MFC, Manulife

These fellows had read that their were no 10-year periods this century that the markets were actually down (or something like that) so they did what they normally do and that is write insurance only to very quickly find out that death is a highly predictable thing but stock markets are not. This made the company a natural bear product as in when the stock market goes down, they go down even faster courtesy of the relatively large amount of insured variable annuities they took on through their very popular Income Plus product. Not surprisingly (see previous blogs) the stock dropped from $42 to just under $10, or 76% in a relatively short period of time. Since then it regained about 1/2 of that drop to around $26 only to lose about 60% of that gain, despite the fact that the market overall did nothing comparable! So what could be next? Here is the chart;

mfc june 2010

The initial drop from $42 to $9+ is not a single 5-wave move (in the chart only the C-wave is shown) but more likely an A-B-C. Ergo it is possible that the entire correction is over and that we are now in the next bull leg, having completed a first wave up and the correction of that wave. Even in the event that that is incorrect , we could still be in a much larger counter-trend that still requires a C wave up (in pink). It is difficult to count the action since last August as anything but corrective, nor is it at all clear why the stock is down 60% (since August last) whereas the market overall is is down less than 5% today and up about 10% since August. Perhaps the stock is telling us that the second leg down in the stock market is still a ways in the future. A quick look at POW (Power Corp) a different but similar type of company lends credibility to this possibility.

POW june 2010 

Note that this stock has more or less followed the same pattern as Goldman Sachs (GS), Morgan Stanley and a few others.