Posts Tagged ‘Elliott Wave International’
How a Simple Line Can Improve Your Trading Success
Elliott Wave International’s Jeffrey Kennedy explains many ways to use this basic tool
May 21, 2012
By Elliott Wave International
The following trading lesson has been adapted from Jeffrey Kennedy’s eBook, Trading the Line — 5 Ways You Can Use Trendlines to Improve Your Trading Decisions. You can download the 14-page eBook here.
“How to draw a trendline” is one of the first things people learn when they study technical analysis. Typically, they quickly move on to more advanced topics and too often discard this simplest of all technical tools.
Yet you’d be amazed at the value a simple line can offer when you analyze a market. As Jeffrey Kennedy, editor of the new Elliott Wave Junctures service, puts it:
“A trendline represents the psychology of the market, specifically, the psychology between the bulls and the bears. If the trendline slopes upward, the bulls are in control. If the trendline slopes downward, the bears are in control. Moreover, the actual angle or slope of a trendline can determine whether or not the market is extremely optimistic or extremely pessimistic.”
In other words, a trendline can help you identify the market’s trend. Consider this example in the price chart of Google.
That one trendline — drawn between the lows in 2004 and the lows in 2005 — provided support for a number of retracements over the next two years.
That’s pretty basic. But there are many more ways to draw trendlines. When a market is in a correction, you can draw a trendline and then draw a parallel line: in turn, these two parallel lines can create a channel that often “contains” the corrective price action. When price breaks out of this channel, there’s a good chance the correction is over and the main trend has resumed. Here’s an example in a chart of Soybeans. Notice how the upper trendline provided support for the subsequent move.
 | For more free trading lessons on trendlines, download Jeffrey Kennedy’s free 14-page eBook, Trading the Line — 5 Ways You Can Use Trendlines to Improve Your Trading Decisions. It explains the power of simple trendlines, how to draw them, and how to determine when the trend has actually changed. |
This article was syndicated by Elliott Wave International and was originally published under the headline How a Simple Line Can Improve Your Trading Success. 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.
How to Handle an Economic Implosion
By Elliott Wave International
I came across some research on the subject of worry. Here’s how it was presented:
Things People Worry About:
- things that never happen – 40%
- things which did happen that worrying can’t undo – 30%
- needless health worries – 12%
- petty, miscellaneous worries – 10%
- real, legitimate worries – 8%
Of the legitimate worries, half are problems beyond our personal ability to solve. That leaves 4% in the realm of worries people can do something about.
I thought about our gigantic national debt and weak economy. These seem to fit into both subcategories of “real” worries. You can’t do much as an individual to solve the nation’s debt and economic problems, yet you can prepare for a worsening economic downtrend.
Do we see evidence for an economic turn for the worse?
Well, consider that the evidence is so overwhelming that it took 456 pages of the second edition of Robert Prechter’s book, Conquer the Crash, to cover it. And since that book published, Prechter has consistently devoted his monthly Elliott Wave Theorist to the facts and evidence behind his forecast.
Here’s a chart from the book that was updated by Elliott Wave International in March 2012:
The downturn from 2008 is critically important, as it shows that after an almost unbroken 60-year climb, the contraction is underway. It surely has much further to go, because it is still a third higher than it was at the outset of the last debt deflation in 1929.
– The Elliott Wave Financial Forecast, March 2012
The rating agencies are well aware of what the above chart means. You probably know that Standard & Poor’s downgraded U.S. debt from the nation’s long-standing triple-A to AA+. Now, another rating agency has taken their rating even lower:
Rating firm Egan-Jones cuts its credit rating on the U.S. government to “AA” from “AA+” with a negative watch, citing a lack of progress in cutting the mounting federal debt.
– CNBC.com, April 5
Robert Prechter’s bestseller, Conquer the Crash, provides practical information about what you can do to protect your finances in the coming economic implosion. And right now, Elliott Wave International is offering 8 lessons from Conquer the Crash in a free 42-page report that covers:
- What to do with your pension plan
- How to identify a safe haven
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In every disaster, only a very few people prepare themselves beforehand. Discover the ways you can be financially prepared and safe.
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This article was syndicated by Elliott Wave International and was originally published under the headline How to Handle an Economic Implosion. 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.
Credit Crisis: Are We Set Up for The Perfect Storm?
