Alan's Finance Blog

Deflation: How To Survive It

Important warnings about deflation from Robert Prechter.

By Elliott Wave International

Telegraph.go.uk, May 26: “US money supply plunges at 1930s pace… The M3 money supply in the U.S. is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history.”

Deflation is suddenly in the news again. It’s a good moment to catch up on a few definitions, as well as strategies on how to beat this rare economic condition.

And who better to ask than EWI’s president Robert Prechter? He predicted the first wave of deflation in the 2007-2009 “credit crunch” and has written on this topic extensively.

We’ve put together a great free resource for our Club EWI members: a 63-page “Deflation Survival Guide eBook,” Prechter’s most important deflation essays. Enjoy this excerpt — and for details on how to read the eBook in full free, look below.

Following the Great Depression, the Fed and the U.S. government embarked on a program…both of increasing the creation of new money and credit and of fostering the confidence of lenders and borrowers so as to facilitate the expansion of credit. These policies both accommodated and encouraged the expansionary trend of the ’Teens and 1920s, which ended in bust, and the far larger expansionary trend that began in 1932 and which has accelerated over the past half-century. Other governments and central banks have followed similar policies. The International Monetary Fund, the World Bank and similar institutions, funded mostly by the U.S. taxpayer, have extended immense credit around the globe.

Their policies have supported nearly continuous worldwide inflation, particularly over the past thirty years. As a result, the global financial system is gorged with non-self-liquidating credit. Conventional economists excuse and praise this system under the erroneous belief that expanding money and credit promotes economic growth, which is terribly false. It appears to do so for a while, but in the long run, the swollen mass of debt collapses of its own weight, which is deflation, and destroys the economy. A devastated economy, moreover, encourages radical politics, which is even worse.

The value of credit that has been extended worldwide is unprecedented. Worse, most of this debt is the non-self-liquidating type. Much of it comprises loans to governments, investment loans for buying stock and real estate, and loans for everyday consumer items and services, none of which has any production tied to it. Even a lot of corporate debt is non-self-liquidating, since so much of corporate activity these days is related to finance rather than production.

Figure 11-5 is a stunning picture of the credit expansion of wave V of the 1920s (beginning the year that Congress authorized the Fed), which ended in a bust, and of wave V in the 1980s-1990s, which is even bigger.

…it has been the biggest credit expansion in history by a huge margin. Coextensively, not only is there a threat of deflation, but there is also the threat of the biggest deflation in history by a huge margin. …

Raising The BAR: Bar Patterns & Trading Opportunities

How a 3-in-1 formation in cotton “triggered” the January selloff
April 17, 2010

By Nico Isaac

For Elliott Wave International’s chief commodity analyst Jeffrey Kennedy, the single most important thing for a trader to have is STYLE– and no, we’re not talking business casual versus sporty chic. Trading “style,” as in any of the following: top/bottom picker, strictly technical, cyclical, or pattern watcher.

Jeffrey himself is (and always has been) a “trend” trader, meaning: he uses the Wave Principle as his primary tool, with a few secondary means of select technical studies. Such as: Bar Patterns. And Jeffrey counts one bar pattern in particular as his favorite: the 3-in-1.

Here’s the gist: The 3-in-1 bar pattern occurs when the price range of the fourth bar (named, the “set-up” bar) engulfs the highs and lows of the last three bars. When prices penetrate above the high — or — below the low of the set-up bar, it often signals the resumption of the larger trend. Where this breach occurs is called the “trigger bar.” On this, the following diagram offers a clear illustration:

Now, how about a real world example of the 3-1 formation in the recent history of a major commodity market? Well, that’s where the picture below comes in. It’s a close-up of Cotton from the February 5, 2010 Daily Futures Junctures.

As you can see, a classic 3-in-1 bar pattern emerged in Cotton at the very start of the New Year. Within a few day the trigger bar closed below the low of the set-up bar, signaling the market’s return to the downside. Immediately after, cotton prices plunged in a powerful selloff to four-month lows.

February arrived, and with it the end of cotton’s decline. In the same chart you can see how Jeffrey used the Wave Principle to calculate a potential downside target for the market at 66.33. This area marked the point where Wave (5) equaled wave (1), a reliable for impulse patterns. Since then a winning streak in cotton has carried prices to new contract highs.

