Art

January 2, 2015 Hamilton

There is no inflation we are always told. Go to Christie’s, the auction house that is, and you may be surprised. This “painting” by no other than Barnett Newman, you are forgiven if that does not ring a bell, just sold for a mere $84.1 million. Two other “paintings” by Andy Warhol, silkscreens depicting 3 Elvis’s or 4 Marlon Brando photographs also sold for, respectively $81.9 and $69.6.

You may recall that back in 1987 van Gogh’s Sunflowers sold to a Japanese buyer for $39.7 mln. , adjusted for inflation that would be about $75 mln. At least that was a painting by a real Dutch master. Black Fire 1 is not worth $10 in my opinion, which, I guess, just proves the point that “value” is entirely in the eye of the beholder and subject to the size of his/her wallet. We are in the wrong business.

Natgas, HNU

January 1, 2015 Hamilton

Natgas futures are showing a potentially serious buying opportunity. Given all the overlap, at various degrees, and the fact that this is in all likelihood a 5th wave, the most probable pattern is that of an expanding diagonal. If so, then a rather violent retracement, most often right to the start, should follow. This would be in synch with our view that oil has or will bottom soon and will rebound for a few months.

The best way to play this is by purchasing the HNU, the Horizons Beta Pro 2X Natgas Bull ETF. We have played this game very successfully before and believe this is the time to do it again. See previous blogs for HNU. To put the present value in a historic perspective below are two longer term charts for the futures and HNU;

Clearly we are closer to the bottoms than the tops, all we need now is a little chill which we are actually getting as we speak.

IBM update

January 1, 2015January 1, 2015 Hamilton

Then – Dec. 7, 2012 – and now charts as usual;

If there ever was such a thing, this is the quintessential blue chip stock par excellence. It is also fairly unique in that it is one of the very few DOW stocks to record negative (stock price) returns two years in a row. This flies in the face of the broadly accepted “Dogs of the Dow” MO whereby you are supposed to buy the bad performers at the end of a year as they are bound to regress to the mean the following year. For 2 years now this has not worked as the stock has lost about $60 or a little less than 30% over that time period.

Oddly, these guys, or girls, have done everything right, all 431,000 of them. First they are owned by such celebrity investors as Warren Buffet which is roughly the equivalent of being on Oprah’s favourite book-list. Next they buy their own shares by the truckload which obviously does wonders for the “earnings per share” metric. To be able to do this they borrow un till the cows come home, which , of course, meets with the warm approval of the Fed. that specifically keeps rates low for this purpose. Then they have learned to live in the “now”, carpe diem if you wish, rather than dreaming about an uncertain future. They invest about 1/2 of what companies like this typically do in research and development.

But it seems like the world does not know what they are doing, what their purpose in life really is, and lately it would seem that they don’t either. The EW target remains far below the present level and despite a good deal of ambiguity the best EW count suggests that we are in a wave 3 down which is not yet complete. Look for $90 as a minimum.

Euro update , FXE or XEU and the March future

January 1, 2015January 1, 2015 Hamilton

As pointed out previously, year-ends are focal points for the markets and it is therefore not unusual that changes in the course of events occur, more or less, at that time. This is particularly true for foreign exchange rates. Here we have the Euro by way of either the FXE or the XEU, we actually prefer the latter but recognize that neither one is a true representation of the real FX market, if for no other reason than that FX trading never stops as it moves around the World. Gaps do not exist in this kind of an environment and are created only by the artifice of a straightjacket that we impose on it by insisting that it fit our timetables. Here we have a gap in each of these charts and using the tried and true gap-in-the-middle approach it is clear that we are done.

Furthermore, the largest part of the move up in 2014 can best be described as a diagonal or wedge in EW terms. Typically these retrace to their starting points. Add to that that the RSI and the MACD are decisively suggesting a turn at about this time. Fundamentally, there was a time immediately after the Great Recession that everybody simple new that the US dollar would be pulverized by excessive money creation by the Fed. Everybody simple got that one wrong. Now, with equal zeal , everybody professes to know that the US dollar will continue it’s upward trajectory at least through 2015. This too may prove to be simple wrong. If for no other reason this 120-ish level poses a lot of resistance so a reversal of sorts would not be all that abnormal. See somewhat longer chart below;

Just to be redundant we have added the March Euro future below;

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