Year: 2012

HNU, update.

Hamilton

We recommended this leveraged ETF on natural gas on April 18th when it was trading at about $8.50. This is about the most trend-persistent commodity for a very long time. What that means is basically that analysts, brokers and other connoisseurs who have absolutely no idea what they are talking about parrot each other and keep repeating the same mantra. When it was around $6 on the commodity this just had to be bought and there was only one single analyst (at Dain Rauscher) that I am aware of who wrote a very good report arguing that natural gas would  go to about $4 and stay there for a long time. Going long the stuff too early has been extremely costly particularly for those that trade commodities without stops.

In any event sentiment has turned in a truly remarkable way and now we have the likes of Goldman Sachs and T. Boone Pickens firmly on the long side. It is all a bit too much. Here is the chart;

hnu may 2 2012

We do not care about the fundamentals. Natural gas is often a by product of oil and consequently it does not have its own demand and supply curves. Next it can not (yet) be moved around so it has a “regional” price. We look only at the EW patterns. Assuming this last leg down on HNU is a 5th wave, typically we should retrace back to about $14 as a minimum. Beyond that $23. In both cases at least a minimum of 3 waves up is required. Presently we are up about 29% and this ETF goes at twice the speed of the gas itself.

DOW, update

Hamilton

Using the same Bloomberg chart here is the DOW (industrial Average);

DOW may 2 2012

So far it is the only one that is making a new high. Why it is in this unique position is not entirely clear. Perhaps they have taken the strongest measures to pump up their stock market, using both transparent and not so transparent means. We do know that the US Fed. is actually targeting the stock market, at least that is implied if the level of the market is used as a measure of the “success” of the Fed’s interventions. From an EW standpoint this should not have happened, or, alternatively the count is wrong. A double zig-zag could explain away the inconsistency (see alt a-b-c X a-b-c) but it is not very convincing. In any event as long as the Dow stays below the 2008 highs it remains likely that it too will fall in line with the rest of the markets.

DAX, update

Hamilton

 

dax may 2012

The DAX also follows the same patterns but somehow manages to retrace 80+% of the preceding drop as if nothing has happened. Perhaps because they are sitting at the other end of the see-saw than the club Med countries. Germany’s neighbour , the Netherlands prefers to chug along the bottom, but the pattern is nevertheless , essentially, the same. Oddly enough, Holland and Australia, and  Germany and Canada twin up with each other the best.

aex may 2012

ASX, Australia update

Hamilton

Nothing in North America seems to work all that well, the Australian index however is performing pretty much as expected. (see previous blog):

asx may 2012

This index has been remarkable consistent. In approximate terms it loses 50%, then regains 50%, loses 50% and regains 50%. It is presently right at a large trend-line and the next move is down 50% except that we are now about to enter wave 3 down and that should normally be the most forceful and longest . As a minimum one would expect it to at least equal wave 1, roughly 1000 points, 1600 is far more common and then there is still a 5th wave to go.

What is remarkable about this index is that is highly dependent on China, generally considered to be the growth engine of the World today. Secondly it is also an exporter of raw materials first and foremost. As a consequence one would think that this index should have some prognostic value with respect to Canada’s TSX. Here it is;

tsx may 2012

Notice that “essentially” the charts are very similar except that the Canadian index has relatively larger retracements and as a consequence has stayed closer to peak values. In all other respects they do seem to be listening to the same drummer and what is not yet evident in Canada is already painfully so in Australia. The question for us, living next to the US (bad economy)and them living next to China (good economy) should be, why are we doing better? or are we and is this just a unsustainable fluke. Could it be that we have better leaders, a more entrepreneurial people, a more competitive industry? Don’t think so.