This example shows the power of a fully-equipped technical analysis “toolbox.” By using the Wave Principle with Bar Patterns, one has a solid, objective chance of anticipating the trend in volatile markets.

And in a 15-page report titled “How To Use Bar Patterns To Spot Trade Set-ups,” Jeffrey Kennedy identifies the top SIX Bar Patterns included in his personal repertoire. They are Double Inside Days, Arrows, Popguns, 3-in-1, Reverse 3-in-1, and Outside-Inside Reversal.

In this comprehensive collection, Jeffrey provides each pattern with a definition, illustrations of its form, lessons on its application and how to incorporate it into Elliott wave analysis, historical examples of its occurrence in major commodity markets, and ultimately — compelling proof of how it identified swift and sizable moves.

Best of all is, you can read the entire, 15-page report today at absolutely no cost. You read that right. The limited “How To Use Bar Patterns To Spot Trade Setups” is available with any free, Club EWI membership.

Blaming “Market Manipulators” For Losses is a Huge Obstacle to Success

To win, you must accept the fact that losses are part of the game.

In 1984, Elliott Wave International’s founder and president Robert Prechter won the U.S. Trading Championship, setting a new all-time profit record of 444.4% in a monitored real-money options account in 4 months. In the average 4-month contest, over 75% of contestants, mostly professionals, fail to report profits.

In November 1986, in his monthly Elliott Wave Theorist Prechter published a Special Report titled, “What A Trader Really Needs To Be Successful” and gave 5 important tips to would-be market speculators. You can read them now, free (details below) — but here’s Bob’s fourth point:

4. Accept the Fact that Losses Are Part of the Game.

There are many denials of reality which automatically disqualify millions of people from joining the ranks of successful speculators. For instance, to moan that “pools,” “manipulators,” “insiders,” “they,” “the big boys” or “program trading” (known today as “high-frequency trading” — Ed.) are to blame for one’s losses is a common fault. Anyone who utters such a conviction is doomed before he starts. But my observation, after eleven years “in the business,” is that the biggest obstacle to successful speculation is the failure merely even to recognize and accept the simple fact that losses are part of the game, and that they must be accommodated.

The perfect trading system does not exist. Expecting, or even hoping for, perfection is a guarantee of failure. Speculation is akin to batting in baseball. A player hitting .300 is good. A player hitting .400 is great. But even the great player fails to hit 60% of the time! He even strikes out often. But he still earns six figures a year, because although not perfect, he has approached the best that can be achieved. You don’t have to be perfect to win in the markets, either; you “merely” have to be better than almost everybody else, and that’s hard enough.

Practically speaking, you must include an objective money management system when formulating your trading method in the first place. There are many ways to do it. Some methods use stops. If stops are impractical (such as with options), you may decide to risk only small amounts of total capital at a time. After all is said and done, learning to handle losses will be your greatest triumph.

The last on my list is [the point] I have never heard mentioned before. …

Keep reading this free Special Report titled, “What A Trader Really Needs To Be Successful” now — all you need to do is create a free Club EWI profile.

Elliott Wave International’s Understanding the Fed eBook is now available

Dear reader,

My friends at Elliott Wave International have just released a free 34-page eBook, Understanding the Fed. It’s the free report the Federal Reserve doesn’t want you to read!

This eye-opening free report, which represents more than 10 years of research by Robert Prechter, goes beyond the Fed’s history and government mandate; it digs into the Fed’s real motivations for being the United States’ “lender of last resort.” In this 34-page report, you’ll discover how the Fed’s actions, combined with public outrage, may ultimately lead to its demise, plus much more about its secret activities and how it affects your money.

Download your free copy of EWI’s Understanding the Fed eBook, here.

Warmest regards,
Alan
———-
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.

Free “end-of-day” Forex group coaching program

Dear Forex traders,

Here’s the scoop…

TOMORROW, on Monday, March 8th, 2010, the doors finally open to
35+ year market veteran Bill Poulos’s brand new “end-of-day”
Forex group coaching program.

As is par for the course with Bill’s releases, he’s limited the
number of new students he lets in to the program.

So to further help “weed out” the tire-kickers, Bill just
released a TON of extra Forex training materials that he put on
a special Member’s Website Preview for you.

Here are just a few of the goodies you’ll get on the preview
site, beginning TODAY:

** Preview access to his PIP FEEDER service where you can get
daily lists of the Forex pairs that have met his rigorous
trade alert criteria. In fact, these are Forex pairs that
have a high probability of entering into potentially
profitable positions any day now. He’ll eventually be
charging $197/mo for this service, but you can see a sneak
peek for a few days.

