Alcoa update [AA]

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Here is my initial buy call on AA entitled "bullish on alcoa".  I followed that up shortly afterward with a post entitled "Buy Alcoa, Baby".  In it I wrote:

"For now, the smart money plays the odds that government will continue to print and the world will continue to tolerate it some more.  My 18 month target price for Alcoa is $18.  Yes, I said it, perennial loser Alcoa gets an initial price target of more than double its current price within 18 months.  I should call it the Alcoa 18 in 18 deal. If your mom doesn't know where to park a nice chunk of her retirement, tell her to go for Alcoa and pick up the 1.4% dividend yield.  They will be raising this dividend as the automobile begins consuming a LOT more aluminum starting next year."

Not a bad call if I do say so myself.  However, today I am upping my price target on it given the way that the chart is unfolding.  But only after it takes a ~35-40% slap down over the next few months!

Below is the current model.  Bottom line: the chart is up against significant predetermined resistance that was cast into the chart back in 2007 and 2008.  Ignore this at your peril.  In addition, 5 waves up are complete or nearly so.  Add these two things up and it comes out to a a 40% loss as the b wave plays out for anyone who cannot read an EW count.

This chart suggests a break down into Q3 followed by a strong rally into 2015 (but not mid 2015 as drawn; C of E will probably slope harder upward and get done quicker than shown).  Since AA is not going to move on its own outside of the herd, it suggests to me that we have a big overarching market correction into Q3 followed by a rally into early next year.  Perhaps this is the vee style 2nd wave for the DJIA and $COMPX that I am on the lookout for.

In other words, broader markets collapse strongly into wave 1 down while AA pulls back into B of 4, then broader market moves up strongly into vee 2nd while AA breaks out of that down sloping resistance line in a C wave.  It will take the power of a C and probably 3rd of C to break that resistance.  Meanwhile the vee 2nd for the broader market makes everyone believe that "buy the dip" is alive and well and so they pile into margin debt even more than before.  But this time the markets stop short of a higher high and this is where the real 3rd wave down panic should begin  The old models stop working for the market and it causes mass confusion and panic.  Boomers, not having time to recover, run for the exits in a mad but well advised panic as all of the ridiculous market leverage unwinds in the face of the corrupt organized crime syndicate known as the military industrial complex.

In any case, 4th waves like that of AA are great because they provide nice price targets for reversal.  AA chart is going to be a great help in playing the big turns going forward.


After the a-b-c pullback to the $10 range, my updated model suggests that the E of 4 wave will top out between $21 and $24 in 5 clear waves (much clearer than those that made up A of E).  But if it breaks out the top channel of the 4th wave triangle and then comes crashing back into the channel as shown then GET OUT because when the broader markets crash in 2015 AA will not be an island of prosperity.  PE compression will occur during the coming deflationary crash and so AA price could plummet even with improving sales into aluminum car and truck bodies.

Now, after that 5th wave is played out with AA back at $2, well, all I can say is buy with both hands, both feet and any other appendage because the inflation that is going to follow this deflation is going to skyrocket the commodity producers like Alcoa.  REMEMBER: deflation always ends at some point but with fiat currency inflation never ends.

Once all the bad debts are defaulted on and people who stored money in banks all get stolen from, the government will be called upon by stupid people to "do something".  And congress will tell Yellen to "do something".  And so the bat faced twerp will do something.   And what she does will be so big in scope that the world will lose confidence in the USD.  It will have to be a monster stimulus of some kind in order to make any difference!

Once global confidence is lost in the USD paper con, a currency crisis will not be far off.  Von Misses will get his crackup boom.