FTSE, London update

February 23, 2015February 23, 2015 Hamilton

These charts with all the annotations become very messy very quickly and , for those that are not really interested in the finer points of EW, rather annoying as well. It helps a little if you click on them to enlarge them. The “executive summary” reads as follows;

The FTSE is near completion of the first two legs, A and B, of a multi year “flat”. Once complete wave C should follow and take the index below the low of A. The high point of B is typically found where sub waves a and c are equal in magnitude. This should occur in close proximity to the starting point of A – that is why the whole thing is called a flat!. Essentially that is at the double-top level. Wave B itself should have a 5-3-5 structure and certainly wave c of B must subdivide into 5 waves.

In the detailed chart which does not show the entire c of B leg due to the 3 year limit, wave 3 is the extended wave and 4 a triangle. There are numerous variations but they all boil down to the simple fact that wave 5 starts at one of the 3 low points since October of last year. Again, typically, when the 3d wave extends there is a tendency towards equality between waves 5 and 1 (blue arrow). RSI and MACD are also turning so EVERYTHING suggests a top, soon.

The one and only, remotely possible alternative bullish interpretation would be that this is not a B-wave and instead it is a 5th wave of the bull that is forming a wedge. That is extremely improbable and in any event does not project all that much higher (7400 maybe)!. Below is an example of what a wedge would look like;

ABX (on NYSE), update

February 21, 2015February 21, 2015 Hamilton

If you look at ABX in US $ terms you may get a slightly truer picture. As gold and gold stocks came down, so did the Can $ and this may have a distorting effect on the miners that operate around the World (as opposed to in Canada only). In any event what is clear is that there was no triangle, just an a-b-c in the wave 4 of C position (unlike with, e.g. the XAU). This means that the 5th wave is still missing a wave 5 and that the low was actually created by an irregular b wave of wave 4 of 5 of C. The low , if we get it, targets $9 or so which is about $11.25 if the exchange rate does not fluctuate too much. A slight move up in the Can$ value would cause overlap almost immediately potentially negating this possibility. In US$ terms that would require a much larger move up of about $2.

Brussels’ stock index

February 21, 2015February 21, 2015 Hamilton

Brussels is the capital of Flanders, a lovely city and a good place to eat mussels. It is also the capital of the European Union and as all capitals, they wouldn’t be chosen otherwise, nice but rather dull. At least they do speak Dutch.

If you look at a map of the EU and compare it to a map of the Roman Empire you will notice that they are very similar except that the North African rim and the Levant was, and much of Germany was not, part of the Roman Empire. Anyway Brussels is now the new Rome and, as is usual in capitals, it is a hotbed of political intrigue. They are the cognoscenti of what goes on day to day or, if you prefer, the insiders. This may explain why the Brussels’ stock exchange – not everybody knows one even exists! – was one of the best performers lately. They knew all along that they would pretend that Greece would stay! Here are the usual charts;

We struggle trying to find the right count, but an expanding diagonal triangle, shown in pink as the alternate, seems to fit best as each leg consists of just three waves. Alternatively, in black, it is a normal 5th wave with the normal 5 wave subdivision. In the former case we are there, in the latter we could go one little step higher. This is based on the expanding triangle , always a 4th wave in the middle of the chart on the right. This, by the way, is a pattern that is sometimes referred to, incorrectly as it has no place in EW, as the Jaws of Death, and in this case amazingly just keeps on going

Practically speaking we always knew that the Belgian dentists, the deus ex machina of the investing world, were a financial force to be reckoned with but the best?? Up 29.02% in just over 4 months?? This is Brussels, not Zimbabwe. Our guess is that this is as good as it gets.

Hollands AEX is up 27.02% and the DAX 32.27%. The Dax does not count as it is a total return index. Italy, Draghi’s home, is up just 24.41% and the STOX50 25.13%. Athens (Greece) itself is virtually flat over this period.

AAPL, the apple of our eye.

February 21, 2015February 21, 2015 Hamilton

It sure seems to be, and now the biggest company on earth at 748 Bln. cap.

Arguable only a fool would go against the grain and suggest that this stock is a sell. But then, on the other hand, this stock did drop by more than 50% over the past seven years, twice in fact. If it did that again it would be down to about $60. Suppose the stock ignores its channel and manages another $20 or so to the upside, it would still drop back to $75 under these circumstances. Only if the stock manages to climb to $240 would you be indifferent to holding or selling if another 50% drop lies in the near future. Seen this way, only a fool would continue holding it. And that is precisely what momentum stocks get their energy from, the ingrained notion that there will always be a greater fool to take the stock off your hands at a higher price.

In EW terms we can count a clean 5 wave sequence from the bottom (but not necessarily from the start of the company in 1976). So it is reasonable to expect a pull back somewhere around here that would correct this entire move, that is down 50 to 62% or to wave 4 of previous degree. Even wave 5 itself subdivides nicely into 5 waves. The RSI is not supporting the recent, almost perpendicular moves up and, the MACD is hitting its head against the ceiling. For those that ever wonder about “fractals” the two charts provide an excellent example, essentially the are self-similar patterns that occur at different degrees. You will notice that the 5th wave looks pretty well identical to the whole thing.

Fundamentally, and we pay very little attention to this, success is invariable the basis for a downfall. It has a blinding effect on management at all levels and tends to close the mind. In this case none of that is readily apparent but there are rumours of starting a car manufacturing line of business, perhaps even an instant one as in buying Tesla. Apart from that, AAPL now represents something like 10% of Nasdaq , nowhere near the 30% that Nortel represented on the TSE or the 60+% of Nokia on the Finnish index, but still a pretty respectable amount. With Nasdaq less than 200 points away from the 5132 intraday high of 15 years ago (see below and previous blogs) things are getting a little stretched. We would definitely step aside.

Would 1000 points, or 25% in 5 months not be a decent gain and if it is why hold out for even more?

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