It could get bad if the Shanghai Composite Index cannot sustain the brief increase that it has experience since the August 26, 2015 low.
As we touched upon this topic on August 23, 2015, the next downside target could be a long way down from the current level at 1,722.12. If the current support level of 2,867.34 cannot be maintained then the only downside supports levels are 2,294.73 and 1,722.12.
It is clear that the commodity market is in the dumps. The chart below outlines the course of the Bloomberg Commodity Index since the July 2008 peak.
With the decline that has occurred in the index, it would be obvious to any long-term investor that there are values to be had. Yeah, there are risks but we’re investors not savers (anyone confused about the difference between saving and investing? Savers expect the money to be there no matter what, investors are taking the risk that more or less will be there, after the passage of time). One idea that we think is worth entertaining (or researching) is a stock that we’ve followed for many years.
According to Yahoo!Finance, “Dover Corporation manufactures and sells a range of equipment and components, specialty systems, and support services in the United States. The company operates in four segments: Energy, Engineered Systems, Fluids, and Refrigeration & Food Equipment. The Energy segment provides solutions and services for the production and processing of oil, natural gas liquids, and gas to drilling and production, bearings and compression, and automation end markets.”
The price of Dover Corp. (DOV) has declined by –32.46% since the early July 2014 peak. Looking at the stock, it appears that the downward spiral is locked in. The following are some thoughts about the stock.
It’s that time again. We’re going to see what the effectiveness of Gould’s Speed Resistance Lines (SRL) is in predicting the downside for Netflix (NFLX). But first we’re going to review the last time that we ran an SRL on Netflix. The very first time we ran numbers on NFLX was on December 3, 2010 when the stock was trading at the pre-split price of $185.45.
At the time, we were testing out the quality of Gould’s work. We came up with a conservative downside target of $117.76 and an extreme downside target of $68.63. The most challenging part of the assessment was the fact that Netflix increased +50% before achieving the first downside target.
A follow-up review of the SRL on Netflix was done on September 22, 2011 where we had the following to say:
“…in reviewing the chart pattern of Netflix (NFLX), we have the peak of NFLX at $298.73. The conservative estimate for the stock is that it would fall to $148 which has already taken place. The extreme downside target would be $99.58. Because of the nature of the rise, we believe that Netflix (NFLX) is slated to fall at least to the $99.58 level.”
At the time, we proposed that NFLX would decline at least -66% from the peak of $298.73. The actual decline was -79.89%. Will it happen again? We don’t know. However, if it does, there will be good buying opportunities ahead.
On May 20, 2014, we said the following about the Dow Jones Industrial Average Altimeter based on the work of Edson Gould:
“Currently, the Altimeter is closing in on the 2007 peak of 47.37. If the Dow were to attain the 47.37 level in the Altimeter, the index would sit at 17,062.67. There is no rule that says the Dow Industrials must stop at the prior turning point. However, our cautious nature instinctively pushes us to wonders if the run from the 2009 low is about to come to an end.”
Since that time, the Altimeter for the Dow peaked at 47.03 on March 2, 2015, just short of the 2007 level of 47.37, and has declined below the 32.05 support level. From a performance standpoint, the Dow Industrials has fallen -11.95% since March 2, 2015.
Naturally we can’t say that we predicted any of the changes in the market since May 2014. However, our primary goal is to observe indicators that most accurately guides our thinking about possible scenarios for the stock market. In this case, we believe that the best way to assess the possible scenarios is by applying Dow Theory to Gould’s Altimeter, as seen below.