Year: 2015

TSX update

Hamilton

tsx july24 2015Tsx july 24 2015

We were always of the opinion that the steep drop late last year was a 5 wave structure indicating the start of a bear market, in this case wave C. There are always other possibilities, it could, for instance, be part of an a-b-c irregular correction so one has to be careful not to jump to conclusions. 7 1/2 months went by and the index came within 161 points of making a new high. All hell seems to have broken loose after that. We seem to be in what Don Cox of Basis Points fame used to refer to as a cascading waterfall. He is the only one I know that could effortlessly mix Greek mythology with economics. The problem with the waterfall pattern is that from an EW perspective it is hard to pin down exactly where you are. Having done about 1200 points, a little over the obligatory 1000 points, our best guess is that we are almost completing wave 1 of 3 of C. Next is wave 3 of C.

    Fundamentally this could work. Our economic backbone of commodities is pretty well in trouble throughout the spectrum, from oil to gold, lumber to potash with the only bright spot being hay in Sasketchewan going for $200 a bale (roll), this without the usual supply management system. Politically we are at a stalemate with unpleasant elections coming soon. Some of our top guys have trouble believing we might be in trouble and choosing denial as the best remedy. We will soon be going into the Sept. to Oct. season that is always good for some awkward outcomes. Time to unload some of the banks!

CRB index update

Hamilton

CRB july 23 2015

Please see some of the earlier blogs on the CRB, they were quite accurate and today we will try to repeat that. Originally we were obsessed with the idea that there was a large B wave from the depths of the great recession lows, if for no other reason than that it showed up in so many different places. We show that scenario in beige. You can find the 3-wave structure of the B wave in the 2011/12 blogs in great detail.

If that scenario is to be correct the developing C wave down must subdivide as a 5 wave structure. It could still do that as shown in beige. However, to date this move down from about 370 has all the attributes of a 3 –wave affair and very precisely at that. This does not preclude the 4 and 5 from being added in the next year or so but it does raise the question whether or not there is a serious alternative. There is. It is possible that the original B wave becomes more complex, that is to say that the drop from 370 to 200 is not a C wave in progress but a b-wave within the larger B-wave. Initially you cannot tell as in both scenarios the direction would be up.

Typically bubbles burst and the index, commodity, whatever trades below the starting point of the preceding bull run. That suggests that we are not done yet but un till we break 270 (overlap) we will not know for sure where we are. I prefer the beige scenario, with the C wave developing as a wedge, but the black one is very compelling, see below,both legs a and c are absolutely perfectly vector equal just a fraction below where we are presently;

crb july 23 2015 s

Note;  Another alternative would be a double zig-zag, as in a-b-c X a-b-c. The second a-b-c is in the Stockchart above. The whole thing would be complete ( which conflicts with a return to levels below the start!) More importantly for this to be so wave A would have had to itself subdivide in a 3 wave structure. To me, if anything, it looks like a straight line down without a visible intermission.

Gold from Chart of the day

Hamilton

Chart of the Day - Gold testing support - Google Chrome_2015-07-22_13-36-19

You can get Chart of the Day at    <a href="http://www.chartoftheday.com/">Chart of the Day</a>

This is, of course, on a semi-log scale. These charts are fairly crisp, this one less so as i had to enlarge it. So here we see the 10+ year run from the lows at around 250 to the highs of 1923. In terms of inflation adjusted, or measured in purchasing power, the high is pretty well at the same level as it was in 1980/81. In other words gold essentially double topped. We have no idea whether or not the recent drop is just an intermission on the way to $5000 or more, or if this is the start of a huge correction. What we do know is that the largest correction during the ten years up was in 2008, from about $1000 to $700. This, regardless of what EW count one wishes to use, is a NORMAL retracement level. This is also at the average cash cost of $719, the level where miners actually stop producing. For an interesting take on this please go to    http://www.cmegroup.com/education/featured-reports/gold-storm-on-the-horizon.html   This is from the economist at the CME, Chicago Mercantile Exchange, sober and objective.

   Concerning EW, if we are approaching a bottom of sorts, after 5-waves down, we should get 3 waves up for a B and then another 5 waves down, so first to $1400/1500 and then down to $700. All of this regardless of where we are precisely.