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Elliott Wave

Deflation Warning: Money Manager Startles Global Conference

History shows that the U.S. should pay attention to economies in Europe

By Elliott Wave International

The economy has been sluggish for five years. There’s no shortage of chatter about “why,” yet few observers mention deflation.

One exception is a hedge fund manager who spoke up at the recent Milken Institute Global Conference.

The presentation by Dan Arbess, a partner at Perella Weinberg and chief investment officer at PWP Xerion Funds, was startling because of how deeply it broke from the standard narrative.

We’ve been wrong to assume that the economic crisis is over, Arbess said. … The threat of deflation is once again rearing its head.

“The persistent risk in our economy is deflation not inflation,” Arbess said.

CNBC, May 2

Deflation appears to be more than a threat. Consider what’s already happening in the U.S. and in Europe.

Industrial production declined in April by the most in eight months, indicating American manufacturers will provide little support for an economy beset by weaker global markets and federal budget cuts.

Bloomberg, May 15

Europe is slipping further into recession.

The euro zone economy shrank more than expected in the first three months of 2013 … as France returned to recession for the first time since 2009 and Germany barely edged forward.

It marked the longest recession for the euro countries since the currency was introduced in 1999.

New York Times, May 15

Here’s a relevant fact: The Great Depression of 1929-1932 started in Europe before coming to America.

The economic wave may be much bigger this time.

Robert Prechter made this observation:

Total credit will contract, so bank deposits will contract, so the supply of money will contract, all with the same degree of leverage with which they were initially expanded.

Conquer the Crash, second edition,
 p. 111

EWI published this chart in March 2012.

The enormous credit expansion that started in the early 1980s is due to be leveled.

You can prosper during the next economic contraction. Many people did just that during the Great Depression. Robert Prechter’s New York Times bestseller, Conquer the Crash, can teach you what you need to know to protect your portfolio during these high-risk financial times.

For a limited time, you can get part of Conquer the Crash for free. See below for more details.


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This free, 42-page report can help you prepare for your financial future. You’ll get valuable lessons on what to do with your pension plan, what to do if you run a business, how to handle calling in loans and paying off debt and so much more.

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This article was syndicated by Elliott Wave International and was originally published under the headline : Deflation Warning: Money Manager Startles Global Conference

EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Fibonacci in Nature: The Golden Ratio and the Golden Spiral

The more you learn about Fibonacci, the more amazed you will be at its importance

By Elliott Wave International

If you’ve studied the financial markets, even for a short time, you’ve probably heard the term “Fibonacci numbers.” The ratios and relationships derived from this mathematical sequence are applied to the markets to help determine targets and retracement levels.

Did you know that Fibonacci numbers are found in nature as well? In fact, we can see examples of the Fibonacci sequence all around us, from the ebb and flow of ocean tides to the shape of a seashell. Even our human bodies are examples of Fibonacci. Read more about the fascinating phenomenon of Fibonacci in nature.


Let’s start with a refresher on Fibonacci numbers. If we start at 0 and then go to the next whole integer number, which is 1, and add 0 to 1, that gives us the second 1. If we then take that number 1 and add it again to the previous number, which is of course 1, we have 1 plus 1 equals 2. If we add 2 to its previous number of 1, then 1 plus 2 gives us 3, and so on. 2 plus 3 gives us 5, and we can do this all the way to infinity. This series of numbers, and the way we arrive at these numbers, is called the Fibonacci sequence. We refer to a series of numbers derived this way as Fibonacci numbers.

We can go back to the beginning and divide one number by its adjacent number – so 1?1 is 1.0, 1?2 is .5, 2?3 is .667, and so on. If we keep doing that all the way to infinity, that ratio approaches the number .618. This is called the Golden Ratio, represented by the Greek letter phi (pronounced “fie”). It is an irrational number, which means that it cannot be represented by a fraction of whole integers. The inverse of .618 is 1.618. So, in other words, if we carry the series forward and take the inverse of each of these numbers, that ratio also approaches 1.618. The Golden Ratio, .618, is the only number that will also be equal to its inverse when added to 1. So, in other words, 1 plus .618 is 1.618, and the inverse of .618 is also 1.618.

