It took the stock a month to go from $26 to $28. It could still go to $29 to make an absolutely perfect A-B-C, but then again it may already have completed the pattern. The RSI is now also clearly at nose-bleed levels. (see previous blogs)
DJIA , Dow Jones update.
From stockcharts the high reading on the Dow, on the 2nd of May 2011 was 12876, intraday. The recent high on Jan. 26, 2012 was 12841, intraday. Ergo we did not make a new high (yet?) and the count still stands, that is this is the top of a wave 2 of 3. 3 of 3 is about to start. Apart from the price itself, the structure definitely supports this view. So does, of course, the fact that only the Dow has managed to retrace, for practical purposes, 100% of the preceding drop. No other index comes even close. One has to be careful not to embrace conspiracy theories too readily, but the simple fact that the Fed would announce the extra year of ultra low rates and think out loud about QE3 exactly at such a critical point, in the absence of any fundamental reasons, makes you wonder.
DJI, Dow Jones
The Dow Jones is the most watched index, it is also the most manipulated. It is now threatening to make a new high as it is only a hundred points away from the may highs of last year. Much of this thanks to the Fed. that announced an additional year to late 2014 of these very low rates and expressed a more open mindset towards other stimulative measures to help growth. The Dow is now close to its all time high of 14000+ in late 2007. No other index has accomplished this miracle. Is the Fed targeting the stock market and creating the next bubble? It is hard to judge what all this means, but it is certainly good to remember that the Dow, now more than a hundred years old, contains only one single stock General Electric from the early days and that one is trading at 1/3 of its high.
EXC, Exelon Corp.
EW provides you with a green, red or amber light. They do not occur in the same proportions. Most often the light is amber meaning that there is no clear-cut predictive value flowing from the EW analysis. That is not a problem since you simple move on to a stock that does present a clear picture, but that approach does not work if someone asks you about a specific stock! That is the case with EXC, this is a utility, mostly electric but also in the gas distribution business. It operates in the Mid-West (HQ in Chicago) and is the largest operator of nuclear power stations. So right of the bat, utility=good and nuclear=bad, the yin and yang of investing. So going straight to the charts this is what we have;
The charts are the same stock over the same time period. The one on the left is arithmetic and the one on the right logarithmic. Arithmetic charts have a tendency to exaggerate the rise of a stock as it follows a parabolic line. The log chart, despite being less commonly used, actually gives a much better proportionate presentation of what is going on. With only the chart on the left, the prediction that this stock may drop to $20 seems preposterous. On the right chart it actually seems to fit nicely. Now the short-term chart;
This looks a bit like MSFT, Microsoft. My best guess at this point is that we are in a triangle wave B, the A was the big drop from $90 to $34. The B will rotate a little longer around $41 and then wave C will drop to $20 (or lower). One could buy the stock here waiting for the e wave to form. You could get lucky and the stock just keeps going, negating the bearish outlook. The only certain thing is that a stop loss should be used at $38.
By the way, regression to the mean alone would bring this stock close o the $20 level.