AEX, Amsterdam, update, MIB

January 25, 2015January 25, 2015 Hamilton

The AEX , being the oldest, should be the wisest, and tell us where we are. Most of the others, as for instance the CAC, DAX etc. have similar patterns except for the FTSE and MIB. We do not think that with all the ups and downs anybody can claim to be able to count this chart in a serious way, but with the benefit of hindsight it is possible to come up with something plausible. In this particular case a rather ugly looking expanding diagonal (read wedge) seems to fit the bill. It is a 5-wave structure with each and every leg consisting of 3 waves, whether up or down, and having an increasing amplitude (see beige lines). This one is really ugly.

If that is the case than the triangles we have seen just about everywhere may be b-waves rather than waves 4. Assuming equality between waves a and c of this last leg up 465 looks to be a reasonable target, not including the always possible “throw-over”. That, by the way, would constitute a 30% increase , more or less, in three months. Paradoxically, Draghi who should get full credit for making this possible was less successful in his own country, see chart below of the Milan index. Looking at the RSI and MACD the overall conclusion must be that we are awfully close to a top.

DAX, 25-year anniversary

January 24, 2015January 24, 2015 Hamilton

Now that Stockcharts is updated we can show the DAX properly. Apparently it was also the 25-year birthday of its existence, what a fitting moment to peak. The chart below shows the performance over that period;

It should not be forgotten that the Dax is a total-return index and includes dividends etc.

CSU, Constellation Software

January 23, 2015 Hamilton

This software company has done extraordinarily well and may even continue to do so, after all it goes up by about $100 per year. Last April we thought it might be a sell but it definitely was not. Now, once again we think it should be sold. It was a great investment but that is the whole point. If you do not take it, it does not count.

Our call today is based in the last few months of trading that very much resembles a wedge, these are ending structures. Beyond that the P/E is at a ridiculous level, the MACD has turned months ago and the RSI is about to go into overbought territory.

DAX update

January 23, 2015 Hamilton

The DAX was up by about 260 points or so this morning, that is more than 2.5% (you need to hold a 10-year bund for about 4 years to get an equivalent return!) The peak was at about 10704, Stockcharts does not operate on a 24 hour basis so that does not show in the chart; it is approximately where the red line runs.

We had identified the triangle sometime ago, see previous blogs, but did not know exactly what would cause it. Delayed exuberance for Draghi’s opening of the European floodgates of money, super QE. Anyway this triangle is either a 4th or a B, we prefer the 4th but do not exclude the possibility of a B (problem is that we have to be able to trace a lot of waves before this to find a wedge). In any event if a 4th wave we are presently above the target of about 10600. Ofcourse the “thrust’’ could be bigger but that is not a reasonable expectation. In the event this is a B-wave the C could continue higher as indicated by the grey arrows. That could go another 500 points. We are presently perpendicularly above the apex which makes for a good time to peak.

For some reason EWG is NOT following this script. It looks more like a rather bearish 1-2, 1-2.

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