Month: February 2016

Fed. guidance

Hamilton

Under the Dodd-Frank legislation the Fed. is required to give “guidance” to the banks under certain stress situations. I happened to read about this in one of Maulding’s articles. It is publically available at;    http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20160128a2.pdf

This is quite an elaborate document so I will spare you the pain of reading it in its totality and get right to the point. Just like the Fed. transmits vibes to the public in general about what it might do with interest rates, it also does this in great detail with regard to a number of variables under certain stress situations, including the level of the DJIA. The idea behind this is that the banks would somehow be better prepared. Here is an example from the Feb. 2016 report;

fed dodd frank report

Granted that this is what might be expected under truly severe circumstances, it is still a little unnerving that even the Fed. can see a situation develop in which the DJIA drops to 10395 (on a total stock market basis). As the high was around 21707 that implies a drop of 52%. On the positive side it would apparently only take 7 quarters to recoup the loss.

Negative short-term interest rates are included in this most severe adverse scenario. Are we almost there?

TCK.B, update

Hamilton

The usual, then 23d. Aug. 2015, and now charts.

TCK.b aug 28 2015tck.b feb 2016

tck.b feb 22 2016

In the text we said that normally a new low should be made. That low was, as far as we can ascertain at $4.25. The new low was actually at $3.65, so let us assume that you followed the blog and bought at $4.25 or even $5. Today you will have doubled your money (almost) but in the next few days this stock should go to about $11 (wave 4 of previous degree). There it would be good to exit as a wave 2 can retrace an awfully large part of W1.

Here are our comments made in July 2012,including that chart;

When you look closely and apply a little common sense, it is all of a sudden not that hard to see how this stock could go to $15 if the pendulum swings through it’s equilibrium as it invariable does. If you like the H&S approach the target is lower at around $10. The true EW target is actually below $5.

TCK jul 25 2012

and from 2011;

tck.b jan 4 2011

MCD update

Hamilton

The usual, December 2015 and now charts;

mcd dec 28 2015mcd feb 22 2016

The “thrust” corresponds to the size of the mouth of this, four year, triangle. Whatever the count (see previous blog) the first move should be back to the low point of the triangle which is about $80. That would represent a $40 drop, or around 30%. It should not take much longer than a year, the same time it took for the thrust to develop. A good short by way of options. For instance, a 100 Jan. 2017 put, which can be bought for about $4, should be worth >$20 if this happens. That is 5X. Call your broker and see how that goes over! He or she will resist and try to talk you out of it. Just explain that it is actually a lot safer to buy a put for relatively little money than to either own, or short, the full amount of the stock. This is because the outlay for the option in this example is just a little over 3%.

Here is the bigger picture;

mcd feb 22 2016 b