Greek bailout.

Hamilton

acropolis

Can we have a bid please?

One decidedly negative outcome of the resolution of the Greek bailout would be that we would lose all hope, after all this farce has concentrated our attention for quite some time now while we wait , time after time, for the “deus ex machina” to come on the stage to resolve this tragedy. We are not quite there yet but this farce is starting to resemble that other story, “one thousand and one nights”, where the sultan’s wife tries to delay her execution by telling fascinating to-be-continued stories.

This whole thing is a wonderful example of sophisticated political engineering. There will not be a default but right away you can whistle good-bye to 70% of your money if you are a creditor. The remaining 30% will be exchanged for 30-year bonds paying an interest rate of, reportedly, 3.6%. As soon as interest rates in the world, and the Eorozone, normalize (if they ever do) to say an interest rate of 6% (the basis of the last 30-year US bond futures contract), you will lose  one half or more of that 30%, leaving only the hope of getting back 15%.  Straight out of Alice in Wonderland?

EEM Emerging Markets ETF

Hamilton

eem feb 2012

The EEM has followed our script precisely, perhaps it will continue to do so (see various previous blogs). One can argue about certain minor details in the above count, but in the main it looks pretty acceptable. 5 down with a nice little triangle in the 4th wave position for Wave 1 down, taking back about 34% of the preceding rally and then an A-B-C in which C is vector equal to A, retraces roughly 62%, and moves right back to the 4th wave (highest point in the triangle). The RSI and the MACD are both topping. Somewhere around here this ETF should turn down.

The XEM, the Can $ equivalent, has pretty well followed the same pattern, shown below without annotations.

xem feb 2012

AEM, Agnico Eagle

Hamilton

AEM l feb 2012

Agnico might well be a buy at these levels. It is only a dollar or two away from having lost 62% of its value (about $33). There are two possible counts, one has an a-b-c finishing at about these levels and the rest is all up. The other, a larger irregular A-B-C that now needs 5 waves down in C. in that case we are in wave 4 that could easily take us up about $10 at least before 5 starts. So in both scenarios we should get reasonable upside. In detail:

aem s feb 2012

The wave 4 could go as high as $52. The stock is trading at levels where it was in 1986, gold itself is trading at levels triple that at least. By the way, I do not mean to convey the impression that I like gold, just this stock, just for a little while.