Month: October 2015

ABX update

Hamilton

The usual then, Aug. 4 , and now charts;

abx aug 4 2015abx oct 15 2015

So after a few false starts that were recognized in time our target was set at $8 Can. or $6 US. This is the diagonal that we have been talking so much about. It is shown on semi-log scale charts. The next target should be around $23 or , in the worst case, at least $16. These are the starting point of this pattern or a 4th wave of previous degree. You are up about 35% had you bought at the target level, however there is a lot more to go.

Fundamentally the impetus for this up move must be the realization that the Fed. is going to do absolutely nothing for, perhaps, a very long time. For the sake of completeness we repeat the big picture from Aug.4 below;

abx aug 4 2015 b

This chart is on a normal scale but uses stock prices in US dollars.

Volatility, hedging etc. with HVU

Hamilton

tsx oct 13 2015hvu oct 13 2015

On the left we have the TSX as usual. On the right the Horizon’s Betapro S&P 500 Short-term Futures Bull Plus ETF TSE. You will have to look it up but it is leveraged, hedged back to Can. dollars and measures volatility. Volatility is nowadays used as a proxy for risk the underlying assumption being that as risk rises, so does volatility. The idea is that you do not need fire insurance if somehow you could find a vehicle that measures the temperature of your house at that critical point in time.

In this example the TSX moved about 2000 points between Aug. 10 and Aug 24. That is , roughly, 14 %. Starting on the same day but lasting a few days longer the HVU etf increased by about 70 points or about 250 to 300%. Ergo the HVU, in this example at least, moves about 20x what the TSE does. This ratio is obviously not fixed as it will depend on the relative speeds at which the TSX drops and the HVU climbs but nevertheless one can “hedge” risk by buying the HVU, perhaps at a nominal ratio of 1 to 5 or so. The trick is to do that at the right time as the gains are explosive and they evaporate quickly. My guess is that the HVU at between 40 and 35 would represent a good time. Remember that we do not give investment advice so talk to your broker.

DOW and S&P, same story

Hamilton

dow oct 11 2015S&P oct 11 2015

Both the DOW and the S&P have similar corrective moves. It is not entirely clear how one would arrive at 5 waves down from the March highs but notwithstanding that the a-b-c’s are quite clear. In fact they are a days trading within a nice Fibo 62% retracement level, but of course waves 2 can retrace a lot more than that. For the Dow that level is at about 17218 and for the S&P about 2033.

For the moment we will assume this a-b-c is a wave 2. Should it stop at these levels the next thing is wave 3. This one is usually 1,618x to 2.618X wave one so roughly 5000 to 8000 points on the DOW. For the S&P the numbers are 432 and 699. We will see what happens, if anything, because from the Plunge Protection team to every broker, pension fund manager and, nowadays, politician will do everything in their power to avoid this kind of outcome.

DD update

Hamilton

According to the Dogs of the Dow, Dupont was the best weekly performer this week at 14% up. Next in line was General Electric , GE, at 10.2%.  Of course only the 30 Dow stocks are included.

Here is our usual then, 28th of July, and now comparison;

dd july 28 2015 sDD oct 10 2015

The stock did follow our script but it did so with a bit of a lag going lower for longer. But then the rebound was even larger than expected. Putting all this together suggests that the bounce off the lows is not a wave 4 (of 1) but a wave 2 of 1. At about 40% this rebound may have very little left in it all though $62, the 200 day moving average, remains a possibility. We would sell in view of the Big picture (see previous blogs).

GE was number two. However, measured over about a month and a half it managed to increase by almost 50%. This is almost unheard of for such an ex-bluechip stock. A mini tantrum followed by a melt up??

ge oct 10 2015

Enjoy Thanksgiving.