DJIA update

Hamilton

djia dec 31 2012

We first presented this idea that a large “diagonal” was forming in August or even earlier. Now that it is complete together with the first wave down and a rebound back to the trend line the pattern truly does look textbook. There are a few important characteristics about the diagonal, wedge, rising flag, pennant or whatever you may wish to call it. First of all it is an exhaustion pattern, that is it always occurs at the end of the ride (wave 5 or c in EW terms). In this case we assume that it ends wave B from the March 2009 lows and has turned. Secondly, invariable these diagonals are retraced in their entirety, that is back to the base (or further!) as a minimum. In this case that should be about 3500 points. Not only does this normally happen, it also tends to happen rather violently. Given the two years plus that it took to complete, it would not at all be surprising if the drop was accomplished in less that 1/2 year. Such a drop would be accompanied by a collective “new” insight that our present pavlovian dog approach cannot yet contemplate.

Fundamentally there are problems galore that remain unsolved. The US spends $1.40 for each $1 that it takes in and despite all the hoopla about the fiscal cliff there is absolutely no conviction anywhere that something needs to be done about it. The European union and the Euro are fraying at the edges but there is no interest at all to cut out the rot. Japan is gradually on it’s way to oblivion given the debt levels and demographics and that is without starting its own Falkland war. China with 46% of GDP coming from “investment” as opposed to consumption is working very hard to set a new world record of capital misallocation that is invariable followed by colossal capital destruction. Canada is oblivious to everything,enjoying a very long period of hibernation.  With all that we do not need the ice to melt or Sumatra to blow up seriously as it did 73000 years ago, it will be self inflicted for the most part.

WHR, Whirpool update

Hamilton

The then , Oct. 2011, and now charts;

whr oct 2011whr dec 29 2012

At least we recognized the rather clear and distinct A-B-C down from the top, which may actually have been the top of the 5th wave. Right here there is no count  that can be treated with any degree of confidence, but should it triple top we would nevertheless sell. In fact if you do own this from the $50 level you have a 100% gain and may wish to sell in any case.

ELUXY, Electrolux update

Hamilton

eluxy dec 29 2012

We though the C wave had started in earnest with the last drop to below $30, but it proved to be just part of a b wave ( see previous blog). In terms of consumer electronics this company must be among the best performers. At around $60 it’s fortunes should change as the C leg takes it down to somewhere in the vicinity of $10. As noted before, for the duration of this chart the stock has lost or gained more than 50% ten times now, a double top is maybe all that is needed to start the process for the 11th time.

PHG or Siemens (and GE)

Hamilton

RBC’s analysts were given the task of finding the 30 “best money-making ideas in absolute terms using a risk-adjusted approach” from the 1500 or so stocks they cover worldwide. Koninklijke Philips Electronics was one of the lucky ones to rise to the top. They put it in the “Medical Equipment and Supplies” category. A more appropriate description would be “Consumer Electronics”. It’s traditional core business was, and is, making light bulbs as the original name, before the Royal prefix was added, attests to. It is to be hoped that this somewhat incorrect classification did not mislead the analyst. Philips is a great company but does it deserve such a recommendation? Here are a chart and some facts;

phg dec 28 2012phg 10 year facts 

The chart has all the hallmarks of a very large triangle, which could be either a 4th and we should get an explosive run up from the recent lows, or a B-triangle and we should dive into the ground. Alternatively, we are in a much smaller triangle that is in a 4th wave position but of a much smaller degree. We would have just finished wave c and still need to do d and e before going lower to, say the $5 area. On balance the whole pattern is bearish rather than bullish. There are not that many comparable companies but comparisons have been made with GE and SI. Both are more industrial, that is, in the heavy stuff like turbines etc. But just for the sake of the exercise here is the chart and info for Siemens.

si dec 28 2012SI dec 282012 10-year summary

The chart looks bearish overall but there is no triangle here. Relatively SI is higher up between the highs and lows than either PHG or, for that matter GE. But if you look at the 10-year summaries you will notice that SI has done much better, has grown more and has turned out much more consistent profits compared to extreme erratic profitability of PHG. You be the judge.

For completeness here is GE, it may or may not have completed the bear;

gedec 28 2012ge dec 28 10-year summary