DOW and DAX update

Hamilton

dow 19 dec 2012dax dec 19 2012

So, so far no banana, but as we pointed out earlier, this market will do anything to push the stocks up. This time it is Japan promising more stimulus , Greece  buying back debt at 31 cents on the dollar, Germany having its confidence factor that reached a 2 1/2 year low suddenly charging the other way and the fiscal cliff fatiguing everybody.

The Dow is hitting the lower line and perhaps had not yet completed the a-b-c as the c lacked the 5th wave. The Dax similarly is right up there completing its C wave. Stay tuned.

LMT, Lockheed Martin Corp.

Hamilton

f 35lmt dec 17 2012

They are planning to make at least 2400 of these “hybrid” fighter jets that now are budgeted to cost close to $200 mln. a piece. So far about $65 bln. has been spent on the development of this plane (2x LMT’s capitalization) and things are not going smoothly for this most costliest defense programme ever. Given this fundamental backdrop and prospects of the negative-feedback loop continuing for some time yet, it is amazing that the stock is still trading at such lofty levels.

The count is not entirely clear but plain enough to assume that the drop in 2008 was wave A, the rebound of about 62% thereafter wave B, so now we should expect wave C down to start any time now. In detail;

lmt dec 17 2012 s

A nice wedge for the C part of the A-B-C rebound. The count could be wrong in so far that we may only be completing wave 3 of C rather than the whole thing. Unlikely considering the RSI and MACD. A sell or use a stop at about $86.

ATH, Athabasca Oil Sands Corp., update

Hamilton

There are a total of 13 different patterns that are recognized by EW. Some are a bit problematic as it seems that the stock movements can be counted in so many different ways that the whole EW approach appears almost arbitrary and not always testable in real time. True, no doubt, but even so there are some extremely accurate and predictive patterns. The “diagonal triangle” is one of the best. It is easy to recognize due to overlap that does not occur anywhere else. It is always in a 5th wave  (leaving the question 5th of what open) or c wave position. The stock almost always returns to the start of the pattern. ATH had one of these diagonals and here are the then and now charts;

ath m 2012ath dec 16 2012

ath 2012ath dec 16 2012 b

It does precisely what it should do, returning right to the start of the pattern. The trick, as always is to recognize this in advance so that it becomes tradable. Notice that the pattern can also be broken into two parts, a triangle followed by a thrust down; combined “diagonal”is therefore an appropriate name.

In this particular case the diagonal occurred as the 5th wave of 3 (it actually failed by a very small margin). Presently we are in the 5th of this 5 wave sequence so a buying opportunity should present itself soon. This 5th wave may , in fact, already be complete but to be safe we are assuming that we are in wave 4 and have one more push to go to the downside. A buy at any new low!