Year: 2011

DAX

Hamilton

DAX aug 5 2011

We were correct in stating, the other day, that the DAX did not have the time to have a thrust up. Like all markets, not surprisingly considering the abundance of B-waves (see for instance Siemens, SI.) the DAX went down like a rock and now sits at about 18% below the top, having lost about 38% of the gains made since the lows in March of ‘09. Others have done worse, see below Zurich’s SMI.

Where from here? I think it is pretty clear that we had an A-B-C up,with the B as a triangle.    This is a correction and therefore we should see a new low below the March low. Unless we are making a far more complex structure, perhaps a multi year triangle.  For the moment that is of little concern as the present leg down is not complete. We still require a 4-5 of 3, and the a 4th and 5th wave to complete this down-leg. A reasonable initial target would be about 5100. That level is at the lowest point of the triangle B and also about a 60% give-back of the entire rally of the last 2+ years.

smi aug 5 2011small

The Zurich index had gained roughly 2750 points the year after the low. It has been in decline for a year and 1/2 and has lost 1750 points or about 60%. That is a nice Fibo # and could signal that it is complete. However this is highly unlikely because the pattern certainly is not. In any case it is not unreasonable to assume that the DAX could also drop this much. Note that any chart using Swiss Francs as a measuring stick looks awful. Expressed in US dollars the drop would be a lot less pronounced.

EMP.a Empire Co. or Sobeys

Hamilton

EMP.a aug 2011

A year ago I thought I had this one nailed down. Since then it has not budged, never exceeding the $60 level. EW is not very helpful in terms of timing.

Looking at it again , I am even more convinced that this one is going into the tank. The 5-waves up are clear even if different little variations from what is shown in the chart could apply. But the outcome is perfectly clear. Either the irregular B-wave that took the stock slightly above the top is correct, and the subsequent moves are a 1-2. Or the top was not in yet and we have been doing a wedge for the past 5 years, see details below;

emp.a aug 2011 d

Personally I favor the idea that the top is already in and that we are in wave 3 down. In practice it does not matter much as it is practically certain that it will not trade above $62 and soon (a year or two) it should trade at about $34. If nothing else writing a few call options with a strike above $62 and a reasonable time to maturity should be very productive.

See also Colgate CL which is in a virtual identical position.

PH Parker Hannifin

Hamilton

Back on Jan 29 we posted this blog;

PH history

The original can be found either under the archives, the index or by entering the symbol in the top right hand corner.    The stock did go to $97, even to $99.40 adhering nicely to the Mnt.Everest idea. Below is where it is now;

ph aug 2011

The stock traded as low as $66.49, which is roughly 1/3 of it’s value gone. The greater fool theory worked until there were none left. It is virtually impossible that this stock will resurrect it self any time soon. We have a 1-2, and then a 1-2 of 3 and perhaps a gap at about $75. $55 would be an optimistic target.

TSX

Hamilton

TSX diagonal

Here we have the TSX. Again the A-B-C rise from the lows is clear. Already the C is approaching the time spent in A. In my 15th of June blog I mentioned that there was still the possibility that we were doing an A-B-C, with the C as a diagonal. At the time the TSX was some 800 odd points higher. The alternative would be a 1-2 series.

The action in the middle, the big B wave, may well have been such a structure. The differences are small between that and what we have just done in the last5 months or so. First of all the top in the recent pattern was most likely the second top, not the first. This would take away the A and B. Secondly the structure seem to have a wave too many. Also the size looks out of proportion.  Accordingly my guess is that we are looking at a series of 1-2, a decidedly bearish situation.

Another serious consideration is that if you look at Italy, France, the UK, Taiwan and all over the world, I have not found a single other index that supports the bullish A-B-C scenario. Instead many clearly show acceleration down, which fits the 1-2’s scenario perfectly. Also the very large number of individual stocks that have clear A-B-C corrective structures, finished, or about to finish over the past two months are indicative that this is it, we should then go a lot further! To illustrate the point, below is the SMI, Zurich, and it is by no means the worst. By the way it has broken 30 year support lines (see blog from a few days ago).If we applied this to the TSE we would be at about 8500.

SMI aug 5 2011