K, Kellogg update

Hamilton

"A handful of patience is worth more than a bushel of brains." – Dutch Proverb

Then (June 2011) and now charts:

K ellog June 2011k ellog dec 16 2012

If you read the text in that June blog , it says that the next big move should be down but that it may first have to complete the double topping process by going to $58. Well we are almost there and it has taken more than a year longer than expected. I cannot remember ever hearing the quoted Dutch proverb, it is probable one of thousands that father Cats or someone like that used to liberally sprinkle Dutch literature, but it certainly seems to fit this situation. A sell now.

JOY Global.

Hamilton

Joy dec 12 2012joy dec 14 2012 s

JOY is in the business of supplying above and below ground mining machinery. It is comparable to companies like Finning, Cummings, Cat. etc. etc. It did quite well the most recent quarter but it also “guided” down for what is coming next, citing oversupply in the mining industry. The stock, together with the others mentioned,  has done extraordinarily well due to the commodities bubble that we have had or are having. Another factor that may have played a role is that as of today, precisely in fact, we have had 4 full years of interest rates essentially at zero. On top of that 100% accelerated depreciation for corporate tax purposes makes buying capital equipment relatively very attractive, more so than hiring labor. Other than in such wonderful places as the Congo, more machines and less people are used than ever before. (This is an economic phenomenon that every first year economist is aware of, except , it seems, the Fed.) This all caused the euphoria that pushed this stock into a Mnt. Everest high of $100+ in what is clearly a B-wave. So far the stock has only lost 50% or so. More will come.

Below is Finning for comparison purposes;

ftt dec 14 2012

RY update

Hamilton

ry dec 13 l 2012ry dec 13 m 2012

We showed the bullish count back in Oct, of this year. Here it is again, in purple. Given all the overlaps this is about the only bullish scenario possible. If it were to occur the peak should be at a little under $65, so just an additional $5 from today’s highs. There is no other bullish scenario that I can dream up (a triangle here over 6 years is just too tortured to be correct. So we continue with the bear scenario. Note that the stock tops no less than 5 times either a little above or a little below $60. That suggests that selling at $60 is not all that stupid, but then the past is no guide for the future.

We did not expect the last little leg up to happen, assuming that the stock was already on its way down in C. It took 9 months for the stock to climb from $59.13 to $59.41, all of 38 cents. It has come to within $2.12 of the high in the B-wave, almost a full retracement.  Even so , apart from taking much longer than expected the bearish count has not been negated. We expect wave 3 of C down to start now. This should take us down to below $44 fairly rapidly. With $5 up and $16 down this is absolutely a no brainer. Think about it.

ry dec 13 2012 s

As an aside , this chart shows how useful the RSI can be. Red lines are highs and green ones lows. With the exception of 4 months, June to Aug. 2011, virtually all turns correspond with turns in the stock. So sell with an RSI at or above 70 and buy with an RSI below 30. This approach is bound to leave your broker behind in the dust.