CMI, Cummings update

The usual then, June 15, 2014 and now charts;

CMI june 15 2014cmi dec 26 2015

See our blogs on this stock. We were targeting about $80 for the first drop, either a wave 1 or a first zig-zag of a double zig-zag as shown in the chart. The high was about $160, $159.06 to be precise on June 6th, a week earlier, but could have gone a little further to about $170. After that the stock went down rapidly to its first target of roughly $80, just about 50%. We expect a rebound from these levels after which the decline might continue to become more complex.

Diesel engines are nothing new even though there have been great improvements recently, particularly with regard to the injection systems and so on (see Borg Warmer, BWA). There is a high correlation between sales of heavy duty diesel machinery and farm income which is down by about 38% from the recent peak, so this kind of performance should be anticipated over a broader spectrum to include John Deere (DE), CAT, Kubota etc. etc. Most have yet to catch up with Cummings.

CMI, Cummings update

See our most recent blog. Today we are roughly twenty dollars lower!

cmi aug 2 2014

All this could also be a “wedge” 5th wave. Already ( on the semi-log chart!)we have a break of the lower trendline. Insignificant at this point but if it gets bigger from here it certainly starts to look very bad. The initial target, as always is at the base, in this case around $80 which would constitute a 50% drop from the peak. The question really is not why this might happen. It is more why did this Diesel engine maker ever get to $161.

DE, John Deere update

de march 9 2013 b

How many lawnmowers do we really need? Well 25 or so years would suggest just as many as is required to keep the stock in this well articulated channel that has been in existence for all of this company’s lifetime. Things change courtesy Greenspan cheap money etc. and all of a sudden , starting in 2006, we all take up the weekend sport of mowing the lawn with a vengeance. Even the Chinese are attracted to this levelling approach to nature despite the lack of lawns on the x-floor of an apartment building. The stock shoots up, tumbles, and shoots up again, proving once again that central banker’s main purpose is to create waves. These ups and downs could be an A and a B and now C is developing, or,  a 4 and 5 and now a 1 of a correction. Either way the stock should work it’s way towards the $30 to $45 level in order to return to the channel, regression to the mean! In our previous blog (Oct.27, 2012) we suggested that in the bear case the stock could still rise to $95 to complete a wave 2 on the way down. Now 4 months later we have this;

de march 9 2013 s

Clearly the prediction was dead wrong. The stock went to $95.60!, leaving just 33 cents of leeway before invalidating this prediction entirely. As it stands things are still going to plan, in fact the little c of the a –b –c counter-trend wave 2 , is a classic example of a wedge (diagonal for EWers). Since the top at $95.60 the stock has, presumable, traced out another wave 1 and 2 (of different degree) and next we should have a 3 etc. and that is usually where the fun starts. This stock, by the way, speaks volumes on the efficacy of the many QE’s, Twists, arm twisting etc. etc. that the central bankers have engaged in. All that and still 30 cents short. A sell of course.

CAT and CMI are in slightly different positions, the 4-5 alternative being the most probable, but otherwise the counts are similar and the expected downward move of similar proportions. See CAT and CMI below, no lawnmowers buy a lot of mining/farming equipment etc.

CAT march 8 2013cmi marck 8 2013