Year: 2015

OIL update

Hamilton

oil march 17 2015

Oil is not doing what was expected. The rise to , say, $60, the top of the triangle , did not occur even though the structure was acceptable as an a-b-c. All this could still be part of a more complex wave 4 (an irregular flat?) but if we go much further down that interpretation will be plain wrong. In the mean time we are not even sure of the degree of this wave 4 ( 4 of 3 or 4 of the whole thing?). So we will wait un till such time that we can predict the past rather than the future. See also RDS.B.

DAX vs EURO

Hamilton

dax vs euro

We happened upon this particular chart on Bloomberg that we thought is instructive in these modern times in which QE, in one form or another, is the rage. Currency swings have been around for a long time and were often larger in magnitude than they are now. For instance in the mid-eighties US$/DeutschMark moved from 3.50 to 1.50 and back again in a little over a year. Sterling had similar swings earlier and our own Canadian dollar has moved from 1.04 to .61 to 1.10 against the US$, albeit over an appreciable longer period of time. Yet the respective stock markets did not appear to have the large gyrations they do today. Perhaps this time is different as most capital mobility constraints have long gone and we now have a huge pool of “homeless” (hot if you prefer) money sloshing around.

    The recent  rise in the Swiss Franc caused by the Central Bank abandoning the currency peg, led, initially at least, to a corresponding drop in their stock market, see below;

smi march 17 2015Swiss franc march 17 2015

Because one event occurs immediately after the other we will use the post hoc ergo ….. fallacy to assume there is not just correlation but causation, even if in this particular example it seems to dissipate rather rapidly to contradict that same assumption. Debasing the currency is, by the way, an excellent way of making the rich richer and the locals poorer.

Back to the DAX. If you are wondering what the leading stocks were to push the Dax up, they are Volkswagen, BMW and Daimler (Mercedes), all three big exporters and all three from an industry that was down and out not too long ago. Time to buy Peabody Energy (BTU) perhaps???

RDS.B encore

Hamilton

rbs.b march 16 2015

Just a quick encore on Royal Dutch, this time using the b shares (the difference between b and a has to do with withhold taxes on dividends). This is the longest chart I could find. In most if not all 5-wave sequences there is normally one wave that is extended. That is longer than it “should” be. Here we assume it is wave 3 of 3, but we are not sure where it ends, that is it could be bigger than you think hence the alternate count. What it does is push the top from 2007 to 2014. That does not change the target as it matters little as in both cases the target is the 4th of previous degree or, alternatively the 4th of 3 (see the two horizontal lines). What does matter, however is how you get there. If a C wave in the very large flat it has to be 5-waves straight down, but if the top was in 2014 a large A-B-C may only just be starting and you could get the pause or intermission somewhere around here (instead of a wave 2 of C).

ABX, XAU and HUI, again

Hamilton

abx march 16 2015 babx march 16 2015 s

This weekend  all of a sudden you could get 5 year charts from Stockcharts.com. Perhaps this is only a temporary expansion of their free product line but it is welcome in any event. ABX is starting to become extremely annoying as it simple will not show its hand conclusively. It has almost been 1/2 year without either confirming or negating a particular scenario , count or outlook. That is not helpful.

However, on the positive side we have at least the possibility of a completed EW pattern if we make a sharp wedge of wave 5. The $11.67 low would be the low and now it is just a matter of time. Both the RSI and the MACD have improved over time and suggest  a decent bull run could be in the cards. Symmetry, a frequent occurrence, would suggest a low just above $12 (see red line); we have already gone a little beyond that. The long and short of it is that we think it is a good buy here once again but we cannot exclude the possibility of a spike down to $9 in the worst case.

Both the XAU and HUI have similar patterns except that they are sporting triangles which makes it more certain. But both start of with a mess which could be a series of 1-2’s so you could expect 4-5’s at the bottom.

xau march 16 2015HUI march 16 2015

The XAU came to within a dollar of our longstanding target. It’s top is earlier than the HUI and it is messy sugesting a series of 1-2’s.  The HUI is much cleaner but also seems ton have a wave too much at the top. All should be a buy here given that a 40% retracement – the standard minimum – should outweigh any further drop should it occur.