This is a diagram of the Golden Spiral. The Golden Spiral is a type of logarithmic spiral that is made up of a number of Fibonacci relationships, or more specifically, a number of Golden Ratios. For example, if we take a specific arc and divide it by its diameter, that will also give us the Golden Ratio 1.618. We can take, for example, arc WY and divide it by its diameter of WY. That produces the multiple 1.618. Certain arcs are also related by the ratio of 1.618. If we take the arc XY and divide that by arc WX, we get 1.618. If we take radius 1 (r1), compare it with the next radius of an arc that’s at a 90° angle with r1, which is r2, and divide r2 by r1, we also get 1.618.

Now here are some pictures of this Golden Spiral in various aspects of nature. For example, on the left is a whirlpool that displays the Golden Spiral and, therefore, these Fibonacci mathematical properties. We also see the Golden Spiral in the formation of hurricanes (center) and in the chambered nautilus shell (right), which also happens to be a common background that Elliott Wave International uses for a number of its presentations and graphics.

We can also see the Golden Ratio in the DNA molecule. Research has shown that if you look at the height of the DNA molecule relative to its length, it is in the proportion of .618:1. If we look at the components of the DNA molecule, there is a major groove in the left section and a minor groove in the right section. The major groove is equal to .618 of the entire length of the DNA molecule, and the minor groove is equal to .382 of the entire length.

This graphic of the human body also shows how the Golden Ratio exists in certain relationships of the human anatomy.


Learn How You Can Use Fibonacci to Improve Your Trading

If you’d like to learn more about Fibonacci and how to apply it to your trading strategy, download the entire 14-page free eBook, How You Can Use Fibonacci to Improve Your Trading.

EWI Senior Tutorial Instructor Wayne Gorman explains:

  • The Golden Spiral, the Golden Ratio, and the Golden Section
  • How to use Fibonacci Ratios/Multiples in forecasting
  • How to identify market targets and turning points in the markets you trade
  • And more!

See how easy it is to use Fibonacci in your trading. Download your free eBook today >>

Economic Gloom or Recovery? 5 Signs That One is Ahead

The economy has never really recovered since the 2007-2009 financial crisis

By Elliott Wave International

Several signs suggest economic contraction instead of expansion.

The first was recent front-page news: 8.1% August jobless rate. The number would have been higher, but it excludes people who gave up the job search.

The second is summed up by this Sept. 4 Bloomberg headline:

Food-Stamp Use Climbs to Record

Nearly one in seven Americans use food stamps. Before the downturn it was one in 10.

You can find the third sign at the other end of the income scale.

The chart shows that after a multi-decade bull market that tracked the major stock indexes, lobster prices (per pound) peaked in 2005, one year ahead of the global downturn. The timing of the lobster price top is so close to the downturn in home prices that the Maine Department of Marine Resources noted, “Interestingly, a ‘lobster bubble’ coincided with the national ‘housing bubble’ in 2006. … The six-year divergence between per-pound prices and total pounds (shown by the trendlines on the chart) suggests that lobster mania will not be back for a long time. Luxury is a classic byproduct of a bubble.

The Elliott Wave Financial Forecast, August 2012

Speaking of the parallel trend of lobster and home prices, a Sept. 18 Wall Street Journal excerpt reveals the fourth sign of a deflationary trend:

Mortgage lending declined to its lowest level in 16 years in 2011 amid weak demand for mortgages and tighter lending standards.

A Sept. 19 Reuters article says the latest housing data is mixed:

U.S. housing starts rose less than expected in August as groundbreaking on multifamily home projects fell, but the trend continued to point to a turnaround in the housing market.

Yet we’ve seen “hopeful signs” of a housing recovery before. The larger trend for real estate points in the opposite direction.

