Year: 2011

XFN , XLF, RY and other Canadian Banks.

Hamilton

XFN and the XLF are, of course, the Canadian capped financial ETF and the S&P’s counterpart for the US. All but one of the Canadian banks have reported their latest quarter earnings and for banks worldwide, they got a pretty good boost from the coordinated global central bank commitment to ease swap pricing even if it is not clear what will come out of that. In any case  good time to review the banks. To start the XFN and XLF;

XFN dec 4 2011XLF dec 4 2011

The message from these virtually identical charts is that a 5 wave down sequence was complete and some sort of complex a-b-c correction has been going on for the past month or two and is not yet complete. Basically both could attempt to get back to the 200 day moving average (the red line) but they certainly do not have to go that far!

How this fits with the Royal is clear from the chart;

ry dec 4 2011

A move to about $50 to $53 seems to be in the cards. As the buy was recommended at about $43.50 one would theoretically be up $5 already. It was not always possible to get a good fill as the stock gapped twice in the last week. Whatever, a 10% gain is in the cards and I would suggest to take it.

The Royal and the others, except BMO that still has to report,  demonstrated their dependence on the nickel and dime business which is little more than an oligopoly rent. Generally, despite new records, particularly in insurance, the old mainstays of proprietary trading and M&A, together with new issuance, were disappointing. Overall the banks are overvalued.

HON , Honeywell

Hamilton

Hon july 22 2011hon dec 2011

The chart on the left is an old one (see previous blogs under CAT and HON) done on July 22 of this year. The argument then was that the stock had completed a clear B-wave and should decline (ultimately to new lows). In reality the top was already behind us and the stock was doing a wave 2, never quite doing a double top but reaching a high of $62+ . Then it took a dive to about $41+, or a little more than 30%. Then it rebounds , after a pause to complete a 5-wave structure, at about the same speed. This seems to be symptomatic for these times where gambling is reduced to a binary all-or-nothing, red or black game of roulette.

Here we are back at $56 is what should be a wave 2 of C that should take us to new lows. With a retracement approaching 80% the risk now is entirely to the downside.

The patterns are ugly, neither the 5-waves down or the a-b-c up for wave 2, are text-book examples. Perhaps it is the constant meddling, the plunge protection team or the binary nature of these markets that change the normal patterns and distorts them to some degree. In any case, it is time to exit Honeywell.

NKE Nike Inc.

Hamilton

This stock came to my attention while reading Prechter’s latest Financial Forecast, so the idea is his, not mine. However, he believes it is a short for cultural reasons, I prefer looking at it from a pure EW perspective. Here is the Yahoo chart, long term;

NKE big dec 2011

My kids were growing up, that is they were teenagers around the time this chart started’. I found it difficult to understand why a pair of gym shoes should cost a king’s ransom in those days and things have probable gotten a lot worse since then. Anyway, as one can readily see the chart easily subdivides into a very acceptable 5 wave sequence up. In fact the stock is content to stay within this 20 year channel for the entire time except the last year. Perhaps more gym shoes are sold when people want to run away from a world falling apart. Whatever the case this is a perfectly normal occurrence a.k.a a throw-over, sort of the last breath if you wish.

On top of that this stock is an excellent example of the Mount Everest effect, much like Colgate Palmolive CL that just will not budge from the top. The top , of course , is the 100 dollar mark that attracts investors like bees to honey. Of course once the top is reached, the stock typically will fall back to wave 4 of previous degree and erase about 62% of its value. Conveniently both are at $40 give or take a dollar. Short term charts more or less corroborate this outlook.

NKE s dec 2011

This chart covers the entire 3 year long 5th wave. I have not put a count on it as I am not sure how it begins, only how it ends. There is either a wedge (blue) or a triangle with a thrust (red).Notice also that wave 5 is approaching the length of wave 3 (in vertical terms), mostly wave 3 is the longest so that may be a critical point. All three target $100 to $105 so basically you have 3 to 8 dollars up and 60 dollars down, at least in EW terms. If so inclined, options may be the best way to approach this.

CNQ Canadian Natural Resources Ltd.

Hamilton

These charts are from Dec 1!

CNQ. b dec 2011CNQdec 2011 s

and the big picture;

cnq big

It is not the goal of this website to predict the future, all it aims to do is to articulate the Elliotte waves. This one is rather obvious. In our previous blog we were looking for a rebound of about $10 to $41, the stock was at about $31. It went a few dollars deeper but the target remains valid, perhaps as high as $42. These markets lately seem to work on an-all-or-nothing basis and exceed all moderate expectations in both directions.