Robert Prechter discusses what’s backing your dollars
January 26, 2012
By Elliott Wave International
In this video clip, taken from Robert Prechter’s interview with The Mind of Money, Prechter and host Douglass Lodmell discuss “real” money vs the FIAT money system, and what is backing your dollars under our current system. Enjoy this 4-minute clip and then watch Prechter’s full 45-minute interview here >>
 | Watch the full 45-minute interview FREE Get even more valuable insights as Mind of Money host Douglass Lodmell interviews Elliott Wave International’s President, Robert Prechter, about how to keep your money safe, the deflation versus inflation debate, and many more topics that are critical to your financial future. |
European Union Agreement: Good or Bad for the Dow Industrials?
By Elliott Wave International
Did European Union leaders make the sovereign debt crisis “go away” last week?
Not even close. What they did agree on is tougher budget rules:
“…17 countries of the euro zone…agreed to run only minimal budget deficits in the future and allowed the European Court of Justice the right to strike down national laws that don’t enforce such discipline properly…”
Wall Street Journal, (12/9)
Will the EU agreement prove bullish or bearish for world stock markets, including the Dow Industrials?
Let’s put it this way: The evidence suggests that government intervention in the economy does not alter the dominant trend of financial markets.
For example: Look at the DJIA chart and try to identify when the U.S. government bailed out Fannie Mae, Freddie Mac, and other financial institutions.
“[The chart below] shows that in fact these actions took place in the early portion of the biggest stock market decline in 76 years. These actions did not push stock prices back up. The market finally bottomed months later, at a time when nothing along these lines happened.
“It is no good to claim that these actions had results eventually. By that reasoning, any future turn in the stock market would prove the contention.”
Elliott Wave Theorist, March 2010
If anything, the face value of this chart argues that economic government intervention makes stocks go down.
There is simply no “cause and effect” relationship between government actions and stock market trends.
The stock market’s price pattern is governed by the Wave Principle:
“Sometimes the market appears to reflect outside conditions and events, but at other times it is entirely detached from what most people assume are causal conditions. The reason is that the market has a law of its own. It is not propelled by the external causality to which one becomes accustomed in the everyday experiences of life.
“….The market’s progression unfolds in waves. Waves are patterns of directional movement.”
Elliott Wave Principle, (p. 21)
 | If you found this insight into stock market behavior eye-opening, read the 2011 Independent Investor eBook, an educational, powerful and FREE 50-page eBook to help you think independently about what really moves the markets. Thousands of investors have downloaded the Independent Investor eBook, and it has changed the way they think forever. Now YOU can get this important eBook, packed with insightful analysis from 2010 and 2011 Elliott Wave Theorist and Elliott Wave Financial Forecast, free. |
This article was syndicated by Elliott Wave International and was originally published under the headline European Union Agreement: Good or Bad for the Dow Industrials?. 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 Stock Market Is Not Physics: Part I
By Elliott Wave International
The following series is excerpted from two classic issues of Robert Prechter’s Elliott Wave Theorist. Although originally published in 2004, the valuable series has been re-released in the Independent Investor eBook, along with over 100 pages of other reports that challenge conventional economic thinking.
Here is Part 1 of the series. Check back in a few days to read Part 2, or you can download your free copy of the Independent Investor eBook here.
See if you can answer these four questions:
- In 1950, a good computer cost $1 million. In 1990, it cost $5000. Today it costs $1000.
Question: What will a good computer cost 50 years from today?- Democracy as a form of government has been spreading for centuries. In the 1940s, Japan changed from an empire to a democracy. In the 1980s, the Russian Soviet system collapsed, and now the country holds multi-party elections. In the 1990s, China adopted free-market reforms. In March of this year, Iraq, a former dictatorship, celebrated a new democratic constitution.
Question: Fifty years from today, will a larger or smaller percentage of the world’s population live under democracy?- In the decade from 1983 to 1993, there were ten months of recession in the U.S.; in the subsequent decade from 1993 to 2003, there were 8 months of recession. In the first period, expansion was underway 92 percent of the time; in the second period, it was 93 percent.
Question: What percentage of the time will expansion take place during the decade from 2003 to 2013?- In 1970, Reserve Funds kicked off the hugely successful money market fund industry. In 1973, the CBOE introduced options on stocks. In 1977, Michael Milken invented junk bond financing, which became a major category of investment. In 1982, stock index futures and options on futures began to trade. In 1983, options on stock indexes became available. Keogh plans, IRAs and 401k’s have brought tax breaks to the investing public. The mutual fund industry, a small segment of the financial world in the late 1970s, has attracted the public’s invested wealth to the point that there are more mutual funds than there are NYSE stocks. Futures contracts on individual stocks have just begun trading.
