RL, Polo Ralph Lauren Corp.

Hamilton

Some luxury goods sell more at a higher price. They are called Veblen goods after one Thorstein Veblen who first pioneered this perverse phenomenon  of conspicuous consumption and status-seeking. Incidentally stocks arguable belong to this category as well. If you recently tried to get a team of polo players together for a Saturday afternoon game, you will know what I am getting at. Here are the charts:

rl big

rl middle rl small

From big to small. The big picture is telling, there is no overlap of waves 4 and 2, they almost touch at about $30. Wave 4 is a text-book a-b-c, where the c = a. Wave 5 has a “throw-over” , that is it moves beyond the upper channel trend-line.

Mid-term the stock channels well, even if the count is not completely clear. It could have a series of 1-2’s at the start and hence should have a similar series of 4-5’s at the end. Even without that it is relatively easy to construct a 5-wave sequence up.

The short-term chart is the most ambiguous. The best count would be a wave 4 expanding triangle (a.k.a a megaphone), followed by said 4-5’s. Alternatively a wedge is forming that would allow for one more minor 5th wave that should itself unfold as a 3-wave structure. This could , repeat could, take the stock to about $170.

Either way the next big move is down to about $105 (4th wave of previous degree or base of wedge). After that possibly to wave 4 of the entire thing (at $30). It might get increasingly difficult to get that game going as more and more players lose their shirt. This is definitely a short, either now or at $170 if you want to play it safe.

RUT, Russell 2000 small cap index

Hamilton

Rut nov 2011

For the Big Picture, the Russell 2000 is as good as any. The pattern , of course, is identical to that of the DAX, AEX, FTSE , and half a dozen others. It is different from the SMI or the TSX but nevertheless gives a good roadmap for the world stock markets overall. The 5 waves down is relatively clear and the a-b-c correction back up for wave 2 even clearer. The a-b-c is well formed and retraces about 62% ending just slightly above a wave 4 of previous degree. The speed is a little off but as long as adults engage in games of sophistry , arguing whether or not a voluntary default is a default, anything is possible.  The most reasonable take on this is that we will soon be in wave 3 down, that is when things get serious.

RY, Royal , Canada’s second largest bank, update. BNS

Hamilton

ry nov 10 2011

In the end we actually got the expected $5 rebound, but by tripping over our own feet in trying to execute on that. Anyway, this is where we are now. The stock has dropped back to about $45 and is bouncing off the upper channel line of 7 or so months. The move from the lows might include a minor failed 5th wave, leaving a clear a-b-c. Whatever the case, it is not an impulsive move. It could be just the A of a larger A-B-C that will be more complex but nevertheless still a correction ( in grey ). Alternatively a triangle wave 4 (in blue) could be in the making. This too will kill time and will limit the upside to $50 maximum. Either way you should be able to buy this stock cheaper, perhaps much cheaper.

Looking at the Bank of Nova Scotia a more complex correction seems to fit best;

BNS nov 2011

It looks like we are doing a small triangle wave b of an a-b-c wave 2 correction that could potentially take the stock to about $55. Then wave 3 down starts!

IVN, Ivanhoe, update

Hamilton

Back on Oct. 6 we commented that we were fundamentally bullish on this stock but were not sure about the count. $23 was mentioned as a “critical” level . Here is that chart;

ivn oct 6 2011

The stock has obliged so far, moving up a lot faster than expected but otherwise following the script. Here is today’s chart;

ivn nov 2011

The problem is that the move from $13 to $23 is pretty well a clean a-b-c, in other words corrective. This could still become a 5-wave move over time , but right now  it does not look as if it will. Stepping aside or using a tight stop is advisable. By the way , even if this becomes a 5-wave initial bull wave, you will probable revisit the $23 to $19 range in any case!