Year: 2011

COS.un , Canadian Oil Sands.

Hamilton

cos 2011 l

cos.un sept 2010

These are old charts going back to early November 2010, below is what actually happened;

cos aug 2011

The stock did not quite make it to $39, it reached $34 simple because the c wave was only 62% of the a wave instead of being equal.It essentially failed to record a new high, a potentially very dangerous signal . That is why you have to look at the commodity as well to get a feel for when a stock may turn. Since peaking the stock has lost about 1/3 of its value. At the moment a good bounce may well be in the cards but ultimately a new low should be anticipated. I am not sure at what price for oil the existing investments become “stranded” but it is somewhere around $40 to $60 for the industry as a whole. In the stock market there are no negative values, in economics there definitely are. They occur when the operating cost exceed revenues for an extended period of time and the best choice is to abandon the operation. Certainly not a likely event, but the question is how close can we get to it. This is what Schumpeter’s creative destruction is all about.

HPQ , Hewlett Packard co.

Hamilton

hpq

HPQ is out of phase with the rest of the world, not unlike AAPL and a few other stocks. It had its lows in 2003. Assuming  that it started a “new” life from that point , it a 5-wave sequence in early 2010. From there it is down about 62% and is a few dollars away from reaching a wave 4 of previous degree level and a point on the parallelogram that  could be the completion of wave 4 if the top (of wave 1) is not yet in. At roughly $27 this could be a great buy.   As the stock is at odds with the rest of the world, care should be taken to put in a stop-loss close to the entry point.

AEX Amsterdam

Hamilton

 aex aug 12 2011

The AEX provides a good contrast to the DAX. Whereas the Dax at its most recent high was within spitting distance of its all time high, this was certainly not the case with the AEX, which was at around 50% of that high (some of the differences can, in a small part, be explained by how the indices are compiled). Considering that very little happens in Germany that does not pass through the Netherlands, it would seem implausible that the economies would be so different. The Netherlands have a good number of multinationals and other industries so the economies are not that dissimilar. It may be that the Netherlands are a good deal more global, they have one of the best and largest pension systems leading to disproportionate foreign direct investments. (the Netherlands are, for instance, the second largest investors in Canada, after the US)

Whatever, but the above chart clearly is NOT a triangle (for starters the lower boundary needs to have an horizontal or upward slope, it does not). The bear case here seems a lot more plausible, it could even be argued that the rally from the March lows is not a wave 2 but a wave 4 (there is no overlap). A drop now to 180 to the trend-line is no big feat. A drop to 100, where the 4th wave of previous degree lies, is entirely possible. At that level the market would have lost 86% of it’s value. A bear market of truly epic proportions!

Compare both DAX and AEX to the DOW;

Dow aug 12 2011

DAX

Hamilton

dax aug 12 2011

The DAX should drop further, the structure to date cannot possible be complete. At best just the a leg could be complete but even then as a minimum we should get a b and c.

The DAX has an interesting chart in that no other major index looks anything like it. Of course they all have the same ups and downs but they do not have this very distinct triangle pattern. That this is unique to the DAX is perhaps a hint that it is incorrect,  but one must keep an open mind at all times.     A triangle has at least 5 waves, 3-3-3-3-3 (in some cases it extends). All the waves in this chart appear to conform to the a-b-c structure for each leg, except wave B, the second one. It could be a 3-wave affair but superficially it certainly looks more like 5. If that detail is overlooked the triangle, so far at least, is legitimate. The respective sizes is also within the normal parameters.

E is not yet complete, it may fall short of a normal target or it may exceed it. Normal would be about 4500, the absolute low would be about 3600. The alternative count, which applies to almost all other indices would call for a much lower drop. Just something to keep in the back of your mind.