Year: 2011

EWN. Double Dutch?

Hamilton

ewn b 0ct 2011

In the big picture the EWN ETF is very clear, the A-B-C  B-wave retraces a predictable 62% after completing a nice wedge for C, here it is in more detail;

ewn oct s 2011

In the mean time we have managed to drop below the B-wave level and so far at least a case could be made that we are in a 4th wave;

ewn oct vs 2011

The best fit here is to assume that we are in wave 4. The EWG, Germany is very similar. The tops is the top , no ambiguity, and no double Dutch at all. By the way, should wave 5 extend as is so often the case, it often travels about the same distance as waves 1 and 3 combined or about 8 points which would suggest 7.

MS, Morgan Stanley

Hamilton

One of the few left standing. It is smaller than GS but famous for it’s bond trading capabilities. It looks like it is a death spiral, just like Goldman, but the chart actually looks rather promising;

MS oct 2011 MS l 2011

First of all, there appears to be a 5 wave down sequence as should be expected from all C waves. If it is or is not complete, is a different matter. The lows of March 2009 were at around $9 and so far we have gotten below $12 already. We know that at $10 or below there will be a lot of buyers so something is bound to happen around that level. The most interesting part is that the 5th wave of wave 5 seems to be developing as an expanding diagonal triangle, which , in English, is a wedge that has ever increasing swings in the 3 down legs and two up legs that it should have. It is an exhaustion pattern, meaning things have gone too far too fast. It only occurs as the last wave in a sequence and virtually always is retraced in full, in this case that equates to $18. Furthermore it does this fast!

The question that remains, is this wedge complete. The simple answer is maybe, maybe not. To play it safe lets assume it is not complete in which case one more dive to roughly $10 is still in the cards. If you buy it there you could make an 80% return in a matter of months. Use options if that fits better.

Below I have added the chart from July 2011 ;

ms july 2011

At the time the stock had already dropped to around $20. It has gone further than expected but the pattern is still perfectly valid (as perhaps with GE)

PS. It could be that this stock goes to zero, but we would still have to get a wave 4 and then 5. This “wedge” would then be at the end of wave 3 as it has to be at the end of something. Given that wave 3 by that time will be from $30 to $10, a retracement to $18 would still occur as wave 4. So provided you sell at $18 things should work. If the stock does not get to $10 and rises from here, al you have lost is an opportunity.

NA, National Bank ; HCG, Home Capital Group

Hamilton

Both these banks are outside the mainstream, one because it is primarily Quebec based and therefore less Anglo so to speak and the other because it chooses to do what the others will not do, that is extend credit without a lien on the first born, mom & pops cosigning and a collateral coverage of at least 3x. Perhaps the resulting charts could better reveal where we are;

NA 2011 l NA 2011 s

In the big picture National Bank probable topped at the first top, in purple. But even if it is the second top, in blue, one more down leg could still be in the cards. So far we still have a good way to go to reach the initial target of about $53 (the B-wave level within the larger B-wave).

HCG l 2011 HCG s 2011

Home Capital is behaving a little better in that it is already much closer to the first initial target of about $37. Also it has a far narrower channel adding credibility to the count. A single additional wave down could complete the first move, but this one could already be complete! If wave 3 (in blue) is shortend, waves 3 and 4 in blue would become 3 and 4 in purple and the first 5 down would be complete. All the other banks have equally mixed signals so buy only at the bottom if it occurs close to the b-wave level.

DE, John Deere

Hamilton

Nothing runs like this, both up and down;

de oct 7 2011 de oct 7 s 2011

The faster things go up, the faster they come down. DE is one of the few stocks that has a fairly clear count;  a single top that makes sense, then a first 5-down and a-b-c retracement of about 50% for a wave 2, and then 5-down with a nice gap for wave 1 of 3. A little higher for wave 2 of 3 and then the real action starts as we go into 3 of 3. The first target is around $47 and then on to new lows. . The alternate, unfortunately there is still an alternate, however with very low probability, is that all of this is wave 1 and we are presently in the process of doing 2 with quite a bit still to go. The stock was down roughly 42%.

How can this be possible? Move to the country and you will learn that just about every farmer nowadays owns two or three of these machines. They cost roughly anywhere between $25k and $150k , depending on horsepower etc. With loaders, gps, air-conditioning the price can go higher. These things, mostly diesels, last a life-time with a little proper care. Ergo, there is hardly ever a true need to buy a new one. When they are bought it is invariable as a want,  not a need. Farmers love their toys just as stock-brokers love their BMWs, the difference is that the BMW depreciates fast, the tractor does not. This is consequently a very discretionary purchase and demand can literally collapse for years. DE has gone through one of these cycles in the past.