We were in and out of this stock at precisely the right time, with a 3 to 4 dollar gain. From here we have absolutely no idea what will happen next so staying out is the way to go. At $25+ it is not a buy, at $ 10 or lower it might be, time will tell.
Here are the DAX and the TSX. Germany and Canada have vastly different economies but clearly the correlation is quite high. The DAX goes from a low of 1000 to a high 0f 8000, the TSX from just under 2000 to about 15000, proportionately the exact same amount. The Euro, Germany’s currency went from the 80-ties to 130-ties over roughly the same time period. The Can. dollar from 62 cents to 1 dollar; again both by about the same amount. Both indices regained a very large proportion (near 80%) of what was lost in the great recession. Both did so in fairly clear B-waves. Both abruptly dropped sharply during last years summer, stopping at about the “pause”level of the B-wave. 4-5 months have gone by in what is clearly a wave 2 counter-trend rally. The next move is down hard in wave 3. Be prepared!
In EW terms I would assume that the tops occurred at the actual high points, in 2007/8. The action from that point on is a large “flat” A-B-C. The “normal”target for any correction is the 4th wave of previous degree. Neither the DAX of the TSX have done that yet. They should. Those levels are roughly 2500 for the DAX and 6000 for the TSX. Similar levels can be arrived at if you like the Head & Shoulder approach.
This is a huge top. It is taking so long because every time the bears get the upper hand another trillion or so in stimulus is frown at the problem, either from the US, the ECB or China. Investors are so ingrained with this Pavlov philosophy of buying the dips, that they cannot imagine such an outcome. I am a member of an investment club consisting of about 25 reasonable smart people. My views, even when expressed delicately, are considered something akin to the mutterings of the village idiot. Only one other member believes the market might go down. There are no bears and that might just be the problem.
Morgan has a clear chart, furthermore Royal’s is very similar so it could be that today, maybe tomorrow, this sector peaks. The move from the December lows has been surprisingly robust but now these stocks have done what they should.
See previous blog. We expected the stock to drop to roughly $20. It did but stopped dead in it’s tracks. Reason to perhaps change the count as follows;
In the big picture the stock drops from $200 to just over $20, that, by any measure is a bear market and it could possible be all of it! If that were the case we would now be in a new bull having completed an initial first wave up followed by a deep correction, so deep that it almost retraces the whole first wave up. This is not at all unusual. The retracement would have to be an A-B-C which we have. Better yet C=A in terms of vertical distance travelled. The interesting part is the C wave, shown below in detail;
This is an almost picture perfect expanding diagonal triangle (3-3-3-3-3). Each leg, both up and down consists of 3 separate legs. There is always a lot of overlap and alternation between 2 and 4 occurs often. Once complete the rebound tends to be violent and takes the form of either a new bull market or, at the very least an A-B-C up that should retrace the entire diagonal. Soon, perhaps at around $60 the A should stop and a pause should happen, often as a triangle. Should this in fact occur, the stock should be a screaming buy. Always use a stop just in case something else is going on. F, Ford is a good example of this particular pattern.