Month: January 2015

DAX update

Hamilton

DAX jan 23 2015

The DAX was up by about 260 points or so this morning, that is more than 2.5% (you need to hold a 10-year bund for about 4 years to get an equivalent return!) The peak was at about 10704, Stockcharts does not operate on a 24 hour basis so that does not show in the chart; it is approximately where the red line runs.

We had identified the triangle sometime ago, see previous blogs, but did not know exactly what would cause it. Delayed exuberance for Draghi’s opening of the European floodgates of money, super QE. Anyway this triangle is either a 4th or a B, we prefer the 4th but do not exclude the possibility of a B (problem is that we have to be able to trace a lot of waves before this to find a wedge). In any event if a 4th wave we are presently above the target of about 10600. Ofcourse the “thrust’’ could be bigger but that is not a reasonable expectation. In the event this is a B-wave the C could continue higher as indicated by the grey arrows. That could go another 500 points.  We are presently perpendicularly above the apex which makes for a good time to peak.

For some reason EWG is NOT following this script. It looks more like a rather bearish 1-2, 1-2.

ewg jan 25 2013

RY, CYN City National Bank

Hamilton

cyn jan 22 2015

Royal is buying City National Bank of California for US$5.4 bln. The stock got to $89 on the announcement. If and when this goes through there will probable not be any stock left to trade but we can always pretend. The chart is relatively clear , from the lows it is either a B-wave, like most stocks, or a 5th wave. Either way the next move should be back down to about $25. This stock trades at a p/e of about 22, compared to RY at about 12. RY only recently got rid of Centura Bank in Florida, despite all the snowbirds they could not make a go of it. The timing is also rather odd. RY is down about 10% over the last few months and the C$ more than that so they are paying roughly 20/25% more than they would have had to do a few months ago.

We did not expect RY to trade above $82.50 ( see Sept. 17th 2014 blog). Of course it did and briefly reached $83.87. It should go down quite a bit further so this acquisition may help that process along. See below;

RY jan 22 2015

HXU update

Hamilton

hxu jan 22 2015 up 1HXU Jan 22 2015 up 2HXU jan 22 2015 d

We pointed out not too long ago that there was, perhaps, a triangle forming in the HXU and if there was, it would almost certainly have to be a 4th wave. We did say that we would be at a loss to explain what would cause such a move. Well we know now as the governor explained that this was the time to move (first time since Sept. 2010) to lower interest rates by a quarter to 75 basis points. Ostensible this was because the increased risk resulting from the oil price collapse. No sane person understands how 1/4% will realistically change anything and when asked, neither the governor or the deputy cared to concede that this action might have the opposite effect as the message clearly is that things are a lot worse than they were thought to be any time over the preceding 3 to 4 years. Apparently market psychology in Canada is irrelevant.

    Then Draghi comes through with his trillion and a half Euro purchase of bonds from the member states. He was no doubt moved by events in Canada that showed that expecting unexpected events is an art in its infancy, at least among economists, not a single one of which had anticipated anything of the sort. Whatever, these two circumstances are good for about 500 points on the TSX.

   The HXU moved as expected. The question now is, 1. are we in the thrust up. 2. Is the triangle not yet complete, or 3. could we be looking at a series of 1-2’s that are the beginnings of a big bear market. We have absolutely no idea but at least you can tell from the above 3 charts when these 3 possibilities will be eliminated.