Sunday, January 30, 2011

The A-B-C Correction

The A-B-C correction is an Elliott Wave pattern that follows a 5-wave Elliott Wave advance – to simplify we get three legs up and two legs down. The A-B-C correction can vary in structure with some flat and others deep and nasty. The correction will usually begin at the peak of the 50-day moving average with the A wave down breaking under the 50 and stopping at support at the 200 day MA. The subsequent recovery B wave fails to make a new high (swing failure) and the following down C wave breaks under support at the 200 day MA and the selling can get nasty 

Forget about that 50 and 200 day crossover stuff with the golden cross being a bullish signal where the shorter 50 day moving average moves above the longer 200 day moving average. This is the opposite of the death cross - a signal where the shorter moving average moves below the longer moving average. By the time the “cross” occurs the move is almost over!    

Currently a number of important stock groups and indices are completing the B recovery wave and setting the beginning of a C wave – once again I don’t have access to my own charting software so I have to poach from but we can see the daily Dow Transports just beginning the C wave at the 50 day MA and that 200 day at 5056 is a long way down

Sunday, January 23, 2011

Money to Burn

The first time I met Charlie Tango was back in January 2006 when I picked up a mooring while skipping a Beneteau 37 out of St. Vincent WI. Yesterday Charlie and I met again but this time I was skipping a 10’ Sunfish out of Young Island – I told Charlie I was using restraint in view of the recent Global Financial Crisis

It only takes a few days in St. Vincent and her islands of Bequia, Canouan, Mustique & Mayreau to ask: crisis what crisis? A new high speed ferry, new airports, more cars, more smart phones, massive hotel and housing projects and of course karaoke bars everywhere. Inflation is getting to be a problem – the price of Sunset Aged Premium Rum is now $24 (EC) up from $12 only two years ago. The local currency is weak but the locals don’t care because they never hold it preferring to own “stuff” like cars, houses, sail boats and small business enterprises.

Next week I will return to my reality of volatile weather and volatile stock markets. I see the Getting Technical Q1 selections are flat vs. a loss of 1.4% for the TSX Comp. The Getting Technical Focus list is up 3.5% over the same time period. The biggest winners are Viterra +22%, Onex & CAE +7% and the iShares Energy up 4.8% One big loser was the iShares Global Gold down 4.5% I don’t have access to my own charting software so I have to poach from – but we can see the weekly on CAE probably too far above the 40-week but the relative vs. the S&P500 is once again turning higher – this is a stock picker’s market

Wednesday, January 5, 2011

Cheeseburgers, KFC & Copper

No doubt we have to credit the Chinese growth story for the big 2010 gains in the North American stock markets. The broadest measure of U.S. equities, the Dow Jones Total Stock Market Index (formerly the Wilshire 5000) gained 15.34% in 2010, or approximately $2.3 trillion in market capitalization. The index has gained 44.99% since 2008. Most notable was the index gain of 23.35% during the third and fourth quarters.

Investors in the commodity space were the big winners with the price of crude, gold, silver, cotton, copper, uranium and potash all soaring in response to the China story.

Our chart displays two direct beneficiaries of the China story – the big fast food players McDonalds (MCD) and YUM Brands (YUM). Look at the price action over the past several weeks – down is the face of a late December rally the took most of the broader stock indices to 52-week highs. Clearly these Chinese consumer bellwethers are predicting a Chinese slowdown – if you love the copper / Chinese story MCD & YUM may give you indigestion.