RIO, RIO Tinto Plc.

Hamilton

Rio Yahoo

This is Mnt. Everest plus $20. You must have a near religious conviction in the China story not to feel a bit uncomfortable with this stock, which is perhaps why they never show longer term charts on BNN or CNBC. This is a standard Yahoo chart but I have added one straight line through the whole thing which, very roughly, represents where the pendulum will swing to when we regress to the mean, and, invariable overshoot to the other side – first $30 and then maybe $20? Looking at the short-term charts, this is not that farfetched ;

RIO mRIO -s

My guess is that we are in a 4th wave, that may or may not develop as a triangle, to be followed by a 5th down. In commodities, as is clearly apparent from the big chart above, 5th waves often exceed all others either to the upside or downside. Alternatively we might just be in wave 4 of 3 but then we should drop almost immediately. However you slice it, it should continue down.

TM, Toyota.

Hamilton

Back in March we thought this was a good sell (see previous blogs). It followed the script perfectly. Just the other day the company announced that profits would essentially drop by half as the result of flooding in Thailand that reduced the sales of cars by about 250,000 units and by the strength of the Yen which the company says must be above 90 against the US dollar to stay profitable.

Toyota Motor Corp. ADS, TM Advanced Chart - (NYSE) TM, Toyota Motor CorpTM dec 10 2011

The stock should move below $40. It is not exactly clear how it will do this but at this time it looks like the stock is forming an irregular flat wave 4. It may not go above $75 or that scenario would be negated. This is actually a nice trade as you only have $7 or so to the upside and at least 4x as much to the downside.

ABB,Asea Brown Boveri, update

Hamilton

ABB LtdlABB -m

ABB - s

We hit the nail on the head with this one (see previous blogs). The question today is where are we in the bigger scheme of things? The drop from the top of a large B-wave appears to be 5-waves. Normally, if there is such a thing nowadays, 5-waves define the direction of the main trend – in this case down – and completes the first leg (wave 1) which should then be retraced (wave 2). Typically waves 2 retrace a good part of wave 1 (62% or more) and go at least to the level of wave 4 of previous degree. Furthermore, this should take about 1/2 the time it took to go down!  Therefore, even though wave a could be all of wave 2, it is after all a three-wave structure, it is highly unlikely to be complete as neither the distance or the time criterion have been met. Add to that that wave b is also a three wave structure, it is reasonable to assume that we are in a wave c, which must be a 5-wave structure and can easily reach the $21/$22 level or even higher. After that the outlook remains decidedly bearish!

MS, Morgan Stanley, remain constructive!

Hamilton

ms dec 7 2011

See our previous blogs on this one.

We tried buying at the lows but missed that opportunity. We got close to that point a second time but did not pay much attention. Now there are 2 possibilities. We are making a triangle and will drop like a stone, or we are still in a large “flat”and still have a ways to go to the upside. In my view the first possibility is highly unlikely as it looks like 5 waves were complete and you are so close to rock bottom that plunging now does not make much sense. So I will definitely go for the bull side but do use a stop-loss limit around $13.

A third possibility is that we do actually get a triangle but as a b-wave, that would delay the upward move but would not change the target all that much. By the way, GS is pretty well identical but at a much higher level, so more risky.

Morgan Stanley is, of course, an offspring of the house of JP Moran and Glass-Steagall, one could not possible hope for a better parent than what was then virtually (in the old sense) the Central Bank of the USA. As mentioned earlier, even Bear Sterns ultimately went for $10.