Bob Prechter Points Out The Many Signs Of Deflation
by ilene - April 29th, 2010 2:07 pm
Messages/free offers from Elliott Wave International: 1) Worry and prepare for deflation – download free Important Investor Report. 2) Free chapters from Robert Prechter’s best-seller Conquer the Crash (if not registered, will need to sign up).
Bob Prechter Points Out The Many Signs Of Deflation
Everywhere you look, the mainstream financial experts are pinning on their "WIN 2" buttons in a show of solidarity against what they see as the number one threat to the U.S. economy: Whip Inflation Now.
There’s just one problem: They’re primed to fight the wrong enemy. Fact is, despite ten rate cuts by the Federal Reserve Board to record low levels plus $13 trillion (and counting) in government bailout money over the past three years — the Demand For and Availability Of credit is plunging. Without a borrower or lender, the massive supply of debt LOSES value, bringing down every exposed investment like one long, toppling row of dominoes.
This is the condition known as Deflation.
Bob Prechter uncovered more than a dozen "value depreciating" developments underway in the U.S. economy as the two main engines of credit expansion sputter: Banks and Consumers. Here’s a preview of his findings contained the free report, The Most Important Investment Report You’ll Read in 2010:
- A riveting chart of Treasury Holdings as a Percentage of US Chartered Bank Assets since 1952 shows how "safe" bank deposits really are. In short: today’s banks are about 95% invested in mortgages via the purchase of federal agency securities. Unlike Treasuries, IOU’s with homes as collateral have "tremendous potential" to fall in dollar value.
- Loan Availability to Small Businesses has fallen to the lowest level since the interest rate crises of 1980. In Bob Prechter’s own words: "The means of debt repayment [via business growth] are evaporating, which implies further deflationary pressure within the banking system."
- An all-inclusive close-up of the Number Of Banks Tightening Their Lending Standards since 1997 has this message to impart: Since peaking in October 2008, lending restrictions have soared, thereby significantly reducing the overall credit supply.
- Both residential and commercial mortgages are plummeting as home/business owners walk away from their leases at an increasing rate.
- The major sources of bank revenue — consumer credit and state taxes — are plunging as more people opt to pay DOWN their debt. Also, a compelling chart of leveraged buyouts since 1995 shows a third catalyst for the credit binge —
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DiggGoldman Sachs Charged With Fraud: Who Could Have Guessed? Part III
by ilene - April 25th, 2010 9:15 am
Goldman Sachs Charged With Fraud: Who Could Have Guessed? Part III
The firm’s history suggests its vulnerability in periods of negative social mood.
By Elliott Wave International
For the full GS/Fraud article, parts I-III, click here.>>
In the November 2009 issue of Elliott Wave International’s monthly Elliott Wave Financial Forecast, co-editors Steven Hochberg and Peter Kendall published a careful study of Goldman Sachs history — and made a sobering forecast for its future. Here is our special report, Part III.
Special Section: A Flickering Financial Star, Part III
With the market’s downtrend recently in abeyance, these transgressions failed to capture the imagination of the public or the scrutiny of law enforcement. But the extreme recriminatory power of the next leg down in social mood suggests that Goldman’s dealings will become a lighting rod for public discontent.
In January 2008, Elliott Wave Financial Forecast noted that Goldman’s success relative to the rest of Wall Street pointed “to the eventual appearance of a much larger public relations problem in the future. In the negative-mood times that accompany bear markets, conflict of interest charges will come pouring out.” The recent revelations about Paulson’s and Friedman’s actions are exactly that to which we were referring. Additional claims against Goldman — including front-running its clients and profiting from inside information — are already too numerous to mention. As the bear market intensifies, the firm will attract scrutiny as easily as it brushed it off in the mid-2000s.
Based strictly on the form of its advance, a July 2007 issue of The Short Term Update called for a peak in Goldman shares at $234. Goldman managed one more new high to $250 in October 2007; it then fell 81 percent to a low of $47 in November 2008. The stock market’s wave 2 rise brought Goldman back to $193 on October 14. Its affinity for marching in lock-step with the DJIA strongly suggests that Goldman will decline to below its November 2008 low.
Another key socionomic trait is for the most successful recipients of bull-market goodwill to be singled out for special treatment in the ensuing decline. Even fellow financiers are taking aim. In a not-so-veiled reference to Goldman, one Wall Street titan said that big profits made by investment banks are “hidden gifts” from the state, and resentment of such firms is “justified.” Let the bloodletting begin.
Let the Buyers (of Stock) Beware
Goldman’s heavy involvement in the hedge fund…
Goldman Sachs Charged With Fraud: Who Could Have Guessed?
by ilene - April 21st, 2010 12:29 pm
Goldman Sachs Charged With Fraud: Who Could Have Guessed?
