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Elliott Wave

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.”

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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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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.

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.

On the Docket: The Case Against Diversification

Just because investment banks and stock brokerages say you should diversify doesn’t make it true
February 7, 2011

By Elliott Wave International

Talk with an investment advisor, and what’s the first piece of advice you will hear? Diversify your portfolio. The case for diversification is repeated so often that it’s come to be thought of as an indisputable rule. Hardly anyone makes the case against diversifying your portfolio. But because we believe that too much liquidity has made all markets act similar to one another, we make that case. Heresy? Not at all. Just because investment banks and stock brokerages say you should diversify doesn’t make it true. After all, their analysts nearly always say that the markets look bullish and that people should buy more now.  For a breath of fresh air on this subject, read what Bob Prechter thinks about diversification.

* * * * *

Excerpt taken from Prechter’s Perspective, originally published 2002, re-published 2004

Question: In recent years, mainstream experts have made the ideas of “buy and hold” and diversification almost synonymous with investing. What about diversification? Now it is nearly universally held that risk is reduced through acquisition of a broad-based portfolio of any imaginable investment category. Where do you stand on this idea?

Bob Prechter: Diversification for its own sake means you don’t know what you’re doing. If that is true, you might as well hold Treasury bills or a savings account. My opinion on this question is black and white, because the whole purpose of being a market speculator is to identify trends and make money with them. The proper approach is to take everything you can out of anticipated trends, using indicators that help you do that. Those times you make a mistake will be made up many times over by the successful investments you make. Some people say that is the purpose of diversification, that the winners will overcome the losers. But that stance requires the opinion that most investment vehicles ultimately go up from any entry point. That is not true, and is an opinion typically held late in a period when it has been true. So ironically, poor timing is often the thing that kills people who claim to ignore timing.

Sometimes the correct approach will lead to a diversified portfolio. There are times I have been long U.S. stocks, short bonds, short the Nikkei, and long something else. Other times, I’ve kept a very concentrated market position. My advice from mid-1984 to October 2, 1987, for instance, was to remain 100% invested in the U.S. stock market. During the bull market, I raised the stop-loss at each point along the wave structure where I could identify definite points of support. If I was wrong, investors would have been out of their positions. The potential was five times greater on the upside than the risk was on the downside, and five times greater in the stock market than any other area. Twice recently, in 1993 and 1995, I have had big positions in precious metals mining stocks when they appeared to me to be the only game in town. In 1993, it worked great, and they gained 100% in ten months. Diversification would have eliminated the profit. And every so often, an across-the-board deflation smashes all investments at once, and the person who has all his eggs in one basket, in this case cash, stays whole while everyone else gets killed.

* * * * *

Excerpt from The Elliott Wave Theorist, April 29, 1994

It is repeated daily that “global diversification” is self evidently an intelligent approach to investing. In brief, goes the line, an investor should not restrict himself to domestic stocks and bonds but also buy stocks and bonds of as many other countries as possible to “spread the risk” and ensure safety. Diversification is a tactic always touted at the end of global bull markets. Without years of a bull market to provide psychological comfort, this apparently self evident truth would not even be considered. No one was making this case at the 1974 low. During the craze for collectible coins, were you helped in owning rare coins of England, Spain, Japan and Malaysia? Or were you that much more hopelessly stuck when the bear market hit?

The Elliott Wave Theorist‘s position has been that successful investing requires one thing: anticipating successful investments, which requires that one must have a method of choosing them. Sometimes that means holding many investments, sometimes few. Recommending diversification so that novices can reduce risk is like recommending that novice skydivers strap a pillow to their backsides to “reduce risk.” Wouldn’t it be more helpful to advise them to avoid skydiving until they have learned all about it? Novices should not be investing; they should be saving, which means acting to protect their principal, not to generate a return when they don’t know how.

For the knowledgeable investor, diversification for its own sake merely reduces profits. Therefore, anyone championing investment diversification for the sake of safety and no other reason has no method for choosing investments, no method of forming a market opinion, and should not be in the money management business. Ironically yet necessarily given today’s conviction about diversification, the deflationary trend that will soon become monolithic will devastate nearly all financial assets except cash. If you want to diversify, buy some 6-month Treasury bills along with your 3-month ones.

Want More Reasons Why Diversification Should be Diverted from your Portfolio? Get our FREE report that explains the holes in the diversification argument. All you have to do is sign up as one of our Club EWI members. It’s free, and it will give you access to more than this diversification report. Follow this link to instantly download this special free report, Death to Diversification – What it Means for Your Investment Strategy.

This article was syndicated by Elliott Wave International and was originally published under the headline On the Docket: The Case Against Diversification. 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.

DJIA Priced in Gold: What It Means for the Long-Term Trend

Timeless Trading Lesson

Of the many forward-looking market indicators we at EWI employ, one of the most interesting tools (and least discussed in the financial media) is the DJIA priced in gold — “the real money,” as EWI’s president Robert Prechter calls it. What implications might the present position of Dow/gold have for the long-term trend of the nominal Dow? In this video, Elliott Wave International’s Steven Hochberg shows you several revealing charts that answer this question.

