Russell 2000 index, DJIA

Hamilton

 

 

This is the Russell 2000 small cap index. It is a very broad index and as such it should probable “represent” the US economy the best, assuming of course that stocks actually represent anything at all. I have left the chart blank as it illustrates very well how the recovery rally from the March 2009 lows is, at least to date, clearly and unequivocally a 3-wave affair and therefore a correction. What is equally clear is that the correction did not stop (as expected) at 50/62% and instead, like the energy bunny just kept going and going and is now at the double top level. A count could look like this;

Rus apr 2011

In this count the actual top would have been in early 2008 from where the index started a huge “flat”, A-B-C where the A was the great recession, the B the even greater recovery and the C has yet to come , but most certainly promises to be the greatest disappointment as it should drop below the March 2009 lows. This interpretation assumes that the tech drop in 2000 is unrelated to the recent calamity.

A different count has been offered by another practitioner of EW as per the chart below;

RUT april 2011

In this particular approach the last 10+ years were spent tracing out a single pattern, variously called the “Jaws of death” a “megaphone” and other descriptive  names. The only pattern within the EW orthodox repertoire that remotely resembles this one , would be the expanding triangle wave 4. At a later stage concessions were made by some (Neely) to allow for an upward sloping lower boundary as in a running triangle. What argues against this is the clear B-wave, which is clearly NOT a 5th wave!. In any case the difference is academic for the next big move. In both cases we could, but do not need to, go higher to the upper trend-line at about 900 and then we should drop like a stone.

These , and two other counts are compressed in the chart of the DJIA below. With only one unlikely exception (if we are in a new bull market) every count points down even if there is a little room for more upside.

DJIA Apr 2011

IVN , Ivanhoe

Hamilton

 ivn sept 24 2010 ivn apr 2011

We have liked this stock a lot (see previous blogs) over the past few years, that is until Sept.  last year when it looked as if the stock might have completed a 5 wave move up (see chart on the left). However, the stock did not proceed down, rather it consolidated over an extended period of time suggesting that it may, just like copper, be forming a triangle which is now all but complete. If correct the stock could climb another $8 or so. The 5 wave must be wrong but this could be accommodated by assuming a set of 1-2, 1-2 at the bottom. A stop at about $22 is highly recommended as a break-down remains a distinct possibility. Oddly enough this company may ultimately become its own undoing as its size is such that it could swamp the market with copper once it is on stream.

Both the RSI and MACD continue in negative territory.

We first recommended the stock at $6/7, see below;

IVN March 31

Copper (the metal)

Hamilton

copper kitco 5 copper kitco 1y

Copper has the reputation of being well correlated with what is happening in the economy and has been given a honorary PHD for that. I doubt that it is that smart, after all it fell from roughly $4000 to $1000 during the great recession, or 3/4, more than most other things. Also, China did not miss a beat and that is where supposedly so much of the demand is coming from. Anyway, looking at the 5 year chart (Kitco’s the best I could find), the metal is NOT in a bull market as, to date at least, the up move since the lows is too bullish to be a bull market and furthermore it does not have any of the required subdivisions. It is instead most certainly a B-wave, one that is complete already or one that is presently completing a triangle (4th wave, always). Cannot be certain at this point but once the triangle and the thrust from it are complete this metal should drop at least by half if not a lot more.

Here is the triangle in more detail:

$copper

C could already be over but as this is usually the most complex leg in the triangle may still need another leg. Then d and e to follow. The thrust should be good for about $50.

RDS.a Royal Dutch Shell

Hamilton

Last November we looked at Royal Dutch to see what could be inferred from that for oil and the energy sector as a whole. So many companies displayed B-waves so it was only logical to assume that Shell was doing something similar. At the time that made our (incorrect)assumption that oil would peak around $104/5 rather plausible. Here is that chart;

rds nov 2010 2

The chart calls for a peak at about $75 for Shell. In the meantime ( about 6 months ) that is precisely where we are.

rds.a march 2011

Here we are at $75/76 with a nice wedge (green) to finish it off. This completes C and with that presumable the entire correction from march 2009.