The firm’s history suggests its vulnerability in periods of negative social mood.
Courtesy of Elliott Wave International
In the November 2009 issue of Elliott Wave International’s monthly Elliott Wave Financial Forecast, co-editors Steven Hochberg and Peter Kendall published a careful study of Goldman Sachs company history — and made a sobering forecast for the firm’s future: "Goldman Sachs will experience an epic fall."
In this special three-part series, we will release this Special Report. Part II is below. You can find the entire series here: EWI forecasts Goldman Sachs company troubles.
[Scroll down below Part II for Part I, in case you missed it. - Ilene]
Special Section: A Flickering Financial Star (Part II)
Despite careful stewardship, Goldman’s reputation faltered as stocks fell in 1969-1970. When the Penn Central Railroad went under, it was revealed that Goldman sold off most of its own Penn Central holdings before the June 1970 bankruptcy. This was another case of shifting standards, as Goldman’s customers were all institutions dealing in unregistered commercial paper. They should have known the high odds of failure, as the railroad’s stock was down almost 90% when it finally failed.
As Cycle wave IV touched its low in October 1974 (S&P; see historic chart in Part I), a jury ruled, however, that Goldman “knew or should have known” that the railroad was in trouble. But Goldman Sachs company survived the negative judgment and grew quickly as the Cycle wave V bull market took off beginning in 1975.
As the chart shows, its rise to 2007 was meteoric. It was in this period that Goldman “reinvented itself” as a “risk-taking principal.” By 1994, Goldman Sachs: The Culture of Success (by Lisa Endlich) says compensation policies had tilted so heavily toward risk taking that one vice president noted, “everyone decided that they were going to become a proprietary trader.” In that year, the firm suffered its first capital loss in decades as stocks sputtered, but, within a year, the Great Asset Mania was in full force and Goldman’s appetite for risk took off with that of the investment public.
In 1999, the last year of a 200-year Grand-Supercycle-degree bull market, Goldman Sachs, appropriately, went public, becoming the last major Wall Street partnership to do so. As Bob Prechter’s Elliott Wave Theorist said at the time, “Some of the most conspicuous cashing in has come from the…
Goldman Sachs Charged With Fraud: Who Could Have Guessed?
by ilene - April 19th, 2010 9:03 pm
Goldman Sachs Charged With Fraud: Who Could Have Guessed?
The firm’s history suggests its vulnerability in periods of negative social mood.
By Vadim Pokhlebkin
April 16, (Reuters) – Goldman Sachs Group Inc was charged with fraud on Friday by the U.S. Securities and Exchange Commission in the structuring and marketing of a debt product tied to subprime mortgages.
Surprised? In the November 2009 issue, the EWFF co-editors Steven Hochberg and Peter Kendall published a careful study of Goldman Sachs’ history — and made a grim forecast for the firm’s future.
Special Section: A Flickering Financial Star
At the Dow’s all-time peak in October 2007, Goldman Sachs Group Inc., was the undisputed heavyweight champion of the financial markets. And, thanks to its bailout by Warren Buffett and the U.S. Treasury as well as the liquidation of rivals Bear Stearns and Lehman Brothers, its reign lives on. Come December, earnings and bonuses will reputedly approach the record levels of 2007. If the market can hold up, it might happen. But as the stock market retreat grabs hold, Goldman Sachs will experience an epic fall.
To understand the basis for this forecast, we need to review the firm’s history in light of socionomics.
At the beginning of the last century, Goldman Sachs originally made a name for itself with its first initial public offerings, United Cigar and Sears Roebuck. The deals came as the stock market made a multi-year top in 1906. Within months, the panic of 1907 was on, and a U.S. Interstate Commerce Commission investigation of the Alton Railroad Company bond offering, in which Goldman participated, was in full swing. According to The Partnership, Charles Ellis’ history of Goldman Sachs, the deal was “long remembered as ‘that unfortunate Alton deal’.” The bond issue allowed a considerable cash surplus to be paid out to shareholders in the form of a one-time dividend, a standard financial maneuver in the preceding bull market. In fact, the deal was unknown to the public until it came before the ICC in 1907. “Then, probably to the surprise of the syndicate, the verdict was practically unanimous against them. They were tried before the bar of public opinion and found guilty,” said author William H. Lough in Corporation Finance. Lough added that syndicate members “ought not be too severely criticized for they merely acted in accordance with the custom of the period.”
