Year: 2011

FRX Forest Labs

Hamilton

Forest Labs has been mentioned in this blog, but quite some time ago. I had completely forgotten about it. Here is the chart of March 9, 2009;

FRX arithmatic march 9

If you go to the blog you will see that this stock was recommended as a buy, for the rather obvious reason that the A-B-C looked pretty nice and symmetric.Here is what happens next;

frx

You would have doubled your money, and even if you sell now you are still up 50%. So what is next. The big A-B-C says that the $18 low should be the low for a long time, yet the small A-B-C says that the $40 high is the top of a counter-trend rally and consequently we should go to new lows, particularly since there is already overlap and the 3-waves cannot, anymore, morph  into a 5-wave sequence. When two outlooks are not reconcilable obviously one must be wrong. So when in doubt get out, take the 50% and move on.

FCX, Freeport.

Hamilton

 

fcx aug 2011

This was the picture for Freeport McMoran on August 8 . In the meantime the employees at the Greenberg operation in Indonesia went on strike and are asking for pay increases in the order of 1000%. My initial target then was $30. We hit that today. Here is the chart;fcx sept 2011

This is not the only EW count that can be put on this stock, but it is quite credible. The $6/7 or so target suggested in August may come across as too extreme or downright ridiculous to some, but I am not making this up! This is well tested pragmatic stuff.

Using the “gap in the middle” concept gets us exactly to that price level. This would imply that we are also in the middle of the 3 of 3. No doubt there are alternative counts that are not quite as dismal (for instance a large A-B-C correction that is almost over), but I would not bet my money on it.

FDX, Fedex.

Hamilton

This company provides a good cross section of the US economy. First of all it is big. Like UPX it has a fleet of aircraft second only to the pentagon, and they use theirs all the time burning more jet fuel than anyone else. Also they transport huge quantities of finished or semi-finished goods, those that due to their value can bear the cost of freight. In this sense they have their finger on the US pulse. It used to be what is good for GM is good for the US, that is now China and the adage should really be , what is good for Fedex is good for the US. Here are the charts;

fed 1 fed2

The stock got pounded in the 2008/2009 great recession and bottomed perfectly in synch with the rest of the world of stocks. The way down is debatable with respect to whether or not it is a 5-wave sequence or an A-B-C. For the moment it is immaterial. The rebound was more robust reaching about 76% ( a Fibo ratio ) and , at least on the monthly chart , triple-topped, a dead give-away for trouble ahead.

fdx 1 fdx2

And that we got, down 35% in little more than 2 months! The question now is how does it continue? We have already surpassed the B-wave level, usually the first target. The count allows for two scenarios (my charts are not detailed enough to distinguish them properly). These two scenarios apply to many other stocks as well!

The one on the right is where we will complete wave 1 down soon. Wave 2 would then take , say two months and frustrate both bulls and bears. In this instance a small triangle is assumed as wave 4 of 3, today’s action, including the gap, is much , perhaps even all of wave 5.

The one on the left assumes that wave one was complete sometime in August and the action since then was a small 1 and 2 and we started 3 a few days ago. In this scenario the stock will continue to drop without much of a pause. This is why, as mentioned earlier (see DAX) it is very dangerous to play short term rebounds. You may find yourself under water much faster than you bargained for. First target now would be around $50 and then below $35.Not good for the US!

CRB Jefferies Reuters commodity index

Hamilton

CRB jan 2011

This was my take on the CRB index, the Jefferies Reuters one which is a little different from the “old”one we used to fret about, back in January of this year.

There are two things one must know about commodities. 

1. They are always the last to peak! Normally people do not play them, only when they are in an advanced state of euphoria, prodded along by there brokers.

2. Unlike stocks there are few idiosyncratic attributes that makes these things move. In the end they will gravitate to the marginal cost of production. 90% or so of traders consistently lose money, almost all of the time. (lack of discipline, market convictions).

In short, if my Jan views come true anyone owning oil, gold, coal etc. etc. stocks will get devastated. The TSX with its large exposure to these commodities will get creamed. Here is where we are now!

CRB sept 2011

I was wrong in assuming we might stop at the 50% line, we went a little further. But the large B-wave (the basis for this prediction), is a perfect text-book example. The C is equal to the A in both time and magnitude. There is no alternative count!!

250, the level of the B where the rally paused, is the first target level.That is down another 20% from where we are today. Just think what that does to your gold and oil stocks!