Question: Over the next 50 years, will the number and sophistication of financial services increase or decrease?Observe that I asked you a microeconomic question, a political question, a macroeconomic question and a financial question.
Trend Extrapolation
If you are like most people, you extrapolated your answers from the trends of previous data. You expect cheaper computers, more democracy, an economic expansion rate in the 90-95 percent range, and an increase in financial sophistication.It appears sensible to answer such questions by extrapolation because people default to physics when predicting social trends. They think, “Momentum will remain constant unless acted on by an outside force.” This mode of thought is deeply embedded in our minds because it has tremendous evolutionary advantages. When Og threw a rock at Ugg back in the cave days, Ugg ducked. He ducked because his mind had inherited and/or learned the consequences of the Law of Conservation of Momentum. The rock would not veer off course because there was nothing between the two men to act upon it, and rocks do not have minds of their own. Earlier animals that incorporated responses to the laws of physics lived; those that didn’t died, and their genes were weeded out of the gene pool. The Law of Conservation of Momentum makes possible our modern technological world. People rely on it every day. Despite its use in so many areas, however, it is inapplicable to predicting social change. For most people in most circumstances, the proper answer to each of the above questions is, “I don�t know.” (Socionomics can give you an edge in social prediction, but that’s another story.)
The most certain aspect of social history is dramatic change. To get a feel for how useless — even counterproductive — extrapolation can be in social forecasting, consider these questions:
- It is 1886. Project the American railroad industry.
- It is 1970. Project the future of China.
- It is 1963. Project the cost of medical care in the U.S.
- It is 1969. Project the U.S. space program.
- It is 100 A.D. Project the future of Roman civilization.
In 1886, you would have envisioned a future landscape combed with rail lines connecting every city, town and neighborhood. Small trains would roll around to your home to pick you up, and a network of rail lines would help deliver you to your destination efficiently and cheaply. Super-fast trains would make cross-country runs. You could eat, read or sleep along the way.
Is that what happened? Would anyone have predicted, indeed did anyone predict, that trains in 2004 would often be going slower than they did in 1886, that they would routinely jump the tracks, that they would be inefficient, that they would have little food and few sleeper cars, that the equipment would be old and worn out?
In 1970, the Communist party was entrenched in China. Over 35 million people had been slaughtered, culminating in the Cultural Revolution in which Chinese youths helped exterminate people just because they were smart, successful or capitalist. Would anyone have imagined that China, in just over a single generation, would be out-producing the United States, which was then the world’s premier industrial giant?
In 1963, medical care was cheap and accessible. Doctors made house calls for $20. Hospitals were so accommodating that new mothers typically stayed for a week or more before being sent home, and it was affordable. Would anyone have guessed that forty years later, pills would sell for $2 apiece, a surgical procedure and a week in the hospital could cost one-third of the average annual wage, and people would have to take out expensive insurance policies just in case they got sick?
In the space of just 30 years, rockets had gone from the experimental stage to such sophistication that one of them brought men to the moon and back. In 1969, many people projected the U.S. space program over the next 30 years to include colonies on the moon and trips to Mars. After all, it was only sensible, wasn’t it? By the laws of physics, it was. But in the 35 years since 1969, the space program has relentlessly regressed.
In 100 A.D., would you have predicted that the most powerful culture in the world would be reduced to rubble in a bit over three centuries? If Rome had had a stock market, it would have gone essentially to zero.
Futurists nearly always extrapolate past trends, and they are nearly always wrong. You cannot use extrapolation under the physics paradigm to predict social trends, including macroeconomic, political and financial trends. The most certain aspect of social history is dramatic change. More interesting, social change is a self-induced change. Rocks cannot change trajectory on their own, but societies can and do change direction, all the time.
| Learn to Think Independently — Download Your Free Independent Investor eBook “The Stock Market is Not Physics” is just one report in the more than 100 page, two-volume Independent Investor eBook. You’ll get some of the most groundbreaking and eye-opening reports ever published in Elliott Wave International’s 30-year history; you’ll also get new analysis, forecasts and commentary to help you think independently in today’s tumultuous market. |
This article was syndicated by Elliott Wave International and was originally published under the headline The Stock Market Is Not Physics: Part I. 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.
What Is Backing Your Deposits in the Bank?
By Elliott Wave International
Is the bank really the safest place to keep your money? Robert Prechter joins the Mind of Money host Douglass Lodmell to discuss what backs bank deposits and how you can keep your hard-earned money safe.