The fifth sign is summed up in this Sept. 18 CBS headline:

Median Income Worse Now Than It Was During Great Recession

The article says:

The median income for American households in 2009 – the official end of the Great Recession – was $52,195 (in 2011 dollars), while the median income dipped to $50,054 last year, falling 4.1 percent over two years. … The recovery is the “most negative for household income during any post-recession period in the past four decades.”

The “Great Recession” never ended. A more accurate way of describing the state of the economy is the onset of “depression.”

Have you prepared your portfolio for what’s ahead? See below for an offer to view 8 chapters of Robert Prechter’s New York Times bestseller, Conquer the Crash.


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This free, 42-page report can help you prepare for your financial future. You’ll get valuable lessons on what to do with your pension plan, what to do if you run a business, how to handle calling in loans and paying off debt and so much more.

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This article was syndicated by Elliott Wave International and was originally published under the headline Economic Gloom or Recovery? 5 Signs That One is Ahead. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Elliott’s Discovery Foretells Major Market Turn

Elliott’s 70-year-old forecast applies in 2012

By Elliott Wave International

Adversity often visits people just as their future seems brightest.

At the same time, other people learn that when one of life’s doors closes, a window will open.

Both of these truisms describe the life of Ralph N. Elliott (1871-1948), the founder of the Wave Principle.

In the 1920s, Elliott became a successful business consultant. But his life of accomplishment and financial independence were in peril when he fell gravely ill. During months of recuperation, Elliott occupied his mind with a meticulous study of the stock market.

In other words: The door closed and the window opened. At 67, Elliott made a discovery.

Through a long illness the writer had the opportunity to study the available information concerning stock market behavior. Gradually the wild, senseless and apparently uncontrollable changes in prices from year to year, from month to month, or from day to day, linked themselves into a law-abiding rhythmic pattern of waves. This pattern seems to repeat itself over and over again. With knowledge of this law or phenomenon (that I have called the Wave Principle), it is possible to measure and forecast the various trends and corrections (Minor, Intermediate, Major and even movements of still greater degree) that go to complete a great cycle.

Ralph N. Elliott, R.N. Elliott’s Masterworks, pp. 154-155

In 1941, Elliott drew a chart of his long-term forecast based on the Wave Principle. The final label on that chart is the year 2012! (That chart is republished in the February 2012 Elliott Wave Theorist)

Amazingly, wave analysis thus far confirms Elliott’s 2012 forecast.

In the August 2012 Elliott Wave Theorist, subscribers receive a specific stock market overview through early 2013.

Indeed, EWI’s timing tools appear pointed to the exact month of a major stock market turning point.

Two observations lead us to the same month for the last upside gasp in the stock market.

The Elliott Wave Theorist, August 2012

Imagine: Today’s price pattern is in line with a forecast R.N. Elliott published 70 years ago!

To that end, EWI offers you a no-obligation education in Elliott Wave analysis. See below for details.


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The Elliott Wave Crash Course is a series of three FREE videos that demolishes the widely held notion that news drives the markets. Each video will provide a basis for using Elliott wave analysis in your own trading and investing decisions.

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This article was syndicated by Elliott Wave International and was originally published under the headline R.N. Elliott’s Discovery Foretells a Major Market Turn Still to Come. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Popgun – A Two-Bar Pattern that Points to Trade Setups

Trader Education Week begins September 26
September 25, 2012

By Elliott Wave International

Some people like to get outside on the weekends, maybe playing tennis or working in the yard. Some people like to visit their friends or cook a big meal or go out to see a movie. And some people who are passionate about their work — such as Elliott Wave International’s (EWI) analyst Jeffrey Kennedy — like to stare at hundreds of price charts on their computer screen to find patterns that point to trade setups. We used to worry for his health but not anymore, because he’s been doing it for years and he comes up with some amazing trading lessons. Enjoy this lesson on bar patterns from EWI analyst Jeffrey Kennedy.

