Looking at the big-chart it is not clear at all clear if this stock is in a new bull market from the low in 2006, or still in a correction from the 2000 highs. That is the beauty of discipline, you don’t need to know. Just buy the stock and put in a stop at about $27. This one is so volatile that it could easily gain $10 or more on the next move, risking a dollar or two is probable worth it. The RSI is signalling a turn soon so you may want to wait another day before putting on this trade.
Sprint Nextel did precisely what we anticipated by dropping to , about, $2 twice, once in Oct. 2011 to end wave 4 and again in Jan 2012 to complete wave 5. We forgot to take note!, just too many stocks to keep an eye on. As a general rule one should always reverse positions after the completion of a 5-wave sequence. If one is only interested in playing the long side, you simple alternate between being out or being long. S looks like it is in a 4th wave on its way to double topping. Not worth playing anymore.
Wall-Mart is America’s largest retailer, largest employer and largest importer (from China). It is also known for it’s anti-union approach which got it kicked out of a new shopping center in New York. This stock is perverse, doing what it should not do. Whereas the slogan was, “What is good for America is good for General Motors” or vice versa, with regard to WMT is should be “What is bad for the US, is good for WMT”. Which, by the way, explains why we got it consistently wrong when it came to this stock.
Things are bad in the US. More people are now receiving food stamps than ever before. Last month more people applied for disability benefits than got jobs. According to Shadow Government Stats (www.shadowstats.com) unemployment in the US is running at about 23% (about the same as Greece and Spain), CPI is about 5% and money supply is dropping like a stone. Little wonder than that WMT is up about 50% over the last year. However, this is an E-wave blog and that should be the main determinant for the outlook. Notice that WMT has been going sideways for about 13 years. Only recently did it get back to the highs of 1999. It looks like the stock was tracing out a triangle of sorts either for this entire period (making the latest spurt up a thrust), or for just the last 3 to 4 years (making this a B-wave). We do not know exactly how much further it could go (if it is in the 4th wave of a thrust it could add another $10 or so, if C=A on a proportionate basis we are already done), but with almost certainty this stock should trade at $45 sometime in the near future. $10 up very maybe against $30 down with almost certainty is not a good risk/reward proposition.
By the way I was speaking to a chartered accountant turned realtor over the weekend in Toronto who explained to me that this perverse relationship is what is behind the city’s real estate boom. People pay close to 2 mln. for a 2400 square feet house with a postage size garden. Locals cannot afford these places unless they got on the bandwagon years ago. It is people from China, Russia, Egypt etc. etc. that buy because they do not care about the return on the investment, they just want their money back some day. Law and order, utter boredom and the Mounties make Toronto a haven like no other.
All the big stocks like Walmart, Exxon, IBM etc. have outperformed the index this year, GE included. Earlier (see blogs) we advanced the notion that GE might actually be so much out of phase with the market overall that it is, perhaps, in a new bull market. After all $5 or so seems low enough. Here is the chart again;
At $23 GE will have retraced 1/2 of the recent drop from $42 (it was once at $60!). The problem with the bull case is that there is no impulse wave up at all, although, I guess, you could stretch things a little and argue that we are presently in a wave 3 or even 5 of a first impulse wave. Not very convincing. A much better interpretation by far would be that the entire move from the low is actually “corrective”, that is counter-trend. The pattern would be an A-B-C with the B as an expanding triangle, treading water for 2 whole years. If the C is to be vector equal with the A, a very common event, it should unfold in 5 waves and end on the circle where it is now. Some are inclined to call the moves from b on the jaws of death. As noted elsewhere this pattern does not exist in EW-land and it has a little too dramatic ring to it. Here at least, it may be conveying the right message.