Unfortunately, that rise occurred in 3 waves, not 5. So it was either part of a larger rising wedge OR it was a dead cat bounce retracement from dot bomb which the federal reserve never let fully express itself. I have to model it as the latter at this point as my primary model for two reasons:
the wave has now fallen back into the range of what would have been wave 1 up of a larger bull market. So the pullback from the peak was not a 4th wave. It COULD still be part of a rising wedge and I would probably go with that but for one small problem: CWT. That bottom into 2002 was clearly a falling wedge and I suspect it was W3 as marked above. Time will tell but it is possible that we get a sucker's rally into green 2 at this point even though I would need to see more bullish evidence before going there because these final collapse waves can sometimes be pretty darned brutal. The reason? STOCKS HAVE NO INTRINSIC VALUE. Period. It's all gambling and at some point the boomers will get good and tired of this boom and bust crap and they will go uber conservative (i.e. commodities). They will eschew momentum based "story stocks" and care a lot more about companies giving sustainable divvies. It's coming folks because the boomers need more security and less risk in their retirement years.
As it is ever so common in business history, whenever a company is handed over by the founding family to a CEO, it's the beginning of its end. In this case, when Jacobs stepped down months ago to make way for Melenkoff, it didn't take too long for him to slash the R&D budget and announce a stocks buyback, as well as entertaining the idea to split the chip and the licensing divisions. IOW, setting the course to QCOM oblivion and CEO nirvana. For while Melenkoff and a handful of funds will collect huge bonuses and profits as a result, the future of QCOM in the highly competitive chip industry will be crippled. And, make no mistake, all those licenses are for patents created in the chip division, all with an expiration date, be it by law or by the dynamics of mobile technology, since, though 3G UMTS relies heavily on QCOM patents, 4G LTE does not and 5G even less. Of course, both the board and the funds know it, yet they could not care less about the future of QCOM. Again, it's the old story of executives and funds looting a company for maximum immediate gain while imploding it in a decade.
ReplyDeleteThanks for the commentary on fundamentals. It shows how any poor slob who thinks stocks are a store of wealth is at the mercy of whatever con man happens to be running the show.
ReplyDeleteOf course, the wave count knew none of these details while accounting for all of them...