** The “Pip Vault”, which contains actual Forex trade example
“screen capture” videos, so you can see exactly how you
can trade in less then 20 minutes a night.

** Day-by-day “trade diaries” that show you the trading
decisions Bill has made each night on some really
great trades (you’ll also see a trade that’s not really going
anywhere yet, and how he manages that situation).

** Previews of the actual CD-ROMs that ship with the course so
you can see exactly the type of material that’s on them.

** and a TON more…

But don’t take my word for it. Go ahead and check it out now by
visiting the web page here now:

http://www.smartforextraining.com/y/?i=773362&u=1&l=f90

Your username is: readyto
Your password is: enroll

Good Trading!

p.s. This complimentary preview access will be expiring in a few
days, and likely taken offline, so I urge you to get in now
while you can if you have any interest learning how to
dramatically up your “pip potential” while saving hours a day at
the same time.

Get in here:

http://www.smartforextraining.com/y/?i=773362&u=1&l=f90

A trading system that doesn’t cost a dime

Hi,

Did you take the short quiz I blogged about the other day? How’d you do?

If not, here’s the link again.
http://www.netpicks.com/cmd.php?af=1004071&u=http://www.highvelocitymarketmaster.com/quiz/quiz.html

I have to admit, I missed one question.  Those “all of the above”
type questions can be tricky.

The nice thing is, even if you don’t ace the quiz you still have a
shot at winning an entire High Velocity Market Master system!
Just be sure you sign-up for the webinar
Wednesday February 17th at 12:00pm EST/ 9:00am PST/5:00pm GMT.

http://www.netpicks.com/cmd.php?af=1004071&u=http://www.highvelocitymarketmaster.com/surprise

The webinar will be action packed.  The guys over at the HVMM
headquarters have some BIG news to reveal…I got a little sneak
peak and trust me…you don’t want to miss this!

Happy Trading,
Alan

P.S.  If you’d like a hint of what to expect in the webinar, make
your way to the HVMM blog and catch a little sneak peak…

http://www.netpicks.com/cmd.php?af=1004071&u=http://www.highvelocitymarketmaster.com/blog/

Something to jump start your capital growth

Hey,

I know many of you were wondering about the High Velocity Market Master
because of the Capital Growth App, so I got you more details…

Here’s a quick video showing the HVMM work its magic on the futures market:

http://www.netpicks.com/cmd.php?af=1004071&u=http://www.highvelocitymarketmaster.com/blog/?p=382

Once you’ve watched that video, there is something else you must see.

Those crazy dudes at the HVMM headquarters love to give things away. They
gave you the Capital Growth App and now they’re moving on to even bigger
things. They’re actually challenging you to a quiz and giving away an
entire High Velocity Market Master course!

Just as the Capital Growth App is universal, so is the HVMM. It works on
any market and timeframe. Whether you are a day trader or swing trader
that trades forex, futures, stocks or options you’ll want to step-up to
this challenge.

Why participate in this little contest?

Well, for starters you get an entire trade system, training course, and
indicator suite all for no cost! (This is the same system that saw *28
straight positive sessions*). You’ll also get to test your trade knowledge
and assuming you ace the quiz you’ll get bragging rights too! ; )

To win a copy of the HVMM just take the short quiz, answer the 9 questions
and make sure you enter your email address at the end. As long as you
complete the quiz you’ll be entered to win, no matter what your final score
is.

Enter the contest now:

http://www.netpicks.com/cmd.php?af=1004071&u=http://www.highvelocitymarketmaster.com/quiz/quiz.html

The winner will be chosen and revealed on Wednesday, February 17th at
12:00pm EDT/ 9:00am PST/5:00pm GMT. You must be present to claim your
prize.

Don’t miss your name being called. Register for the webinar here:

http://www.netpicks.com/cmd.php?af=1004071&u=http://www.highvelocitymarketmaster.com/surprise

Best of luck!

Happy Trading,
Alan

Capital growth application on-the-house

Hi!

What do you think of the capital growth app I blogged about in my previous post?

You can’t argue with the cost – it’s completely affordable with the
$0.00 price tag!  But I’m sure some of you thought since it didn’t cost
anything it wasn’t worth much…

How pleasantly surprised were you when you found out that this
application and seminar will make dreaded tasks like budgeting and
setting financial projections for your trade business totally simple?!