[Editor’s note: Elliott Wave International is hosting Trader Education Week, September 26 through October 3. During this event, analyst Jeffrey Kennedy will share video trading lessons that will empower you to improve the way you trade.]


The Popgun
I’m no doubt dating myself, but when I was a kid, I had a popgun — the old-fashioned kind with a cork and string (no fake Star Wars light saber for me). You pulled the trigger, and the cork popped out of the barrel attached to a string. If you were like me, you immediately attached a longer string to improve the popgun’s reach. Why the reminiscing? Because “Popgun” is the name of a bar pattern I would like to share with you this month. And it’s the path of the cork (out and back) that made me think of the name for this pattern.

The Popgun is a two-bar pattern composed of an outside bar preceded by an inside bar. (Quick refresher course: An outside bar occurs when the range of a bar encompasses the previous bar and an inside bar is a price bar whose range is encompassed by the previous bar.) In Chart 1 (Coffee), I have circled two Popguns.

So what’s so special about the Popgun? It introduces swift, tradable moves in price. More importantly, once the moves end, they are significantly retraced, just like the popgun cork going out and back. As you can see in Chart 2 [not shown], prices advance sharply following the Popgun, and then the move is significantly retraced. In Chart 3 [not shown], we see the same thing again but to the downside: prices fall dramatically after the Popgun, and then a sizable correction develops.

How can we incorporate this bar pattern into our Elliott wave analysis? The best way is to understand where Popguns show up in the wave patterns. I have noticed that Popguns tend to occur prior to impulse waves — waves one, three and five. But, remember, waves A and C of corrective wave patterns are also technically impulse waves. So Popguns can occur prior to those moves as well.

As with all my work, I rely on a pattern only if it applies across all time frames and markets. To illustrate, I have included two charts of Sirius Satellite Radio (SIRI) that show this pattern works equally well on 60-minute and weekly charts. Notice that the Popgun on the 60-minute chart [not shown] preceded a small third wave advance. Now look at the weekly chart [not shown] to see what three Popguns introduced (from left to right), wave C of a flat correction, wave 5 of (3) and wave C of (4).

There’s only one more thing to know about using this Popgun trade setup: Just be careful and don’t shoot your eye out, as my mom would say.


A FREE trading event that will teach you how to spot trading opportunities in your charts

Elliott Wave International is hosting a free Trader Education Week, Sept. 26 through Oct. 3. Register now and get instant access to 4 free trading resources from EWI analyst Jeffrey Kennedy — plus you’ll receive more lessons from Jeffrey as they’re unlocked each day of the event.

Don’t miss this opportunity to learn how to spot trading opportunities in the markets you follow. Register Now >>

This article was syndicated by Elliott Wave International and was originally published under the headline A Two-Bar Pattern that Points to Trade Setups. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Announcing Trader Education Week – Sept 26 through Oct 3

Announcing Trader Education Week — A FREE trading event that will teach you how to spot trading opportunities in your charts. Spend the next week getting free trading lessons that you can apply to your trading immediately — from one of the world’s foremost market technicians, Jeffrey Kennedy.

Register now for your FREE week of trading lessons and resources.


You have an opportunity to spend the next week learning how you can spot high-confidence trade setups in the charts you follow every day.

Elliott Wave International (EWI) is hosting a free Trader Education Week, Sept. 26 through Oct. 3. Register now and get instant access to free trading resources — plus you’ll receive more lessons as they’re unlocked each day of the event.

Jeffrey Kennedy, EWI analyst and one of the world’s foremost market technicians, has taught thousands how to improve their trading through his courses, subscription services and as an adjunct professor of technical analysis at Georgia Tech University. Now you have the opportunity to be a student in his online classroom, as he takes complex technical methods and tools and breaks them down so that you can apply them to your trading immediately. 

Don’t miss this opportunity to learn how to spot trading opportunities in the markets you follow.

Register today and get your first set of free trading resources immediately, plus we’ll alert you to valuable new resources unlocked every day beginning September 26.