(Discover why deflation is the biggest threat to your money — download your FREE 90-page eBook now.)

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Newly updated for 2010, Prechter’s 90-page eBook reveals why deflation is the biggest threat to your money right now. You will learn how to prepare for
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your FREE deflation eBook now
.

The Next Major Disaster Developing for Bond Holders

Announcements: Robert Prechter and the folks over at Elliott Wave International have just released an urgent new report for bond holders and mutual fund investors. Prechter’s report, The Next Major Disaster Developing for Bond Holders, is the first of its kind from EWI. Never before has the world’s largest technical analysis firm published such extensive research and analysis on bonds for non-paying readers. This is a unique opportunity to see what Prechter’s subscribers see, and protect your investments without committing to a paid subscription. Learn more about Prechter’s 10-page report on the developing risks in bonds now — it’s yours for free.


If you have money in mutual funds, Treasury bonds, municipal bonds or high-yield bonds, Robert Prechter has just issued a crystal-clear warning for you: Your money could be at risk.

Prechter, the famed market forecaster who specializes in Elliott wave analysis, sent similar warnings about the Nasdaq in 2000, real estate in 2006, the blue chips in 2007 and commodities in 2008. His forecasts proved deadly accurate.

In trademark fashion, Prechter now has his readers focused on something most mainstream investors, analysts and advisors are taking for granted: the safety and stability of the bond market.

Why worry about the safety of bonds, you ask? A recent USA Today article reported that investors put a “record-shattering” net $376 billion into bond mutual funds in 2009, and individual investors and mutual funds are “still showing the love” in 2010.

After such explosive growth, Prechter says bond investors have been pushed to the edge of a mile-high cliff. Millions of investors are just one step away from tumbling over the edge.

If your hard-earned savings are exposed to the developing risks in these markets, you owe it to yourself to heed Prechter’s urgent warning.

Download your free copy of Robert Prechter’s new 10-page report, The Next Major Disaster Developing for Bond Holders, now — 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.

Video: The Versatility of the Wave Principle

Timeless Trading Lesson

In the video below, EWI senior analyst and trading instructor Jeffrey Kennedy shows how the Wave Principle can help you identify a high-probability trade set up regardless of the direction of the larger trend.


This timeless educational video was taken from Jeffrey’s renowned Trader’s Classroom series and is being re-released because of its valuable lesson. If a few minutes isn’t enough, get more FREE practical trading lessons from Jeffrey Kennedy in his latest eBook.

October Curse vs. Objective Analysis: The Choice Is Yours

October 12, 2010

By Elliott Wave International

Over the weekend, I went shopping for Halloween decorations. In the store, one of the clerks was wearing a white T-shirt with a puff-paint rendering of the Dow Jones Industrial Average. The line representing prices was the color of blood red, dripping and splashed across the front. When I asked him what it was, he said “the October Curse.”

‘Tis the season of stock market adages; those age-old Wall Street platitudes that claim stock prices perform a certain way during certain months of the year. The problem is, such correlations are hardly a guarantee.

Take October, for example. Yes, this month has marked some of the darkest periods in stock market history: 1929, 1987 and on. Historically, however, it’s not the worst performing month. For example, the supposed “Halloween Jinx” failed to bring a deathly pallor to stocks in 2008, as the final days of that year’s October saw the biggest weekly gain since 1974.

Remove Dangerous Mainstream Assumptions from Your Investment Process. Elliott Wave International’s FREE 118-page Independent Investor eBook shows you exactly what moves markets and what doesn’t. It will change the way you invest forever. Click here to learn more and download your free, 118-page ebook.

Then there are these familiar saws of seasonal wisdom:

“As Goes The First Week of January, So Goes The Month”– In the first week of January 2010, the stock market enjoyed a powerful winning streak. Yet, by the end of the month, prices were back in the red, circling the drain of a two-month low.

“Sell In May And Go Away” — And don’t come back ’till St. Leger’s Day (September). If investors heeded this wisdom this year, they would have missed one of the strongest uptrends in stocks of the entire year from July to September.

“September Curse” — If you think October is supposed to be bad, September is widely assumed to take the financial killing cake. Yet this year, U.S. stocks enjoyed their strongest September in 71 years!

Bottom line: Don’t “buy” your trading strategy before the trend actually arrives. The choice comes down to old adages, or objective analysis. Pick the latter.

Remove Dangerous Mainstream Assumptions from Your Investment Process. Elliott Wave International’s FREE 118-page Independent Investor eBook shows you exactly what moves markets and what doesn’t. It will change the way you invest forever. Click here to learn more and download your free, 118-page ebook.

This article was syndicated by Elliott Wave International and was originally published under the headline October Curse Vs Objective Analysis: The Choice Is Yours. 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.