TSX update.

Hamilton

tsx may 17 2012

Just a quick reminder of where we are in the big picture. Things happen on an incremental basis and what feels like perfectly normal may actually be totally absurd if you care to step back for a moment. It is true that at roughly 11000 the TSX has not moved for about 12 years. But it is also true that in the past 25 years the TSX has only been higher than it is today for less than perhaps 2 1/2 years, this while the world supposedly collapsed financially! It would appear to me that the realists that think that the index might drop to say 8000 should not have to prove their point  and that the burden of proof  should be put on the armies of pushers-of-stock that are, forever,  looking for higher levels.

SI, Siemens

Hamilton

Siemens was predicted to go to about $81. It is getting there but it has taken a long time. The outlook remains quite bearish (see previous blogs), but rather than regurgitate the EW analysis it occurred to me that it might be refreshing to use the Head & Shoulder pattern, something I know very little about. Here is the chart;

si may 2012

The left shoulder and the right shoulder sort of fit into a band that should run close to horizontally. Then, after the break-out under the lower channel line, the stock should fall by an amount similar to the distance that the head exceeds the upper trend line. It is as simple as that. Target $60. The EW target, by the way, is half of that.

STD, Banco Santander S.A. (American Deposit Receipts)

Hamilton

std may 2012std picture

This just happens to be the biggest bank in the Euro area. It gobbled up the likes of ABN-AMRO, albeit only briefly, and a whole slew of other banks or finance companies. Originally it hails from the Santander region of Spain. In terms of building headquarters these guys out spent most of the competitors.

When they say buy when there is blood in the street this is what they mean. The stock is trading at a P/E of 6.7 and yields 20.6% and it may just get a little better than that over the next few weeks. The magical number seems to be $4, and should it get there it will be the third time in less than ten years. Then when it bounces it moves quite impressively.

From an EW perspective the pattern is a large A-B-C X A-B-C , which is simple an A-B-C, except that the details differ. Theoretically the ideal target would be $4 or a little below. Presently we are either in the 5th wave of a thrust out of a triangle (having already completed the triangle measurement), or we are in a “wedge” type of structure with very little left to go down. Today’s low, so far , was at $5.52 or about a single dollar above the lows. A buy at $4.50 would only be suitable for those that are willing to loose it all, but it is exactly those people that become rich.

MS, Morgan Stanley update

Hamilton

Like Discount Corp. (now defunct) Morgan Stanley was created as a means to circumvent Glass-Stegall. It is a spin-off of JP Morgan. Now, of course, it is legally also a bank but  no doubt that can be changed back with the same speed as it was done in 2009. Apart from GS this is the only other remaining big gambling casino, but without the bad reputation or the over-sized rolodex. Here are the charts;

MS may 2012

This is a little different from the last blog. With all due respect to the Gainesville gang, it would seem to me that this chart looks a lot like GE and that it is conceivable that MS has done the entire correction! Alternatively, as shown before and in the chart below, we are still in some 5th wave, in fact the 5th of the 5th. The large A-B-C down is almost perfect, starting at about $100 and going to $10. The pattern is very symmetric.

ms s may 2012

Supposing we are in a 5th of some sort, waves 1 and 5 would be equal at about $9, just $3/$4 from where we are now. (probable 3 of 5 of 5). The stock trades at a p/e of 20 but that is meaningless. We caught the $11 to $21 move correctly but did not execute well. This time there is a chance of doing both. For the moment this should be a buy at $9 for sure but for the more courageous perhaps already, if, for instance, this is a b-wave almost complete. Perhaps, once again, their will be a stream of talent flowing from JPM to MS. The RSI and MACD certainly suggest a change is in the air. Below is that comparison in a chart, MS in green and GE in blue.

ms ge may 2012

Click on the chart to enlarge, one dropped from 100 to 10, the other from 60 to 6. MS is more volatile as would be expected when compared to industrial turbines and so on, but by and large, the correlation is inescapable.