Sunday, March 20, 2016

Follow the Bellwethers:

During the later stages of a long bull market – investors can get confused and begin to engage in market timing or over-trading. The best approach would be to understand the longer term structure of the great 2009 – 2016 advance in the major global stock markets. If we apply long term analysis to market bellwethers we can better identify our current location within the great 2009 – 2016 advance.     

The term Bellwether – was derived from the Middle English Bellwether which refers to the practice of placing a bell around the neck of a castrated ram – (a wether) in order that this animal might lead its flock of sheep.

US Bellwether - Berkshire Hathaway Inc. Cl B (BRK.B) is a conglomerate holding company owning subsidiaries engaged in a number of business activities and basically a proxy for the world’s largest economy.

Canadian Bellwether - Brookfield Asset Management Inc. (BAM.a) s an alternative asset management company focused on property, renewable energy, infrastructure and private equity and also a proxy for the world’s largest economy.

Our long term plot of BAM.a displays the Elliott Wave structure of the great advance the began from the lows of 2009 – the count being three advancing waves (1,3,5) separated by two corrective waves (2,4)

The first advancing wave (1) originated from the lows of 2009 and peaked in early 2011- this was a rebound bull that typically occurs after a crisis bear such as the 2007-2008 global financial crisis. The first corrective wave (2) occurred in 2011..

The second advancing wave (3) originated from the bear market lows of late 2011 and peaked in late 2014 – followed by the second corrective wave (4) that persisted though 2015 and into early 2016. Advancing wave (3) will contain the “recognition point” which is signalled when the price advances above the peak if wave (!).

If we get a typical Elliott Wave count - then a third and final advancing wave (5) to new highs, should follow the current 2015 – 2016 corrective wave (4) and persist through 2016

Monday, March 14, 2016

Lumber is a Dominant Theme:

The price of lumber is lagging the broader commodity complex by about eight years having posted a 25-year low in late 2008. The prime lumber drivers are the U.S. housing recovery and various natural disasters about the globe such as the 2011 Japan tsunami and the recent hurricane Sandy.

Random Length Lumber Futures are traded on the Chicago Mercantile Exchange. Each contract is for 110,000 board feet (260 cubic meters). Prices are quoted in Dollars per 1,000 board feet (mbf). To participate in lumber’s advance most investors are better served by investing in the lumber stocks – most good advisers know their names.

Outlook: Our relative performance study clearly displays the lumber out perform vs. a broad commodity basket form 2009 to date – also note the long series of bullish higher lows