So it goes…
Raising The BAR: Bar Patterns & Trading Opportunities
by Chart School - April 16th, 2010 6:55 pm
Raising The BAR: Bar Patterns & Trading Opportunities
How a 3-in-1 formation in cotton "triggered" the January selloff
By Nico Isaac at Elliott Wave International
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 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…
Volume: The Stock Market’s “Footprints”
by ilene - April 14th, 2010 2:03 pm
Volume: The Stock Market’s "Footprints"
Market volume changes can signal a trend change
Courtesy of Elliott Wave International
A few years ago, a question was posed to Elliott Wave International’s president Robert Prechter:
"Under the Wave Principle, what is the most important thing to watch other than price?"
Prechter answered via his monthly Elliott Wave Theorist: "Volume."
High trading volume is a chief characteristic of a healthy trend, bullish or bearish. The DJIA has rallied for over a year now off its March 2009 low, but volume has consistently been lacking. We’ve shared our thoughts on this fact many times with our subscribers.
"Many market watchers said that the low volume in December was merely seasonal and not bearish. But volume in January has been no higher than it was from December 1 to December 22, and it is still lower than October’s, which was lower than September’s, and so on."
-- Bob Prechter, Elliott Wave Theorist, January 2010.
Even lately, low volume has persisted. Here’s what is notable, though: The market’s down days have generally been on higher volume than the up days. This could mean investors are gradually leaving the market. Our Monday-Wednesday-Friday Short Term Update has been monitoring volume closely:
March 31 Short Term Update: "Today was the first down close since March 24 and it occurred on increased volume."
April 5: "A contraction in the number of NYSE issues closing up versus down over the past two weeks as well as the total daily NYSE volume that was up versus down shows [that] internally, the market was ‘correcting’."
April 6: "The S&P closed up, but breadth was noticeably weaker today versus yesterday, as was the NYSE up/down volume ratio."
On Monday, April 12, the Dow climbed over 30 points intraday before closing with a modest gain of just under 9 points and actually falling into negative territory for a time. While this did mark the first time the Dow closed above 11,000 in many moons, volume remained near the muted levels of April 9. Here’s the April 12 Short Term Update’s comment (online now):
"NYSE volume remains anemic, with just 964 million shares traded today (4/13). April has now consisted of 7 trading sessions of which 5 occurred with NYSE volume of less than 1 billion shares traded, which is a bit ‘zany’ in that the first two weeks of
…
Why Economic Forecasts Often Fail
by ilene - April 14th, 2010 11:22 am
Why Economic Forecasts Often Fail
Linear thinking often utterly misses the mark in financial forecasting.
Courtesy of Elliott Wave International
Let’s begin with a paradox: The one constant in our society is dramatic change. This is the main reason why projecting present conditions into the future often fails.
"If someone had asked you in 1972 to project the future of China, would anyone have said, in a single generation, they will be more productive than the United States and be a highly capitalist country?
"Project the U.S. space program in 1969, in fact many people did — there are plenty of papers you can read from 1969 to 1970 saying, well, it’s obvious at this pace we’ll both have colonies on the Moon very soon and we’ll have men on Mars…
"One could just as well ask someone to project, say, the Roman stock market in 100 A.D. I doubt if you’d have found anyone who said, well, it’s essentially going to go to zero."
-- Robert Prechter at the London School of Economics, lecture "Toward a New Science of Social Prediction."
Examples of linear thinking may be well-known like the ones above, or they may happen in our individual spheres. Mom sees Johnny eating animal crackers Monday, Tuesday and Wednesday. The box is now empty. She buys more — but the box remains unopened for days. Johnny wants a break from animal crackers. It’s an elementary example, but a demonstration of linear thinking nonetheless.
The socially awkward classmate you knew in high school is now the boss of the former class president who was dubbed "most likely to succeed." Projections for both of their futures would have widely missed the mark.
SUVs are selling like snow cones on an August afternoon in Luckenbach, Texas… "let’s make more," says Detroit. "Dramatic change" takes over in the form of sky-high gas prices followed by a recession and a social distaste for excess — and SUV sales sink.
Point is: When it comes to your money, pay attention to the pitfalls of linear thinking.
The markets of today may not resemble the markets of tomorrow.
Keep in mind the concept of dramatic change. This cannot be over-emphasized and bears repeating: Major change is not an occasional occurrence throughout history; paradoxically, it’s the only constant.
Even with the benefit of reviewing the above examples, it can be difficult to imagine, ahead of time,…
A Tradable Edge
by Chart School - April 9th, 2010 4:28 pm
A tradable edge
Courtesy of Allan
On April 1, the GLD Daily Trend Model flipped long, with GLD closing on that day at 110.26.
One week later, GLD is above 113, for about a 3% gain. This gain may not look like much on the above chart, but the near-term at-the-money calls are up well over 100%. The Buy signal didn’t come in at the very bottom, but it did come in early enough in the GLD rally to generate some nice gains. The same can be said for the three other signals shown on the Daily chart above. I like the way these signals perform, not perfect, but a tradable edge.
