Year: 2015

Alchemy, and we thought it impossible! Copper, Gold.

Hamilton

Here are two charts from InfoMine, same scale, same timeframe , more or less, and so on. On the left Copper and on the right Gold.

copper jan 13 2015Gold jan 13 2015

With the exception of the spike down in 2008 for copper the two charts are very similar. Both have their lows in or around 2001+ and both peak in 2011+. Moreover both manage an amplitude of about 9-times. The most recent, multi-year correction takes back roughly 3 out of 8 lines which equates to about 38%, normally a Fibonacci minimum. We can only speculate why the exception of 2008 occurred, perhaps copper as a base metal is more sensitive to economic growth which seemed to disappear during the initial phases of the great recession. Or perhaps gold was more sensitive to the expansionary monetary experiments of the Worlds central banks. Whatever the cause it is clear that the difference was short lived and that for the most part the two metals behave like twins, have an extremely high correlation (at least for this time period!), and are essentially interchangeable as if alchemy actually works. Those that delight in conspiracy theories  might want to delve deeper into what the Chinese have been up to.

For our purposes all this is important only in that if you can predict one, you can predict the other. Here are then  – 29, Oct., 2012 – and now charts;

copper dec 2012copper 13 oct 2015

That was a bulls eye even if it took a year and a half longer. Nevertheless we do not think the count at the time was correct. For the triangle to be a 4th wave it is too big. A 5th wave may have started earlier and taken the form of a wedge. This would then complete wave A or 1 down at toady’s low. Perhaps a better characterization would be a double zig-zag with the triangle in the middle as the X-wave. We are not entirely sure as other variations are possible but the main thing is that we got to $2.70 per pound, the initial target. At the very least we would expect a pause of some duration at this stage, more or less. So if that is the case with copper, why not with gold?

DAX update

Hamilton

dax jan 12 2015

The DAX sports a similar triangle as discussed elsewhere ad nauseum. These triangles are invariable either in a 4th wave, or a b-wave position. (Alternatively they are misinterpreted as triangles but are, in reality, a series of 1-2’s). The different position depend on whether or not this wave up is part of a normal 5-wave sequence that subdivides in individual 5-wave minor waves or, whether we are in a wedge-like structure within which all the sub waves are 3-wave structures. Either way,if this is correct, we should get a thrust, or c wave up to at least 10500 and then the whole thing should more or less collapse. Do not trade on this. Neither the RSI or the MACD provide any meaningful clues.

G, Goldcorp update

Hamilton

g jan 10 2015

See our previous blog from a few days ago. So far there is no decisive resolution of what is happening. A wedge or an incomplete 5th wave are still possibilities. Just a little higher we will get overlap and if we can get a little higher yet, say to $27, the probability shifts to the view that the low is in for the time being.

See also HGU and ZJG, neither of which are resolved decisively either.

PD, Precision Drilling

Hamilton

pd jan 10 2015 b

pd jan 10 2015 mpd jan 10 2015 s

We have all three charts here, big, medium and small. The top of a cycle is assumed to be in 2006. From there we have an absolutely classic correction in the form of a perfectly formed A-B-C that wipes out almost all the progress over the previous ten years or so. It hits bottom in synch with the rest of the market in early 2009. The low is around $3.38 exactly where both legs of the zig-zag are equal. This is the point where a stock either goes bust or starts a new upward cycle. We assume that wave 1 up of the new cycle occurs from 2009 to 2011. Next we have the inevitable correction of wave 1, wave 2. Wave 2 appears to be doing a very symmetrical a-b-c down and in the process takes back nearly all of wave 1, as is normal. The c of 2 does not look as if it is complete as 1. it is not yet equal to a, and 2. it has not completed a 5-wave sequence as all c waves should. You need a very sharp pencil to figure this out but nevertheless the target would seem to be around $4.75 or so, not far from where we are today. Furthermore, assuming our interpretation is correct, the stock should not trade below $3.38. The next move should be wave 3 up which at the very least should exceed wave 1 in size, that is >$16. So roughly speaking you could lose 30% or gain 300%. When did your broker present you with such a proposition? For free!

We have no fundamental view on what might make this happen. One possibility is that the famous Belgian dentists of the past mistake this company for some sort of association of dental practitioners in the forefront of that science and are all over it to get a piece of the action. Investors’ memories are, after all, very short.