they are both 6 blocks see chart on the right).

In April of 2020 it hit the low of $19.5 That would have been a clear buy if you had been looking at this stock! Obviously I was not. That low was the bottom of a 4th wave which, if correct, implies that there should still be another 5th wave up to a new high (or close to that in case of a “failure”) sometime in the (near) future. It should develop as an impuls wave which normally would subdivide in 5 separate waves, however, as this is a 5th wave it could become a diagonal triangle which looks like a wedge or cone and may have subdivisions of 3 waves. So far that does not look to be the case. In any event we would look for 5 waves up and again there seems to be a small triangle which could be a wave 4 of the entire 5th wave or just of the 3d wave of the 5th wave, the degree is important. As far as I can tell wave 1 is about 5 blocks and wave 3 7 blocks. Wave 5 of the 5th cannot be the longest so it must be shorter than 7 blocks. Often it is equal to wave 1 which would imply 5 blocks. That would put the stock at about $50 but all it needs to do is exceed $47.50 to register a new high and that does not include the possibility of a failure. From that point it should drop about $30. Enjoy.

Is there an alternative count. Yes. It is possible though unlikely to count the entire three moves from 2014 to 2020, down up and then down, as one single 4th wave correction. This would imply that we are presently in the process of completing wave 5 of 4 and not of 5. That still does not change the immediate prognosis by much.

Russel 2000 update

rut 21 febr 2021  rut log 21 feb 2021

This is the same chart as the one on IWM a little while ago. The Russell 2000 is displaying an exponential function which, put simple means that you start horizontally and end going vertically, straight up. On a semi-log scale it becomes a straight line in which the angle of attack is a function of the variables relative size on the x and y axis.

We have hit the upper trend line 4 times over the past 40+ years. Each time the index reverses and loses about 1/2 of its value.  This is of course a very crude measure, certainly in terms of timing but it does strongly suggest that exiting this market is the most sensible thing to do. Keep in mind that this index climbed some 1300 points in the recent 9 months. That is a rate of 1700 points roughly in a year. It took an entire lifetime to get to that level before!

I would now sell both Royal Dutch RDS.b and General Electric. Both have roughly doubled over the past year. They could go higher but this was the “sure” part if there is such a thing.

Dow

dow 19 feb 2021 dow log scale 19 febr 2021

We may have peaked about a week or so ago on the Dow, see my previous blog.

This is all predicated on the idea of a diagonal triangle 5th wave, all the way from the lows of the 1929 depression (or, if a triangle in the post WW2 lows of 1947 or so). Each leg does not need to be a 5-wave affaire in this scenario. Note that both the RSI and MACD have been dropping for quite some time. Also, the ten year US bond yield doubled in the past few months and that may well be the Achilles heel of this financial Alice in Wonderland that we are living in.

IWM, Russell 2000 index

iwm dec 2020

This chart is from yesterday, December 10, 2020.

This chart is pretty clear to me, particularly the very distinct b-wave in 2019. It is part of a larger corrective structure which makes the covid related drop a 4th wave. Sometimes it is hard to embrace the logic but obviously all the stimulus that was put in place immediately, in amounts unheard of ever before, including arm twisting at the fed as well as all kinds of regulatory and fiscal policy changes etc. etc led to a very positive climate for some, mostly large, corporate assets. As 10 people own 1/2 of all stocks there never really was that much pressure to sell, so against expectations we actually got a very sharp V-shaped recovery. Just as counter-intuitive all that was, the coming years may prove equally counter intuitive. Vaccine or not, it is time to pay the piper. Expect the market to drop precipitously.