Year: 2015

ABX update

Hamilton

abx july 21 2015 labx july 21 2015

Yesterday gold fell about $26 or 4%, give or take. ABX fell almost 16%. We do understand that as you approach the marginal costs of a producer, the impact on the stock is disproportionate to the change in the price of gold (oil, whatever), but this is a little ridiculous. 4X as much? Perhaps a sign of (the beginning) of capitulation. We believe there may be one more push down towards $ 8 or so.

In our opinion ABX is doing a full correction, that is an A-B-C from the recent top of $52+. I have used semi-log scale charts as they depict the proportions much better when such large moves are involved. At one point we thought the C could develop as a contracting wedge and consequently could have been complete at the $11.63 low. We did get a very nice bounce but it could not break the upper trend line. Now we are entertaining the idea that a expanding wedge is forming as the whole of wave C. This means that the stock could, but does not have to, move all the way to the lower trend line at about $8. From the structure it looks like we need another small 4 and 5 of 5 of C.  This is supported by the RSI. You will notice that when it hits a low it takes a little while for the stock itself to make a corresponding low. The lag could be as long as a month but under the circumstances, that is where we are in a capitulation phase, things may happen more rapidly.

The XAU at about $48 is in an identical position .

AMZN, Amazon.com and BABA

Hamilton

amzn july 19 2015 vbamzn july 19 2015s

For full disclosure see previous blog of some three years ago which was dead wrong. This time we have a few more things to hang our hat on. First and foremost, as always, it would appear that a five wave sequence is coming to an end. The exact subdivisions are debatable but not that sequence and the channel. Shorter term we have a very nice triangle that, under the circumstances, almost has to be a fourth wave. The “thrust” out of the triangle is much bigger than the triangle’s mouth measures and will probable develop as a 1.618x multiple thereof. The fifth wave itself could be coming to an end soon if the count shown is correct. Wave 3 is shorter than wave 1 so wave 5 has to be shorter than wave 3. Alternatively we are about to complete 3 and still need 4 and 5. Given the trend lines, the position right above the apex and the fact that we will soon be at $500 we think it is a sell at that level or just below.

By the way, this stock is up more than $200 over the last 6 to 7 months and is now approaching JP Morgan in terms of market cap. Annualised this increase approximates 150% which is  more than the Shanghai index did. Everything is relative.

If you want to stay in this space, BABA may be a suitable alternative;

baba july 19 2015

It appears to have already completed 5 waves down and could therefore climb back to at least $95. Yahoo is looking to unload the shares it owns by creating a separate company. If they get the OK to do that as a tax-free roll-over the $32 bln. in stock should be absorbed relatively easily. The IPO price, incidentally, was $68.

Canadian Dollar

Hamilton

can dollar july 17 2015

It is not clear that an EW approach to the value of a currency should work. It certainly was not part of the pragmatic studies undertaken by R.N. Elliott on which he based his findings. Currencies represent relative values that just might not behave the way stocks do. To me it has never been clear how 5-waves up in C$$ can, at the same time, be 3-waves down in US$$. The pattern must be identical regardless of whether you are in Toronto or New York.

Fortunately we have the Toronto Star to help us out. I had watched the Governor and his deputy take great pains to avoid the R- word. Even if we had had two or three quarters with no or negative growth, we still did not have a recession so the story went and it would be counter productive to talk about that which did not exist. It was painful to watch. David Olive of the Star was pretty blunt in his comments on the merits of the rate cut itself, quote “It is now clear Poloz has not yet attained a sufficient grasp of markets and global economics required of the central banker of a country that is so thoroughly integrated with the world economy” unquote. Not much deference here!

For the vast majority of Canadians a lower dollar makes almost everything more expensive, even gas for the car when the oil is extracted from Canadian soil. It tends to increase income inequality. We do not have much manufacturing left and most of it is for goods that are demand inelastic so the dollars drop provides little or no extra incentive. Most importantly it sends the wrong message. For the moment the market assumes we will get another rate cut so the situation is a little out of control. My guess is 1.35 or about 74 cents should do it.

BHP, Billiton update

Hamilton

bhp aug 30 2011

This is an old blog from August 8, 2011, nearly four years ago. Today we are not at all sure that the B-wave as indicated in the chart is actually a B wave and not a 5th wave. Fortunately, for the immediate direction of the stock it does not make a lot of difference, except that if there was a B then we are now in a C that must subdivide as a 5-wave structure. If this was a 5th wave all we need is a big correction that can take a number of different shapes. In BOTH cases the ultimate target is at the 4th wave of previous degree at about $25 or below. We have redone this chart as per below, showing the top in 2011;

bhp july 15 2015

The nice thing about using a longer term chart is that things that appear quite improbable with shorter term charts, al of a sudden become quite plausible. Here we have drawn a band that has contained the stock from inception when it was an Anglo-Dutch mining conglomerate. Here again you can see that the stock only jumped the tracks in 2004 and increased 5-fold in just 4 or 7 years, a relatively short period of time in the context of the history of this company. The lift-off seems to coincide, with about a three year lag, with Fed. easing around 2000 as a result of Y2K and the tech bubble crash.

If the real top was indeed the second top, we could have a zig-zag correction which would take the form of two down legs with some sort of intermission (an a-b-c or triangle) in the middle. That is shown in purple using the 1-2-3 annotation just in case this develops into a 5-wave affair. That should bring us to the 4th of previous degree. It will not take all that much to push the stock back into the band. Another write-off, this time for a paltry 2 bln has already been announced making lower stock prices all the more plausible.