If you didn’t grab it yet, what are you waiting for?

Get it here:

http://www.netpicks.com/cmd.php?af=1004071&u=http://www.highvelocitymarketmaster.com/capitalgrowth

I’m stoked about this app, as probably you are too, because you
realize how much time and effort it can save you.

The pro trader who developed this app uses it with the High
Velocity Market Master but you can use it on literally any system!

http://www.netpicks.com/cmd.php?af=1004071&u=http://www.highvelocitymarketmaster.com/capitalgrowth

Good Trading,

Alan

P.S. The capital growth application is on-the-house.  Download it
before they wise up and start charging:

http://www.netpicks.com/cmd.php?af=1004071&u=http://www.highvelocitymarketmaster.com/capitalgrowth

Free Universal Capital Growth Trade Tool

Hello,

Capital growth…

Isn’t that why we’re traders in the first place?  So, why is it
hard to learn the truth about growing your account?

I guess it’s because the truth isn’t always pretty.  If you’ve been
a trader for many years, as I have, then you know you have to treat
trading like any other serious business. And that means setting a
budget and developing your own financial projections.

Doesn’t sound very glamorous, does it?  Well, it may not be
glamorous, but it’s really not hard.  Especially with the tools that
are out there today.

That’s why when I got my hands on this cool universal capital growth
application I had to pass it along to you.  The best part is there
is not cost involved!

Check-it-out:
http://www.netpicks.com/cmd.php?af=1004071&u=http://www.highvelocitymarketmaster.com/capitalgrowth

If you’re looking to make trading your #1 career, you’ve got to ask
yourself, “Are you taking it seriously?”

This trade application and seminar are going to show you exactly
what you need to get your trade business in order. You’ll be able to
set realistic expectations for your income and capital growth as
opposed to believing the hype you receive in your spam box every day.

If you’re a beginning trader, even better! You have no bad habits
to break, which means you can learn the RIGHT way from the very start.

Grab this trade app and listen to the seminar (why not, it’s FREE):

http://www.netpicks.com/cmd.php?af=1004071&u=http://www.highvelocitymarketmaster.com/capitalgrowth

Let me know if you like it.

Good Trading,
Alan

P.S. I wouldn’t wait to download the application. I’m not sure how
long this link will work.  Once the masses find out about this,
I’m sure these guys will start charging for the tool!

http://www.netpicks.com/cmd.php?af=1004071&u=http://www.highvelocitymarketmaster.com/capitalgrowth

Grab this free trade system

Are you a forex trader like me? Do you want to get into Forex?
If you said yes to either question, please read on.

This time of year you’re bombarded with sales, holiday specials,
coupons, all sorts of discounts, and even free stuff, but it
seems there’s always a catch.

I just got wind of a total giveaway that has *NO CATCH* seriously!

http://www.netpicks.com/cmd.php?af=1004071&u=http://www.highvelocitymarketmaster.com/ultimatedaytradesystem.html

A friend of mine sent me this link for a trade system. Being a bit
of a skeptic scrooge, I immediately started looking for the hidden
cost involved, the hoops you may have to jump through to get it, the
survey you have to take, etc. I searched and searched and read the
fine print, only to find that this is truly a freebie!

This system is designed for the forex market (and can be applied to
other markets). When I say system, that’s exactly what I mean (not a
gimmick report or video training). It’s a real system that will
pinpoint exact entries and exits and help you identify and trade the
major pairs, all while only spending a few hours a day to see
positive results.

The developers bring 13 years experience to the table, from what
I’ve seen that experience has paid off and is translated effortlessly
to you in this system.

Check out this free trade system:

http://www.netpicks.com/cmd.php?af=1004071&u=http://www.highvelocitymarketmaster.com/ultimatedaytradesystem.html

Why pass this up? If you’ve been looking for clear and precise
rules that will indicate when to take a trade and exactly when to
get out, this is the simple system that spells it out for you.

Happy Trading!
Alan

P.S. As with any too good to be true offer, I’m not sure how long
this will be around before they put some stipulation on it or make
you pay for it.

So get it today:

http://www.netpicks.com/cmd.php?af=1004071&u=http://www.highvelocitymarketmaster.com/ultimatedaytradesystem.html