We invite you to watch the interview below. Then read Robert Prechter’s free report, Discover the Top 100 Safest U.S. Banks.
 | What is the best course of action to safeguard your money? Read our free 10-page report, Discover the Top 100 Safest U.S. Banks, to learn:
Download your free report, Discover the Top 100 Safest U.S. Banks, now. |
This article was syndicated by Elliott Wave International and was originally published under the headline What Is Backing Your Deposits in the Bank?. 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 Light Bulb Moment for the Eurozone
EWI’s free EU debt report sheds some light on what’s in store
By Elliott Wave International
How many European bankers does it take to change a light bulb? That’s a joke in search of an answer, but EWI’s European analyst Brian Whitmer explained five months ago that the “light bulb moment” was coming — that’s the time when most people would clearly recognize the severity of the European debt crisis. He offered this spot-on analysis back in July 2011, before the larger world came to know recently how bad things really are in the eurozone.
This chart shows how markets in Greece, Ireland and Portugal have behaved over the past five years, including the bailouts. Whitmer says that the turmoil in Greece is due mostly to both social mood and Greek markets having plummeted for more than a year and a half, while the larger EU stock markets have levitated. Once they turn down, he forecasts that what you saw in Greece will be replayed in the eurozone.
To help his subscribers see the light and get the full picture, he compared EU member nations under financial scrutiny to those that are usually viewed as being safe — and showed that they weren’t as safe as most people thought.
Specifically, Whitmer warned that the debt per person in Greece looked eerily similar to the debt per person in highly regarded countries, such as Germany and France — and even to non-eurozone countries, such as the United Kingdom.
In 2010, Britain proposed a five-year, 25% budget reduction that affects nearly every area of the government. While it sounds like a drastic measure, it has played out differently during the past year. According to member of European Parliament Daniel Hannan, statistics show that not only is government spending and borrowing significantly higher than this time last year, but taxes, too, are way up. Whitmer notes that the budget cuts rely heavily on the future and lack near-term bite.
Why has the worst of Europe’s violence taken place on the streets of Athens rather than London? Athenians did not suddenly grow more violent in 2011. What has changed since 2007 is their stock market. Whitmer’s words of advice: “…should your country’s stock market begin to look like Greece’s, watch out. Trouble will be on the way.”
*****
European Financial Forecast Editor Brian Whitmer has covered Europe’s debt crisis since March 2010 — and his forecasts kept subscribers ahead of the downward spiral every step of the way. Read more of his analysis in our free report, “The European Debt Crisis and Your Investments.”
 | Free Report The European Debt Crisis and Your Investments Continue reading more articles like this one by Brian Whitmer in our European Debt Crisis report. This free report offers commentary from February 2010 through November 2011 that will help you to better understand what could be in store in the coming months and years. |
This article was syndicated by Elliott Wave International and was originally published under the headline The Light Bulb Moment for the Eurozone. 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.
Prechter: “The Trend Is Exhausted”
Robert Prechter explains what’s the real problem with today’s market
By Elliott Wave International
What is the real problem with today’s market? Watch this excerpt from Robert Prechter’s special, video issue of the August 2011 Elliott Wave Theorist. Prechter shows you how the buildup of dollar-denominated debt has brought us to what he calls a critical market juncture.
Get even more information about current market trends and how to prepare for what’s ahead with our new 14-page investing report. See details below.
 | The Most Important Investment Report You’ll Read for 2012 Every year or two Elliott Wave International (EWI) publishes analysis with a message so critical that they decide to share it, FREE. They have just released The Most Important Investment Report You’ll Read for 2012, a free report to help you navigate the markets and prepare for what’s ahead. You’ll get hard facts, 25 eye-opening charts and 14 pages of straightforward commentary that will put the volatile market action of the past months into perspective within the “big picture” to help you position for the years to come. |
This article was syndicated by Elliott Wave International and was originally published under the headline Prechter: “The Trend Is Exhausted”. 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.
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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 Do You Get from Dow Theory to Elliott Wave Analysis?
Happy 160th Birthday, Charles Dow
By Elliott Wave International
If you are interested in Elliott wave analysis, odds are that you have also heard of Dow Theory, whose best and longest-lived proponent is Richard Russell. (Best wishes to Richard as he recovers his health.) This excerpt from Prechter’s Perspective explains how Elliott wave analysis and Dow Theory are connected. We wanted to run it now in honor of the 160th anniversary of the birth of Charles Dow, which the Market Technicians Association celebrates on Wall Street on Thursday, November 3, 2011.
