Year: 2012

HSI, Hang Seng Index update,

Hamilton

The usual then (Nov. 29, 2011) and now harts;

hsi 29 nov 2011hsi nov 9 2012

At the time we explained the various paths this index could take and for what EW reasons. In the end, with the benefit of hindsight , we now know that something was complete at the lows from which a rebound took the stock back to an  anticipated level of about 21500. It did so pretty well as indicated, but then transformed into a much lengthier and more complex A-B-C by adding very little to the upside but a lot in time. That should now be over and the next wave down probable already started;

hsi 10 n0v 2012 b

Right now at 22000 this index is sitting more or less in the middle of it’s range for the past six years. For those that believe that EW is a form of witchcraft, I have added a “standard” H&S pattern to the broth, which measures to about 4000, approximately the same level EW would suggest, for instance if C were to equal A someday. In any event the wave 2 is clear as a bell so at the very least we should get one more new low below 16000 and most likely to the trendline at 14000. This is what we pin our hopes on for world growth??

CVX , Chevron update

Hamilton

cvx b nov 10 2012Crude nov 10 2012

Chevron is one of the “six sister” that comprised Rockefeller’s Standard Oil Co. broken up in 1911 by the Sherman Antitrust Act. It is now one of the largest integrated oil companies in the world.  On the face of it, one would expect that there would be a positive correlation between the price of oil and this stock. For the last 4 years or so , that is not the case. Oil peaked in 2008 and the stock this year (that remains to be seen but we certainly think so). Chevron is pretty well alone in doing so. Other large integrated companies like Exxon, Royal Dutch , British Petroleum and also the service industries like Halliburton, Trans Ocean and so on , are nowhere near their highs. The precise count is , unfortunately, not entirely clear. Back in June when this stock had peaked at about $110 it looked like a sell (see that blog), but by some miracle the stock went on to about $118.58 , see chart below;

cvx s nov 10 2012

It is presently already below those levels and is trading at levels first reached in April of 2011, more than a year and a half ago. Given the very distinct B-wave rebound in oil the outlook for the stuff itself is very poor consequently one would expect Chevron, and with it most other oil companies to drop in the years ahead. Definitely a sell with a first target around $60.

By the way, the stock that is best correlated to oil is IMO, see below;

imo nov 10 2012

Ask yourself what “regression to the mean” would do to this stock.

SNC update

Hamilton

snc nov 10 2012

See also our April previous blog. We were expecting a rebound to $43 and then a drop to about $32. The former has happened, albeit slightly late, and the latter will take a little longer as well. $32 is on its way if the pattern is that of a double zig-zag. A more bearish target emerges if one assumes that the top in 2008 was not THE top but just the top of wave 3. That would put the real top in 2011 and would allow this correction that we are in to unfold as an a-b-c. Cs are often much larger than the a so much lower targets can be obtained. The chart below shows that possibility;

snc nov 9 2012 b

The stock, by the way, is trading at a p/e of about 21 so it is definitely not undervalued which is pretty obvious from a superficial glance at the chart.

It is somewhat ironic that the Spanish, who are now in so much trouble with their real estate , were a 1/3 partner through Cintra in the consortium led by SNC that bought the  407 highway from the Ontario (Harris) government for a song ($3.1 bln). So the last shall be first, and the first last. Where was the “net benefit” then??

AAPL update

Hamilton

AAPL nov 9 2012

AAPL probable completed a 5 wave sequence at the $700 level. The drop has been breath taking as is usual with momentum stocks as there was no reason to be up there in the first place. We are now about to re-enter the channel that in our estimation was wave 3 (see previous blogs). Things are pretty oversold as is, so a rebound could start any moment but preferable from the bottom of the channel. Corrections are always 3 waves or combinations thereof and here we have only one so expect a b and c to follow.