Month: January 2010

MCD or the yellow arches, Jan 2010.

Hamilton

This one has eluded me for some time. I was reminded of it last weekend when after driving for a good many hours my wife and I were starved so we went to McDonalds. For two Agnus burgers, two french fries and two cockes (that we did not want) the price was about $18. Fortunately my wife had a few coupons to cut that down a few dollars. The setting was comparable to a jail cafetaria.    When the kids were small you could do this for 4 at 1/2 the price!

    Anyway the stock lost about 80% in the 2000-2003 stock market drop , but has been totally impervious to the more recent events. That is it has traced out a very clear triangle over the last year or so. I expected it to crash but made a point of pointing out that triangles can reslve themselves in EITHER direction. Now we know it was up. We also know that the next move is down. The high should be reached soon at $66 to $68 after which it should drop to $44 and perhaps to $10 ( a previous 4th wave!)

I like the $4 up $20 down (perhaps $50 ) ratio for the risk/reward profile. Options are best for this one and even though I expect all this to occur fairly soon (see RSI and MACD) I would still go out about 6 months. 

mcd jan 2010 2 mcd jan 2010

Remember you can enlarge the graphs by clicking on them.

HUI or Gold Bug ETF, Jan 2010

Hamilton

Like the XAU the HUI is a great index to see what might happen in the gold space. In this case, see below, it more or less confirms, or at least , supports our bearish stance. Also it provides a very good example of how patterns occur over and over albeit usually in a specific order. These are both standard wedges, they always occur at tops and are invariable retraced in their entirety. Notice also that both the RSI and the MACD both warn of imminent tops, in the former case even by almost 6 months.

HUI

Another dead give away is the double top without a clear impuls  wave leading to the second top. Chances are that the first top is the “real” one and the second simple the result of an overly exuberant retracement, which may mean that what we are looking at is an A-B-C flat in which case the HUI  might (repeat might ) trade back to the lows.

XIU (TSE ETF) Jan 2010.

Hamilton

XIU Jan 2010

The XIU, a proxy for the TSE is dropping right on target, it is now at 16.50 on its way to , at least, 14.50 but first we probable need a little rebound as the TSE tends to do its business in increments of 1000 points.  In the mean time our favorite HXD has moved in tandem and at roughly twice the pace. Both have a comparable base value right now and as the XIU moved from about 17.50 to 16.50 or one point. the HXD went from just under 12 to almost 14, or two points. This pattern in the XIU calls for another 2 points down (as a minimum) so that should get the HXD to about 16. Ultimately I would look for much higher levels. (41+??)

Nikkei, Ford , the US long bond and Mr. A Wiggen of Agora fame.

Hamilton

The other day I happened to see Mr. Wiggen on TV. Every 10 years he sticks his neck out to predict what will be the next 10 years best investment. Last time it was long gold/short the Dow Jones – which proved to be a very good trade. This year his best choice is long the Nikkei, short the US Government long bond. The guys at Agora are fiercely independent and even if they can be accused of all sorts of things like sensationalism they are definitely out-of-the-box thinkers. This 10-year call resonated well with me so here it is revisited.

Nikkei 225 Jan 2010 F Jan 2010 3

 F Jan 2010 2

St louis fed jan 2010 long bond

I put Ford in simple because it had recently completed a pattern known as a “diagonal” or an expanding wedge. It takes stocks down ( or up, as the case may be) beyond an extreme value and therefore leads to a rather violent reversal once complete. Japans Nikkei may be close to a low but the pattern is not complete and consequently, even though I agree with Mr. Wiggen over 10 years, I do think we should go a few thousand points lower first.

Note that the 30-year bond chart is similar to the Nikkei chart, however, its down trend lasted 30 years or so whereas the Nikkei has only been at it for 20, ergo a few more years and a little lower is certainly not out of the question.