What now? Hold your gold. It’s in an up trend. Same thing for financials.
Financials and the market
FAS is a triple leveraged ETF for financial services stocks. Its hard to imagine the market suffering any kind of sustainable decline with this kind of strength:
The How to Spot Trading Opportunities eBook features 47-pages of easy-to-understand trading techniques that help you identify high-confidence trade setups. Senior EWI Analyst Jeffrey Kennedy shows you how some of the simplest rules and guidelines can be used as powerful trading tools. Created from the $129 two-volume set of the same name, this valuable eBook is offered free until April 23, 2010.
Free Trials of the Day
by ilene - April 1st, 2010 1:57 pm
Two free trials: Market Club and Elliott Wave
1. Market Club is offering a two week trial of their powerful tools, unlimited email and phone support, and Adam Hewison himself. Use the trading tools see what you think, for free! Click here.>>
2. Elliott Wave International:
No method gets you into a trend earlier and out of a failed move faster than the Wave Principle. Read the entire free 6-page report, free "How the Wave Principle Can Improve Your Trading" today.
If you try one or both, please let me know what you think. – Ilene
The Wave Principle: Where The Rubber Hits The Road
Elliott wave analysis saw corn’s biggest moves coming
By Nico Isaac
You could be to technical analysis what tweens are to texting, and it wouldn’t make a lick of difference: You still wouldn’t necessarily be trading at your fullest potential. The reason being: Without Elliott wave in your technical analysis toolbox, it’s like looking at the world of opportunity through a narrow keyhole and ultimately missing the big picture.
The Wave Principle can help you unlock that door. Teaching you how to do it is the goal of the latest free educational report from our Club EWI resource center, titled "How the Wave Principle Can Improve Your Trading." In this six-page article, our editorial staff reveals these (and many more) ways in which the wave model makes up for the ways ordinary technical methods fall short:
- Technical studies can get you on board a trend, but the Wave Principe can say specifically at which point that trend has failed — namely, when prices violate critical support or resistance levels in your price charts.
- Technical studies can identify the direction of a trend, but the Wave Principle can determine how high prices will rally or how low they will fall.
- Technical studies can recognize the strength of a trend, but the Wave Principle can discern the maturity of one; when it’s time to take profits or raise protective stops.
- Technical studies can recognize the strength of a trend, but the Wave Principle can discern the maturity of one; when it’s time to take profits or raise protective stops.
Now for the fun part: Putting the Wave Principle to use in the real-time action of a well known market. For this, we turn to EWI’s chief commodity analyst and long-time Futures Junctures Service editor Jeffrey Kennedy. (Note: Futures Junctures Service is…
What To Do With Your Pension Plan
by ilene - March 16th, 2010 7:59 pm
What To Do With Your Pension Plan
Courtesy of Elliott Wave International
Robert Prechter’s Conquer the Crash foresaw and explained nearly every chapter of today’s financial crisis, years before it happened. Enjoy your 8 free chapters from the book with this free Club EWI report; here’s a quick excerpt from chapter 23, "What To Do With Your Pension Plan." Note especially the last two paragraphs.
Make sure you fully understand all aspects of your government’s individual retirement plans. In the U.S., this includes such structures as IRAs, 401Ks and Keoghs. If you anticipate severe system-wide financial and political stresses, you may decide to liquidate any such plans and pay whatever penalty is required. Why?
Because there are strings attached to the perk of having your money sheltered from taxes. You may do only what the government allows you to do with the money. It restricts certain investments and can change the list at any time. It charges a penalty for early withdrawal and can change the amount of the penalty at any time.
What is the worst that could happen? In Argentina, the government continued to spend more than it took in until it went broke trying to pay the interest on its debt. In December 2001, it seized $2.3 billion dollars worth of deposits in private pension funds to pay its bills.
In the 1930s, the world heard a lot of populist rhetoric about why “rich” people should be plundered for the public good. It is easy to imagine such talk in the next crisis, directed at requiring wealthy people to forfeit their retirement savings for the good of the nation.
With the retirement setup in the U.S., the government need not be as direct as Argentina’s. It need merely assert, after a stock market fall decimates many people’s savings, that stocks are too risky to hold for retirement purposes. Under the guise of protecting you, it could ban stocks and perhaps other investments in tax-exempt pension plans and restrict assets to one category: “safe” long-term U.S. Treasury bonds.
Then it could raise the penalty of early withdrawal to 100 percent. Bingo. The government will have seized the entire $2 trillion — or what’s left of it given a crash — that today is held in government-sponsored, tax-deferred 401K private pension plans. I’m not saying it will happen, but it could, and wouldn’t you rather…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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