Year: 2015

HSI update, Shanghai

Hamilton

Hong Kong’s HSI index was up 3.8% or 961 points all in one day. The high of the day was at 26,247.63, well above the rough target I had yesterday of about 25,800. The difference, as mentioned , may be accounted for by a slight throw-over, a normal event with these wedges.

It should now be assumed that this index has peaked!

For good measure we throw in a chart of the Shanghai index. This one is up a miraculous 100% or so in just one year, at a time when the economy is stalling a little.

Shanghai april 8 2015Shanghai april 8 2015 s

This one may or may not be completely done but it certainly does not contradict our call on HK. Interest rates in China are still at 5.3% by the way.

Also for the benefit of the reader we have included (below) the chart of the CAC 40 where we encountered this same diagonal or wedge pattern, see June 6, 2014 blog on the left. We did not know how big it was but certainly the one shown in blue was perfect in all respects. This made the call to at least the base rather easy. It promptly did that and more. Than it shot up which we did not anticipate but that is a different matter all together. These patterns are extremely reliable and are ignored only at your peril. You can click on this chart and the one in the previous blog and make an easy comparison. Despite the fact that one is 1/2 year long and the other 3 and 1/2 years, the patterns are pretty much identical.

CAC june 6cac april 8 2015

HSI update

Hamilton

hsi apr 4 2015

It was only a week or two ago that we last commented on this index. In the meantime it has gained roughly 900 points and is fast approaching our target which is around 500 points higher yet, about 25800 give or take and not including a possible throw-over. We are paying particular attention to this index as this wedge is a highly accurate predictor of what follows. Furthermore this would complete the entire B-wave so a drop to 16000 is only the beginning! Notice that the RSI is already touching on overbought territory. As it stands the timeframe to reach the peak is about a week. This could be delayed if we are still in the 4th wave which could become more complex and consume a little more time, but that is becoming less likely by the minute.

What would cause such a sizeable move? Who knows but that is the whole point of expecting the unexpected. If you knew, it would become expected and would defeat the reason for your present preparedness as you would no longer be expecting the unexpected. See how EW solves this problem! You do not have a clue and yet you are ready.

Interest Rates, update

Hamilton

The usual then – Aug. 22 , 2012 – and now charts (see also previous blogs).

US 10year bondus 10y bond apr 4 2015

The US 10 year bond hit a  year low back in August of 2012. We anticipated that event basically on the symmetry from 1945 to 1979 to 2012. 33 years up followed by 33 years down, the exact dates are hard to find so this is a rough measurement but nevertheless quite accurate (see previous blogs). At the time a new low was still anticipated but that never materialized. The wedge, however , is clear as daylight and consequently the 4% was reasonable as that represents the base of that wedge. No new lows were made in the 10 year (the 30 year did make a new low). Most of 2013 was the year of the Fed’s “conundrum”, they had promised more QEs etc. and still rates went up, not down.

    We are always taught to expect the unexpected but when it arrives we are surprised and annoyed that it was not the expected outcome. This is along the lines of Donald Rumsfeld’s known and unknown knowns and unknowns.  My guess is that interest rates will rise more rapidly than is now expected so Greenspan’s 2013 conundrum might well become Yellen’s 2015/16 enigma. From an EW perspective, there was never a conundrum , nor will there be an enigma. Both the conundrum and the enigma only exist if one assumes that the Fed. (or other CBs) actually can control interest rates. This may not, in fact, be the case at all. After all it is possible that we have spent the past 6 or so years in one of those famous “liquidity traps” from which it is almost impossible to extract the economy. Pushing on a string as we all know does not work but at the Fed. this is apparently still an unknown unknown.

There are undoubtedly many households, banks etc.etc. that have been egged on to do more business or borrow more than they otherwise would. The relative low cost has been a great stimulus for doing so. Should rates change unexpectedly and by more than is now expected, you can rest assured that the vast majority did not expect the unexpected.