DE, John Deere

Hamilton

Nothing runs like this, both up and down;

de oct 7 2011 de oct 7 s 2011

The faster things go up, the faster they come down. DE is one of the few stocks that has a fairly clear count;  a single top that makes sense, then a first 5-down and a-b-c retracement of about 50% for a wave 2, and then 5-down with a nice gap for wave 1 of 3. A little higher for wave 2 of 3 and then the real action starts as we go into 3 of 3. The first target is around $47 and then on to new lows. . The alternate, unfortunately there is still an alternate, however with very low probability, is that all of this is wave 1 and we are presently in the process of doing 2 with quite a bit still to go. The stock was down roughly 42%.

How can this be possible? Move to the country and you will learn that just about every farmer nowadays owns two or three of these machines. They cost roughly anywhere between $25k and $150k , depending on horsepower etc. With loaders, gps, air-conditioning the price can go higher. These things, mostly diesels, last a life-time with a little proper care. Ergo, there is hardly ever a true need to buy a new one. When they are bought it is invariable as a want,  not a need. Farmers love their toys just as stock-brokers love their BMWs, the difference is that the BMW depreciates fast, the tractor does not. This is consequently a very discretionary purchase and demand can literally collapse for years. DE has gone through one of these cycles in the past.

COS update.

Hamilton

cos oct 6 2011 cos oct 6 s 2011

Best guess is that we just completed an expanding wedge wave 5 of 3, which should be retraced entirely, so back to $24, but after that it should be down again. Keep an eye on oil, if it gets well under $65/$60 it could accelerate down as a result of stranded capital investments.

TSX update

Hamilton

On the 26 of August, about 2 months ago this was my expectation with regard to the TSX;

TSX 26 aug 2011

One of my better charts, I think, with the A-B-C B-wave loud and clear in this stylized format. That, as it happens also puts an initial low very near the 10700 level where 62% of the entire correction will itself be corrected. Notice that we did and are doing pretty well exactly as expected, except that wave 4 is sharper to the upside having already regained about 800 points in just a few days. It could have another two days of 300 points to get to 12200 or so for wave 4.Time will tell. In the meantime here are some updated charts of the TSX and the XIU (the same thing in a slightly different format);

tsx oct 6 2011 xiu oct 6 2011

Rather than two 1-2 to start , as in the top chart, I have used three, so the pattern becomes 1-2,1-2,1-2,3-4-5,4-5,4-5. using the first top which is actually higher by 4 and 1 point respectively. It is actually possible to add even a fourth 1-2. What speaks for the first top is that the entire drop so far is perfectly contained within a channel. It is possible that there is one too many 1-2 as well, but even then we need a fifth down to complete the entire thing. If we get to 12200 or a little under that it would be a fairly fast move of more than 1000 points. In all probability this would be wave A of a triangle (all waves 2 are zig-zags) so I would look for alternation. We will see.

IVN, Ivanhoe

Hamilton

ivn oct 2011

This one certainly did not stick to the script as tightly as one might expect, but not too many alternatives are available. It went right down to the max. of $13 but now seems poised to go higher with new agreements between the Chinese ( Mongolian) government, Rio Tinto etc. etc. See previous blogs. To some extent this mine should be quite insensitive to the price of copper itself, it is that big and the costs are that low.

The alternative,with low probability, would be consistent with the TSX as a whole and would consist of a series of 1-2 (with irregular corrections as wave 2). In that scenario the stock should not trade above $23 (overlap).