The then (Dec.26) and now charts;
Granted that it did take a little longer (wave 4 went into triangle mode) , but the low as indicated by the arrow was at around $3 so not that far away from the actual low just slightly under $2, $1.63 to be very precise. This one should go , at least, into the target zone of $5.50 to $7, good for roughly a 100% gain. It may go higher yet (see previous blog) but that would be speculation.
The Dow has behaved in a rather disappointing way by not dropping. But it also has not, yet, negated the outlook and it has followed the other prediction which was that this market will do just about anything to climb back up. With a lot of noise we have now substituted the “fiscal cliff” for the debt cliff with a government that is even more divided than before which , on balance, may have made matters worse.
At the same time the announced additional 40 bln per month, to 85 bln. per month by the Fed has done wonders. Instead of lowering interest rates it has had the effect of raising them by about 30 basis points. This may prove to be temporary but then again it may be the real turn (after 31 or so years). All this with a little help from the Chinese, Japanese and a whole host of others including the Swiss who, by intervening in the currency market (which is the same as easing), have managed to accumulate Euro reserves to the tune of one time their GDP ($600 bln.) Stay bearish until this wedge is proven wrong.
Then, 31st of July, and now charts, as usual;
Not bad for 5 months in advance. We would go neutral here.
If you are going to make New Year resolutions, here are a few to consider.
1. Buy low, sell high. Most people actually do the opposite. True we do not know what is high or low but a little common sense should give us some inkling as to what that means.
2. Wait for a completed pattern or for a stock to get to a “logical” target.
You may still get it wrong but chances are you will do a lot better!. Best Buy is a good example. It has completed a huge a-b-c down from about $55 to $11, a drop of 90% or so. It has also gone to the 4th of previous degree and appears to have completed a full EW cycle, 5 up and 3 down. And if you happen to like technical analysis (EW is not!!) the RSI and MACD seem to be supporting some turn soon. The p/e is at 3.76 and the yield around 5.8%. For contrarians, and you should be one most of the time, 10.4% of the stock is sold short.
There are no guarantees that this will work each and every time, but if you keep doing it you will do better than listening to hot tips from your neighbour.