CNQ, Canadian National Resources.

Hamilton

cnq b cnq m

CNQ is like so many others, except a little clearer even. You have to look at the chart and then it is not that difficult to conclude that , if this stock were actually to regress to the mean, it could easily make it to $10 . In fact, it is not far-fetched at all as regressing to the mean is as normal as the sun rising in the morning.

In EW terms it gets pretty compelling. The rally after the lows of March is ,without a doubt, an A-B-C shown in a stylized way to make the point. It has given back almost 40% of its value and about 60% of the rally. It may go a little lower just to get to the B-wave level but should get a solid bounce soon (decent here means almost $10). Then the regression will continue! A sell at $41 if it gets there!

IYR, iShares DJ US Real Estate Index Fund

Hamilton

This fund or ETF seeks quote – investment results that correspond generally to the price and yield performance, before fees and expenses, to the performance of the real estate sector of the US equity market, as represented by the Dow Jones US Real Estate Index – unquote. There are 84 components in this index, mostly REITs. Here is the chart:

iyr

This “picture” should be a familiar one. This iShare only came into existence in 2000 so the chart covers less time than usual. The explosive run-up into the $95 high is pretty standard. The drop down to $21 or so a little more than standard, but the structure is a very nice A-B-C. That could be all of the correction were it not that the rally from there has an identical A-B-C, or corrective structure. It follows then that at the very least the rally should become more complex, this being just the first large leg, or we go to levels below the $21 low. Either way we will go to about $43 as a minimum, the start of a wedge wave C. Notice that the volume rises as the ETF trades down and v.v. According to Bigcharts short interest on this ETF is running at 87.18% an unheard of high percentage. The shorts are mostly smarter than the longs so this does not bode well for the immediate future.

In Canada real estate is immune to what happens in the world. Even so one has to wonder how anyone can live in Vancouver. According to RBC it now takes 92.5% of pretax household income to pay for the average house. As income taxes are around 20% or so the new homeowner can forget about eating or anything else. In Toronto it is a mere 51.9% so you might still be able to eat, but that is about it. Interest rates better not go up!

DAX, Frankfurt

Hamilton

dax aug 20 2011

Just to make sure that my bullish comments are properly understood, I am bullish but only  for  five  hundred points or so. Next BIG move is still down, down a lot and this may only be the beginning. Cash at 0% might just be the bargain of the century.

CEF.A , Central Fund of Canada Cl A N.V.

Hamilton

cef.a

The Central Fund is a closed end quasi mutual  offshore fund incorporated under Dutch law. It has been around for a long time and is worth close to $7 bln. It is all about gold. Which is shown below by way of GLD;

gld aog 20 2011

The charts are over a comparable period but since the GLD has not been around that long it starts in ‘05. From that time gold is up about 4 to 5 times and so is the Central Fund. The GLD is worth about 76 bln, 10X larger. The correlation is obvious.

Both charts have triangles in them, presumable 4th waves as that is the only possibility, the question is just of what degree. Given the size, one or one and one half years in duration, I suspect that they are of the highest degree, which would imply that sometime in the not too distant future the stock/unit price should drop back to that level!!  This should happen once the 5th wave or “thrust” is complete, i.e. after again 5 waves (or 9, 13 etc). On the Central Fund 5 waves can easily be counted, and wave 5 is now precisely equal to waves 1 and 3 combined: on the GLD 9 (after the triangle) so both could be topping now.

One , according to Greenspan, cannot tell if there is a bubble and when it will end. That is the wrong question. All bubbles, once they burst invariable drop to below their respective starting points ergo by selling at any time during their existence you will be better off than holding forever. Furthermore there actually is a very easy way to tell if you are in bubble territory, when the angle of ascend reaches the vertical you are there. From the looks of GLD that is NOW. For reference purposes I have added the Nasdaq “tech” bubble below, notice that the proportions are about the same!;

Tech bubble

PS. Today the GLD ETF surpassed the SPY, which un till now has always been the largest and most active ETF as it represents the S&P 500. If bubbles are caused by the concentration of investable funds in a , usually, narrow asset class, this is it.