Year: 2012

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!

FFH, Fairfax Financial update

Hamilton

The usual then, Sept. 2011 and now charts;

ffh sept 20 2011ffh oct 27 2012

You can click on these charts to enlarge them and push them around for a better comparison. This stock is run by a pretty savvy fellow known for his bearish predilections and his willingness to act on them. That may , in part, explain why the stock is out of phase with the rest of the world and certainly most insurance companies. The range during the great recession from, say , $200 to $400 is but a fraction of the rollercoaster back when we had the tech bubble burst.  Our call, in Sept. of 2011, for a drop in wave C down was obviously premature, in fact the stock managed to go essentially nowhere for another whole year and then some. With the benefit of hindsight and examples set by other stocks (see HON, and the US indices), one has to conclude that the diagonal, that is wedge, was incomplete and counted incorrectly. This is what all these QEs do , they drag out the inevitable much further than one would normally expect.  The C was probable over at the start of this year, followed by a minor degree 1-2 etc.

Ultimately wedges should retrace to there base which in this case is $100.

HON, Honeywell Intern. update

Hamilton

hon oct 27 2012Hon oct 27 2012 s

Twice we recommended selling this stock. The first time it worked out quite nicely but not so the second time (see previous blogs). Where did we go wrong? The first time around we assumed that the A-B-C rebound was complete in 2011, not unreasonable since it sort of double topped there in any event. It did drop about $20 or some 30% but then came right back up. With the benefit of hindsight we now assume that the C part of the rebound was not yet complete and now has taken the form of a diagonal (wedge) just as in  the DOW , S&P and even the Nasdaq). If correct we had a small throw-over in the 5th wave of this structure and it should now be complete. A sell for sure.

CUA.V , CuOro update.

Hamilton

cua oct 25 2012

Two days ago the company announced that they are abandoning their Barranco de Loba project, the quality of this ore body apparently was below expectations. There will be some write-offs as a result but on the other side the company will not have to put down another $600.000 to exercise the option that they hold.  This project was where the gold might be. At 3967 hectares it is much larger in surface area than the 1287 hectares of the Santa Elena copper project.

What is worrisome is that the stock dropped to a low of 42 cents on relatively high volume. There are clearly motivated sellers coming out of the woodwork. Nevertheless the stock may be getting close to a low.