S&P, DAX and the FTSE Athens top 20

August 2, 2011August 2, 2011 Hamilton

The top chart is of the S&P, the one below of the Frankfurt DAX and below that the FTSE Athens top 20. During the fall the S&P lost exactly 50% of its value. The DAX lost 69% and the Athens top 20, 76% Not precisely the same but in the same order of magnitude. Interestingly every single wiggle occurs in all three charts. This relationship holds for the first half of the rebound, then Athens goes its own way. Is it perhaps telling us something??

The SPX and the DAX continue listening to the same drummer except that the DAX is more robust. So far it easily exceeded the B-wave point on the way down, whereas the SPX has failed to make that high. Concerning the structure, both are undoubtedly working their way up in an A-B-C correction, that is a counter-trend move. In terms of symmetry, both could still forge their way up to the green circle; Athens is obviously complete and perfectly symmetrical. The SPX still has the time and could have one more spurt, perhaps as a thrust from a triangle. That is less likely with the DAX, which has decidedly broken a trend-line and there is no time left and there is no (finished) triangle. Also it would have to regain all the losses which i consider a fairly tall order. ( By the way, the difference in the red and green circles reflects how the individual A and C legs , and the “pause”in the middle are counted ).

Athens is a clear train wreck, and both the SPX and the DAX have outperformed to some degree. Many other markets have been far less robust. Normally one would expect a retracement in the order of 50/62%. The STOXX 50 may represent what is normal best. Here is it’s chart.

The yellow area represents the 50 to 62% range. Here too the circle is drawn with a view towards symmetry for the entire corrective structure, it does not show all points where C=A. Here the high occurred 5 months ago in March, which , by the way, was anticipated!

The 76% retracement is wrongly calculated due to the fact that the chart did not show the top near 4000. The blog can be referenced by going to the March 5th entry, or searching STOXX50.

TKR, Timken and SKF

July 31, 2011 Hamilton

Just for comparison purposes I took a peak at that other ball bearing manufacturer on this side of the pond, Timken. Here are both TKR and SKF. Click on them to enlarge and you can move them around as well.

The timeframes are not exactly the same, the SKF one is about 3 years shorter, but by shifting them around you can better compare them anyway.

Both have been on a roll , so to speak : Timken a little more robust than SKF. Both look like they will get a thorough thrashing soon. An old Mercedes-Benz diesel that I once had , used Timken bearings in the rear axel, not SKF’s which I found rather surprising. It was second hand so perhaps it was not original equipment. In any case both stocks are clearly listening to the same drummer.

Nasdaq ($NDX)

July 31, 2011July 31, 2011 Hamilton

As my rumblings re. the QQQ may not have had the clarity that I had hoped, here is essentially a repeat using the Nasdaq Index by way of the NDX. First the big picture;

This shows the Nasdaq from the lows in November of 2008 to the present. The idea here is that we are looking at an A-B-C corrective (or counter-trend) rally. A (vector ) equality is by no means a requirement but it certainly adds credibility to any conclusion. What we do not know is which low was the real one in E-terms, Nov. ‘08 or, as in most of the universe, March ‘09. We also do not know is there actually was a triangle as a B-wave in the middle or something smaller and more abrupt. Consequently there are two tops for A and two starting points for B. Stockcharts allows for an easy transfer of an arrow as a vector. As a result the above chart has all 8 possibilities for C being vector equal to A (two for each color, blue, brown, green and purple) The light green colored elliptical area more or less contains all 8 outcomes. The conclusion must therefore be that, provided that we are looking for vector equality, the Nasdaq must go higher. Again equality is nice but not at all required.

Furthermore, given the length already travelled and the tendency towards alternation, it makes a lot of sense to assume that the messy action for the past six months is a (irregular) flat or a triangle, both of which are sideways moves. This is shown in detail below;

In the above chart there are 4 completed waves, all of which could be 3-wave structure. The first most definitely is, the second likely is, but the third is touch and go. The fourth is most likely not a 3-wave structure. Supposing the all were subdivided in 3-waves than a fifth wave e would be required to complete the (expanding) triangle pattern. Only then can the “thrust” up take place. This possibility seems totally at odds with the deficit nonsense now going on in the US, at least in the timing. The other choice is that the flat was in fact complete at point e, and that we are already in the 5th wave up. It may even be complete as is. If not we are in 4 of 5 with 5 starting any moment (see blue arrow) or again forming a small triangle to kill time and then completing the 5th of 5 (second blue arrow). This should not stretch the process more than a week or so.

The ultimate high should not be much more than 200 points higher than the present level. Wave 3 of 5 is about 200 points in length, with 1 a lot shorter. Usually, though not always, 5 would then be shorter than 3 so the top would then occur somewhere below 2560. That level corresponds well with the lower range of the green ellipse .

It is good to keep in mind that there are other possibilities not discussed here, and also that the top may already be in. Symmetry is not an EW attribute , the Nasdaq obviously does not represent the markets at large and both the RSI and the MACD already look as sick as a dog. Time will tell.

UN, Unilever

July 31, 2011July 31, 2011 Hamilton

Unilever is a little like the United Nations, it has operations in just as many countries and it’s businesses vary from margarine to detergents, cosmetics and toothpastes. Its employees are truly multi-national coming from all corners of the world. Unlike the UN, it is not run by a bunch of political hacks that can hardly be distinguished from common crooks. It is therefore a truly global institution in a , for the most part, non-cyclical business. If there are still blue-chips this one certainly fits the bill. It is also one of the few, Shell being the other, world concerns that have endured despite a dual cultural and linguistic history. Here are the charts;

(see also a previous blog!, that fairly accurately predicted events to date) This stock has a p/e in the high 15 and earns about 1.3%. The lines drawn are not channel lines, they simple serve the purpose of illustrating between what points most of the trading on this stock occurs. Forget about EW and intuitively I should think that it is rather evident that you might want to buy this stock near the lower line which it has touched at least 9x, only once , very briefly, going through it by a miniscule margin. When the stock gets above the upper line, a relatively rare occurrence , only 3 x so far, it never stays there very long and then invariable drops right back al the way to the bottom line. The stock is presently well above the line and no sane person should hold the stock! Unless, of course, the perception is that there is no where else to go.

From an EW point of view there is every reason to assume that in the next downdraft the bottom line will NOT hold. There is a “flat” forming with waves A and B complete , or nearly so. C may well have started already and targets +/- $17. The only question now is , is the wedge complete? See below;

Wedges are very accurate patterns but the also have a tendency to fool you by going one level further, but probable the peak is in. In any case the RSI and MACD are warning that a turn is due.

As the previous blog was not coded it cannot be found, so I have repeated those charts below;

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