Register for Trader Education Week — It’s FREE!.

 

About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world’s largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.

How Does a Trader Who Runs from Risk Achieve THIS Track Record?

Peter Brandt is the “Real McCoy”

By Elliott Wave International

In the late ’70s, Peter Brandt emptied his trading accounts several times. He’d lose a string of trades, then refund his account, then “wipe out” all over again.

But he persisted because he knew he was meant for a trading career. His determination paid off.

In 1982, a currency chart “sang a song” for Brandt. By that time he had saved his earnings and supplied his trading account with a healthy sum.

The currency trade worked out very well. After that trade, he believed he could call himself a competent full-time trader.

Eventually, Peter Brandt’s trading earned an annual 42% return over an 18-year period.

Did he achieve this by “swinging for the fences” on every trade? No. In fact, he believes that successful speculation requires strict risk-management.

One other message became clear when I recently called and spoke with Brandt: successful speculation is also about managing yourself.

Here’s an excerpt from our Q&A:

——————

Q: What’s the human factor and why is it so important to successful trading?

The biggest barrier to profitable trading is not the markets themselves. It’s not other traders. It’s not high frequency trading operations. It’s not the Wall Street trading machine out to get us. The biggest hurdle is ourselves. We have met the enemy, and the enemy is ourselves.

The human element comes into play immediately when an individual thinks he or she can make their living from trading. The human components that drive this mentality include pride, unrealistic expectations, wishful thinking, greed, disconnected hope.

If an aspiring trader can learn from and survive the mistakes of the first three to five years, they will finally figure out the real rules of the game…Most aspiring traders with four or five years of experience who know what they must do will readily agree that their real problem is actually doing what they must do. It is said that successful trading is an uphill run or upstream swim against human nature. How true!

Q. Risk management is very important to you as a trader, why? How do professional traders view risk differently from beginners?

I see this in two manifestations. First, professional traders expect to have losses — most lose more often than they win. They build losses into their processes and expectations. They factor losses into the equation.

Second, while the default expectation for professional traders is a losing trade, the default expectation of a beginner is for a winner. As a result, professional traders build aggressive risk management protocols into their trading operations.

One of the best traders I have ever known was a man named Dan Markey, who mentored me at the Chicago Board of Trade. He once told me that his job as a trader was as simple as liquidating every trade that closed at a loss. He focused on his losers. He ignored his winners.

Q: What steps did you take that led you to your successful track record of 42% over 18 years?

This is not easy to answer, mainly because I don’t want to give myself credit for any success I have achieved.

First, I didn’t need to make money from trading when I broke into futures. So that pressure was absent. I had income from several very large accounts. My proprietary trading started four years into my career in the markets.

Second, I had two very wise mentors. These were guys who told me about all the landmines I would encounter. They directed me to less risky paths. They were also very excellent traders and I could observe their habits.

Third, I stumbled across classical charting principles. Every successful trader has an approach that fits their personality, level of capitalization and risk tolerance. Some beginners never find a niche. I found a niche early on.

Fourth, I didn’t have my ego tied to every trade. I was able to take losses in stride.

Finally, I got lucky on a big score within the first two years of my proprietary trading. Now, people can say that luck is a process of a lot of things that come before it. But, luck is luck. I had a hunch and I bet a bunch — and I was right. I might have been wrong and the outcomes could have been very different.

I should also say that I’m a sequential thinker. For me that works because I go through the mental process of accounting for all the contingencies I can think of. If this happens, I’ve planned my response. If that happens, I’ve got my other response planned.


Learn more about Brandt — a veteran trader and one of a select few contributors to Bob Prechter’s Elliott Wave Theorist — in this exclusive FREE report:

Foundations of Successful Trading: Insights on Becoming a Consistently Successful Trader from Peter Brandt.

