HXU

HXU update, TSX

Hamilton

HXU han 8 2015 s

This was our take on the HXU back on January the 8th. We do not take credit for being prescient as, frankly, we had a hard time believing it. We show it anyway for the benefit of EW in general, that it does actually have predictive powers. Below is where we are today;

hxu april 20 2015 1HXU april 20 2015 2

We show two charts, not because my readers are elderly, but because there are two, distinct possibilities. First that there was indeed a triangle, on the right, and that the thrust out still has a few dollars to go to get to the approximate $8 the triangle measures at the mouth, that is about $34 which is also a double-top level going back to early 2008. Secondly, that there never was a triangle, just an irregular wave 4 and since then we have been working our way up in a diagonal or wedge. Both scenarios allow for slightly higher levels but given the RSI and MACD I would not hold my breath. Note , by the way, that the suggested timing for a top is, ideally, about 4 months into this year. If you did, albeit by accident, followed the prediction verbatim you will have gained $31.25 – $25.50 = $5.75 , or about 25% if you wait a little longer. Soon it will be time to buy the HXD!

The TSX can accommodate both the above scenarios. It is no more than a good days trading away from double topping.

TSX april 20 2015

HXU update and HXD

Hamilton

The usual then – Jan 14, 2015 – and now charts;

HXU jan 14 2015HXU feb 13 2015

We strained to believe it but the triangle was unmistakeable (as it was in so many other places) that it could not be ignored. In case you did heed the advice you could have owned this at about $26. We would sell today for a small profit of about 16% for the month. The very simple reason is that despite the very clear possibility of this ETF going to $34, we recognize that there is a possibility that there never was a triangle. The first leg down, the a leg, always looked more like a 5-wave affair than 3 waves. That is a no no in a triangle. From that low point in October we could have been doing a simple a-b-c (in black) counter trend bounce. This will be negated at around $31.30 , so less than a dollar away, but in the mean time this is a big risk for an investment that goes against the grain in any event.

A look at the counterpart, the HXD makes the above all the more plausible;

HXD feb 13 2015

Essentially this is, of course, the inverse of the HXU. Here we have a similar triangle which is probable a valid interpretation as this ETF actually already has made a new low. The last leg down, moreover, very much resembles a wedge. RSI and MACD are turning so this might be a very good thing to buy now. The extra charming attribute is that the HXD is relatively immune to a further rise in the TSX if that unexpectedly were to occur.

HXU update

Hamilton

hxu jan 22 2015 up 1HXU Jan 22 2015 up 2HXU jan 22 2015 d

We pointed out not too long ago that there was, perhaps, a triangle forming in the HXU and if there was, it would almost certainly have to be a 4th wave. We did say that we would be at a loss to explain what would cause such a move. Well we know now as the governor explained that this was the time to move (first time since Sept. 2010) to lower interest rates by a quarter to 75 basis points. Ostensible this was because the increased risk resulting from the oil price collapse. No sane person understands how 1/4% will realistically change anything and when asked, neither the governor or the deputy cared to concede that this action might have the opposite effect as the message clearly is that things are a lot worse than they were thought to be any time over the preceding 3 to 4 years. Apparently market psychology in Canada is irrelevant.

    Then Draghi comes through with his trillion and a half Euro purchase of bonds from the member states. He was no doubt moved by events in Canada that showed that expecting unexpected events is an art in its infancy, at least among economists, not a single one of which had anticipated anything of the sort. Whatever, these two circumstances are good for about 500 points on the TSX.

   The HXU moved as expected. The question now is, 1. are we in the thrust up. 2. Is the triangle not yet complete, or 3. could we be looking at a series of 1-2’s that are the beginnings of a big bear market. We have absolutely no idea but at least you can tell from the above 3 charts when these 3 possibilities will be eliminated.

HXU update

Hamilton

HXU jan 14 2015

Hard to believe but here it is. Wave e does not have to reach the trend line and it may exceed it provided it does not go beyond the low of wave c. We struggle to believe the implications but there can be little question that this could indeed be a triangle.