Month: September 2012

WMT, Wall-Mart again

Hamilton

wmt b sept 2012wmt s sept 2012

Wall-Mart is America’s largest retailer, largest employer and largest importer (from China). It is also known for it’s anti-union approach which got it kicked out of a new shopping center in New York. This stock is perverse, doing what it should not do. Whereas the slogan was, “What is good for America is good for General Motors” or vice versa, with regard to WMT is should be  “What is bad for the US, is good for WMT”. Which, by the way, explains why we got it consistently wrong when it came to this stock.

Things are bad in the US. More people are now receiving food stamps than ever before. Last month more people applied for disability benefits than got jobs. According to Shadow Government Stats (www.shadowstats.com) unemployment in the US is running at about 23% (about the same as Greece and Spain), CPI is about 5% and money supply is dropping like a stone. Little wonder than that WMT is up about 50% over the last year. However, this is an E-wave blog and that should be the main determinant for the outlook. Notice that WMT has been going sideways for about 13 years. Only recently did it get back to the highs of 1999. It looks like the stock was tracing out a triangle of sorts either for this entire period (making the latest spurt up a thrust), or for just the last 3 to 4 years (making this a B-wave). We do not know exactly how much further it could go (if it is in the 4th wave of a thrust it could add another $10 or so, if  C=A on a proportionate basis we are already done), but with almost certainty this stock should trade at $45 sometime in the near future. $10 up very maybe against $30 down with almost certainty is not a good risk/reward proposition.

By the way I was speaking to a chartered accountant turned realtor over the weekend in Toronto who explained to me that this perverse relationship is what is behind the city’s real estate boom. People pay close to 2 mln. for a 2400 square feet house with a postage size garden. Locals cannot afford these places unless they got on the bandwagon years ago. It is people from China, Russia, Egypt etc. etc. that buy because they do not care about the return on the investment, they just want their money back some day. Law and order, utter boredom and the Mounties make Toronto a haven like no other.

GE, General Electric

Hamilton

All the big stocks like Walmart, Exxon, IBM etc. have outperformed the index this year, GE included. Earlier (see blogs) we advanced the notion that GE might actually be so much out of phase with the market overall that it is, perhaps, in a new bull market. After all $5 or so seems low enough. Here is the chart again;

ge sept 2012

At $23 GE will have retraced 1/2 of the recent drop from $42 (it was once at $60!). The problem with the bull case is that there is no impulse wave up at all, although, I guess, you could stretch things a little and argue that we are presently in a wave 3 or even 5 of a first impulse wave. Not very convincing. A much better interpretation by far would be that the entire move from the low is actually “corrective”, that is counter-trend. The pattern would be an A-B-C with the B as an expanding triangle, treading water for 2 whole years. If the C is to be vector equal with the A, a very common event, it should unfold in 5 waves and end on the circle where it is now. Some are inclined to call the moves from b on the jaws of death. As noted elsewhere this pattern does not exist in EW-land and it has a little too dramatic ring to it. Here at least, it may be conveying the right message.

DJIA

Hamilton

dji sept 2012

The Dow Jones Industrials sport the same “wedge” pattern as the S&P,. In fact this one is even prettier than the other. The throw-over to date is hardly discernable, a slightly thicker pencil would eliminate it entirely. So, for the moment at least, we will continue to assume that this is the correct pattern. It then follows that we should get a rather sharp breakdown to the base of the pattern at around 9500. What might trigger such a drop is , as always not clear today but, with the help of a little hindsight a few months from now, will prove to have been entirely foreseeable.  Then again, maybe nothing will happen.

CDE, Coeur d’Alene Mines

Hamilton

cde sept 2012cde b sept 2012

Coeur d’Alene is an interesting high Beta precious metal (silver) stock. Had you bought this as a hedge against the financial market falling apart you would not be a happy camper given that you are left with about 1/3 of your money. As far as the future is concerned this stock might give a hint as to what is in store. From the big chart it is clear that this stock has made three A-B-Cs in succession leaving us guessing what the next move might be. The shorter term chart shows the last A-B-C in more detail. Superficially it looks like an A, triangle B and then a C equal in size to the A. There is a problem with the triangle, the e leg goes too high but lets ignore that. Looking at the RSI (Relative Strength Index) the stock is more overbought than any time in the past 3 years. It is doubtful that the stock will trade above , say , $31 where it is already up by about 100% from a month and a half ago.

A similar message can be drawn from the platinum ETF PPLT;

pplt

It is by no means clear that this one should go up much further, in fact it looks like it is about to reverse. The light is still amber in our opinion.