Whether you are an average investor, a novice trader, or an industry professional, you stand to benefit from what Peter Brandt has to say. You can learn more about Brandt and gain insights on his consistently successful approach to market speculation in this free 16-page excerpt from Part I of his book, “Foundations of Successful Trading.”

Download your free report and learn what leads to a lifetime of trading success >>

This article was syndicated by Elliott Wave International and was originally published under the headline How Does a Trader Who Runs from Risk Achieve THIS Track Record?. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Single- and Multi-Bar Price Analysis: Forecast the Markets

EWI’s Jeffrey Kennedy shows you what a simple price bar can tell you about a market

By Elliott Wave International

Senior Analyst Jeffrey Kennedy has spent over 15 years developing techniques to “read between the lines” on a price chart, and he shares some of his techniques with you in a FREE eBook: Learn to Identify High Confidence Trading Opportunities Using Price Bars and Chart Patterns.

You’d be amazed at how a simple price bar can provide you with so much information that can improve your trading success. In this excerpt from his eBook, Jeffrey explains how to interpret price bars and what that means for the subsequent market moves. Learn how you can download the entire 14-page eBook below.


Here’s a picture of two different price bars that we will consider to be daily price bars. What story does the single price bar on the left tell you?

Prices opened that day at the lowest price and closed at the highest price, which means that the buyers, or bulls, are in total control of the market. The bears have no power whatsoever, and, because the market closed so high, odds are that the price will continue up the next day. As I said, one price bar can give you tons of information about a financial market.

Now, look at the price bar on the right. It tells you a similar story in the opposite direction. Once the market opened, it got slammed to the down side. It stayed down hard all day and closed on the lows. A market like this is dominated by the bears, the sellers, and odds favor further decline the following day. It means that the bulls, or the buyers, have no control in this market.

Although these kinds of price bars are fairly rare, they may open your eyes to how much information a single price bar can contain, especially if you know how to interpret it.

These two price bars are more like what you will encounter every day.

The price bar on the left side shows that the bears, or the sellers, opened the market up and pushed it down a little bit. In a sense, they had some control, but not much. Then the buyers, or the bulls, took control of this market so that it closed above the open. This type of price bar shows up in an uptrending market.

Conversely, the price bar on the right often shows up in downtrending markets. It signifies that the bears control the market. You could say that the buyers gave it a feeble attempt early on, but by the close, the sellers had taken over. Closes don’t lie, and they are the most important item on the price chart.


Learn to Identify High Confidence Trading Opportunities Using Price Bars and Chart Patterns

When you look at a price chart, can you quickly spot the dominant trend? What about important reversals, or possible support/resistance levels?

EWI has just released a free 14-page eBook: Learn to Identify High Confidence Trading Opportunities Using Price Bars and Chart Patterns. Senior Analyst Jeffrey Kennedy has spent over 15 years developing techniques to “read between the lines” on a price chart, and he shares some of his techniques with you in this new resource. You’ll be amazed at how a simple price chart can provide you so much information that can improve your trading success.

Learn how to get your free eBook >>

This article was syndicated by Elliott Wave International and was originally published under the headline Single- and Multi-Bar Price Analysis: Could It Help You Forecast the Markets?. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

The Surge Higher in U.S. Markets: “The Stage is Being Set”

The market’s main trend stays the same.
August 03, 2012

By Elliott Wave International

Elliott Wave International has long observed that external events do not alter the dominant trend of financial markets — not even major events like wars, natural disasters, terrorist attacks, political assassinations or any other news that makes headlines.

Now, it is true that news can sometimes have a near-term effect on market prices.

The July 26 opening bell is an example.

Dow Surges 200 Points on Draghi Comments, Jobless Claims

That’s from The Wall Street Journal. The text reads:

Europe’s top central banker sparked a global rally in stocks after reassuring investors the Continent’s central bank would be vigilant about holding together the euro zone…. European Central Bank President Mario Draghi…said the ECB is ready to do whatever it takes to preserve the common-currency union.

