Month: October 2012

AFL, Aflac update

Hamilton

afl oct 2012 bafl oct 2012 s

We look at stocks randomly, or because they are in the news or something else attracts our attention. It is therefore pure coincidence if we happen to look at it at the time it makes an exact extreme. Furthermore, if we comment that “this stock is going down a lot further” do not wait for this service to tell you when we are there. There are simple too many stocks to allow for ongoing surveillance.

We had a sell on this one at about $53 (see previous blogs). It went to about $31 and we hope that you bought back if you were short after a profit of say 30% or so. A year has gone by and the stock has again done an a-b-c up and about to reach the line connecting the tops. If you look closely you will also notice that the pattern in 2008 to2010 is repeated on a smaller scale in 2011 and 2012. At about $53 it will reach that line again (if it does) and then it should resume the downward trek.

If , for some reason, you SEE a huge triangle here – which would be bullish ultimately – you would still get out as wave e is still required and should take the stock down about $10+

W5000, Wilshire 5000 Total Market Full Cap index.

Hamilton

w5000 2012 bw5000 2012 s

One of the most important attributes of EW patterns with respect to their credibility is elegance, harmony or symmetry. The more you have of that the more likely you will be in being correct. This is the Wilshire 5000 index, it is cap-weighted like the Dow and contains a little over 4000 different stocks (not 5000 as you might expect). It is the broadest index in the US and therefore probable represents the best cross section of US equities. We have the big dive down of the great recession and then a B-wave up that almost double tops. That wave is subdivided in two, vector equal sections A and C. The three higher highs of the wedge are perfectly on one single line. So are the three lows today but tomorrow (or next week some time) we expect the line to be broken to the downside.

DOW, update

Hamilton

DOW oct 27 2012 bDOW oct 27 2012 s

Just a quick update on the wedge concept as it is progressing in the DOW. It looks like the structure is complete but these diagonals have an annoying habit to go further than one expects. Each led comes in threes and consequently it would be possible that we have only completed waves 1, 2 and 3 and are presently in wave 4 with 5 still to go. However, the proportions of the legs to each other and the whole looks to be near perfect. A break now of the lower boundary would increase the confidence that it is game over for this index.  The question then is what can possible cause, trigger or provide the tipping point for such a change to occur. We have no idea and do not really care. Nevertheless it is hard not to notice that in 9 days from now, or perhaps a little earlier, it might become clear who the next president of the US might become. Obama would be good as he would keep Bernanke in office so you can count on QEs forever, Romney would be good because he favours super free capitalism that should increase profits, that at least is the conception. Perhaps it will soon be clear that concept and reality are miles apart, regardless who wins.

DE, John Deere & Co, update

Hamilton

de oct 27 2012de oct 27 2012 m

de oct 27 2012 s

The dumber you are, the better EW works, so I am at a disadvantage. But then I do like to keep an open mind. A few years ago the best performing stock market in the world was that of Zimbabwe, better known to many as Rhodesia. That was, of course, measured in local currency and in nominal terms. I expect deflation first and then inflation so I am not looking for the same thing to happen in the USA right away, but who knows.

Deere has traced a nice triangle, the b, c, d and e are clearly 3 wave structures, but the a could be either a 3 wave or a 5 wave structure. The latter would disqualify the pattern as a triangle, but in the former case (shown in black) the triangle would be valid and would, as always, have to be either a B-wave in an A-B-C, or a 4th wave in a 5 wave sequence. Here, only that would make any sense at all. The stock would then thrust up to about $130.            In the bear case (in purple) we are working on completing a wave 2, a-b-c counter-trend bounce that might go as high as, say $95 before peaking. It is downhill from there.

EW aside, the bear case makes a lot more sense at this time. See also previous comments. The RSI is peaking and the MACD is clearly not confirming. CAT is in the doghouse and expecting lower growth, only CMI, Cummings remains at similar lofty levels.. Overlap between waves 4 and 2 in the big picture make the bull case near impossible!