* * * * *
Excerpted from Prechter’s Perspective, 2004
Q: What was R. N. Elliott looking for in the stock market data in the late 1930s? Did he have a model or theory about price behavior?
Bob Prechter: Elliott had no basic premises, just a mind that was open to the idea that the market might be patterned, which he may have adopted from the then relatively new Dow Theory, which was a set of very few and far more general observations about market behavior. Though the Dow Theorists formed only very rough concepts, they broke ground, tremendous ground, in merely coming up with their observations that market behavior was non-random and tied to investor psychology. That was probably the germ of the idea that kicked off Elliott’s research.
Q: What was his procedure?
Bob Prechter: He did what every good researcher must do. First, he recorded the data that reality provided. He looked at the movements on chart paper and wondered, “Can I find forms that occur over and over again?” His answer was, “Yes.” He found that they occurred on hourly moves, daily moves, weekly, yearly. He even plotted moves that were decades long and noticed that they were following the same form. Likewise, the specific market did not matter. It could be the stock market, the gold price, interest rates or any other market. Then he organized the data, which was his talent. He began recognizing recurrences in the data, so it became clear that there were indeed repetitive patterns, which he ultimately organized into concepts.
Q: What exactly is Dow Theory and how does it relate to the Wave Principle?
Bob Prechter: The Dow Theory was developed by Charles Dow in the late 1800s. One of the tenets of Dow Theory is that, in general, a primary bull market runs in three upward phrases. In the initial phase, there is a lot of disbelief, and the markets are at very depressed levels. The middle phase is a kind of recognition phase when people begin to realize that the fundamentals are improving, and the markets are rising in harmony with them. The final stage is when the euphoria and the gambling come in. Elliott discovered that this basic formula of three steps up, separated by two intervening corrections, making five waves, was applicable not just to a primary bull market but to any degree of advance. He then observed that corrections take a different path: a three-wave shape or variation thereof. Then he observed that these cycles were not independent of each other but part of the market’s larger structure, which in turn developed according to these principles.
Q: It is through Charles Collins that we know about the genesis of the theory. He more or less sponsored Elliott’s introduction to Wall Street and helped him think through various aspects of becoming professional. In fact, he was the ghostwriter of a good deal of Elliott’s first important book, The Wave Principle, which came out in 1938. Did Collins make any contribution to the theory itself?
Bob Prechter: Yes. The catalyst for tying the Wave Principle to grander natural forces was Collins’s discovery that the number of waves in Elliott’s idealized pattern reflected the Fibonacci sequence. Collins wrote Elliott during the development of the theory and said in essence, “You ought to read this book by Jay Hambidge on Fibonacci ratios and spirals, because I noticed that when you count the waves through lower and lower degrees of trend, you find the Fibonacci sequence.” That sent Elliott off on the track to his grand conclusion. It is comforting to know that he did not start with the Fibonacci sequence or a theory based on it and then force nature to it. Nature showed its law, and these two men observed it.
Q: Is Fibonacci really that crucial to the theory?
Bob Prechter: It is not crucial to the what, but it is crucial to the why. First, Elliott observed the Wave Principle operate. Then he took the next step and asked, “Why does it exist?” He concluded that there must be some progression that human beings go through as they move overall from a state of deep pessimism to extreme optimism and back again, because they continue to trace out these patterns. His eventual conclusion was that it was a natural law of human behavior, that human beings were part of the natural world, and just like trees and wolves and lemmings and anything else you can name, they have certain ways of acting. It shows up in the charts vividly, making it clear that mass psychology is structured. The unifying conclusion, that mankind’s progress follows a law of nature exhibited by countless forms of life, is a profound and reasonable explanation that fits the facts.
 | Learn about R.N. Elliott’s Wave Analysis with The Basic Tutorial — Free from Elliott Wave InternationalNow you know how R.N. Elliott did his research. Next, learn how to analyze price charts using his form of analysis. The Elliott Wave Basic Tutorial is a 10-lesson comprehensive course with the same content you’d receive in a formal training class — but you can learn at your own pace and review the material as many times as you like! Get 10 FREE Lessons on The Elliott Wave Principle that Will Change the Way You Invest Forever >> |
This article was syndicated by Elliott Wave International and was originally published under the headline How Do You Get from Dow Theory to Elliott Wave Analysis?. 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.