The article adds that “the number of U.S. workers filing for unemployment benefits fell for the fourth time in five weeks, to a level that was far lower than expected.”

EWI expected a near-term bounce in stock prices — just one day ago.

On July 25, EWI’s Financial Forecast Short Term Update said this to subscribers:

Near term, there may be a few more days of bounce. The stock market is setting the stage…

The Update went on to describe what the stock market is setting the stage for. It is not what most investors expect.

The pattern in the major U.S. stock indexes has been 80 years in the making — which is to say, the pattern is unfolding at a large degree of trend.


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This article was syndicated by Elliott Wave International and was originally published under the headline The Surge Higher in U.S. Markets: “The Stage is Being Set”. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

The Day of American Austerity: What Will It Look Like?

In the United States, the belt-tightening has just begun
June 07, 2012

By Elliott Wave International

Since the start of the European sovereign debt debacle, the word “austerity” has been bandied about a lot.

It wasn’t an everyday word, and may send some people to the dictionary. Merriam-Webster defines “austerity” this way: enforced or extreme economy.

But even knowing this definition might leave one wondering how “austerity measures” relate to Europe’s debt crisis. The Associated Press (5/13) provided this overview:

Austerity has been the main prescription across Europe for dealing with the continent’s nearly 3-year-old debt crisis, brought on by too much government spending. But what does it mean for the average European? Imagine paying sales tax of 23 percent or more. Or having your wages cut by 15 percent. Austerity comes in many forms: higher taxes, fewer state benefits, more job cuts, working longer until retirement, you name it.

How about America? Will austerity measures be imposed on the world’s largest economy? Well, a Marketwatch columnist says “America’s new Age of Austerity is already here…Yes, America is already in a depression.” (5/29)

We agree. In fact, Robert Prechter said as much in the September 2011 Elliott Wave Theorist:

Bulls say the economy is in recovery, albeit a weak one. Bears are calling for a “double dip” recession, like the back-to-back recessions of 1980 and 1982. But, as is often the case, we disagree with both camps: The economic contraction of 2007-2009 was not a recession; the respite since then is not the start of a new economic expansion; and the economy is not going to have another “dip” into recession. The economy has been sliding into depression.

The signs of an American austerity are becoming widely visible. And nowhere is this belt-tightening more evident than in state and local governments. Recent years have seen a multitude of stories that describe reduced services. And in the overall economy, we’re seeing a de-leveraging of debt. Unemployment remains relatively high. Here’s a CNBC headline from today (5/30):

Sign of the Times: 20,000 Apply for 877 Auto Job Openings

This story about a new automobile plant in Montgomery, Alabama is one of many like it that feature jobless or under-employed individuals standing in line.

Above I showed the September 2011 quote from Robert Prechter. Yet he actually foretold much of what is financially happening today in his 2002 book Conquer the Crash.

That’s right. Ten years ago, he described what this age of austerity would look like. Much of what he described looks just like what is going on today. But how about the rest of what’s described in Conquer the Crash?

Yes, there’s more. You see, Prechter pointed out much more than what unfolded in the 2007-2009 financial crisis. Do yourself the biggest of favors and learn what he has to say. Be one of the few who are prepared vs. the majority who will be caught off-guard.

How? Right now, Elliott Wave International is offering a special FREE report with 8 lessons from Conquer the Crash to help you prepare for your financial future.

In this 42-page report, you’ll get valuable lessons on:

  • What to do with your pension plan
  • How to identify a safe haven (a safe place for your family)
  • What should you do if you run a business
  • Calling in loans and paying off debt
  • Should you rely on the government to protect you?
  • Money, Credit and the Federal Reserve Banking System
  • Can the Fed Stop Deflation?
  • A Short List of Imperative Do’s and Don’ts

It’s not too late to prepare yourself for what’s ahead. Get Your FREE 8-Lesson Conquer the Crash Report Now

This article was syndicated by Elliott Wave International and was originally published under the headline The Day of American Austerity: What Will It Look Like?. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.