ewg

BNS update

Hamilton

The expectation                                                   and the reality.

bns june 5 2012 sbns june 12 2012

The triangle is not the most elegant one but  it will do. Need to complete wave e and then a drop to about $49 should occur. There it might be a buy for $3 or $4, a short-term trade. At $49, if it gets there , wave 1 of 3 of C would be complete. If you do the short–term trade be sure to exit in a timely fashion as the next wave down is probable wave 3 of 3 of C which is when things usually get decidedly nasty.

Other possibilities do exist, for instance this 3 month down move could conceivable be a B-wave, to be followed by a C up, before we go straight down. That would add 4/5 months of agony and is certainly not the preferred scenario. A more likely alternative is that we are forming a B-wave triangle in an a-b-c wave 2, as wave 1 is already complete. The stock could then move up to $54 before dropping, this would only take a couple of weeks. For those interested here is a previous example of the same set of choices, this time with EWG and we chose the wrong option;

The expectation                                                  and the reality.

ewg s jan 2012EWG JUNE 12 2012

In the end the EWG is still going down but an opportunity is missed and a lot of time goes by. CAE is another example, see that blog.

Germany IShares MSCI EWG

Hamilton

ewg jan 2012ewg s2 jan 2012

Germany keeps confusing, one day it has the lowest unemployment in 20 years and confidence is at its highest since whatever and the next day GDP goes from a healthy 3+ % to actually shrinking, albeit at a very small rate. There are also at least two dimensions, one political and the other economic and the undercurrents are very difficult to recognise. The charts should tell the story.

The DAX , as with the DJI, is not always the best index to make a point. Both contain the top 30 companies and their performance is far from average. Furthermore these indexes obviously attract those that may wish to influence the outcome. This is less so with the somewhat more obscure EWG IShare MSCI. You can click on the chart to enlarge them. At the risk of repeating myself ad nauseam , the B wave in the large chart is perfectly clear. This alone suggest a new low should be forthcoming. In the small chart, as in so many others, a triangle is clearly visible and complies with all the rules. The fact that it trades sideways out of the channel is perfectly normal. In this case the triangle must be a 4th wave as it is occurring in the C leg. The ideal target would be wave 4 of previous degree, about 8. The `normal` thrust from a triangle would get it to about 16-14, BUT it is not unusual for a 5th wave to cover the same distance as waves 1 through 3 combined, roughly 10 which would do the trick.

In terms of how far-fetched this prediction is, or how radical perhaps, note that if this does happen we will be back exactly where we were 10 years ago!

DAX, EWG and Siemens

Hamilton

Dax oct17 2011 ewg oct17 2011

si oct17 2011

The question is are we in wave 4 of 1, with 5 still to go to complete wave 1 (in black), or did we in fact already complete the entire wave 1 and are now in wave 2 (in blue)? Certainly the black interpretation is the more elegant one, but fortunately it does not matter all that much at this point as wave 3 was the lion’s share of the drop anyway so the proportion of either wave 4 of 1 or wave 2 are not that different. We have already retraced about 40% and are at a wave 4 level, a move to about 62% would not be negligible but certainly not tradeable for most of us. That is why we recommended getting out of longs the other day.

This market is like a casino and roulette is played without the numbers, just black and red and as a result it is a binary proposition, that cannot be controlled too well . This risk-on , risk-off  approach does not leave much for error. You should stay short for the next few months as this market has a long way to go. In terms getting short again , or more so, the 62% retracement level is as good a spot as any, but we may not even get there.