Year: 2015

DOW and S&P update

Hamilton

DOW oct 15 20115S&P oct 15 2015

Our targets a few days ago were 17218 for the Dow and 2033 for the S&P. We had more earnings, Netflix was down almost 15% overnight, Goldman did something similar but on a smaller scale and Walmart, the largest employer in the US, surprised everybody but not us, see our blog of Sept. 16th. There were others but nothing too stimulating. Despite that the market is up double digits again today proving once again that the real story, no the only story, is what the Fed. is doing. This will stop at some point, perhaps in the next few days as the above targets are met. This is a 4th wave and could spend more time going sideways (as in a triangle) but soon and at about these levels things should change.

WFC update

Hamilton

wfc oct 15 2015

Exactly a month ago we decided that there was no triangle in the making, see previous blogs. Today we are not that sure as a triangle as shown would fit very well. It would target the $45 level from where the diagonal started and would form a nice initial 5 waves down. We have drawn the triangle rather bluntly, assuming for the moment that wave d is not yet complete. Under  this assumption there is still some time left before the 5th wave drops the stock to about $45. But if one assumes that d is already complete and we are polishing off e, the whole thing could drop any moment now. Both JP Morgan and Goldman had so so earnings and this may become contagious. A sell here for a buy back at $45 or so.

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.