Simple Tools for Competent Trades
by Chart School - December 2nd, 2010 11:57 am
Improve your Financial Decision-Making Skills with Guidance from EWI Chief Commodity Analyst Jeffrey Kennedy. Courtesy of Elliott Wave International.
Simple Tools for Competent Trades
As a high school freshman, I had a friend over to do math homework after school. It was cold in the room, so I stood on my chair and jumped up and down to try and bat open a closed heating vent.
My dad walked in and commented on the geometry problem we were working on, as I continued to struggle, unsuccessfully, to open the vent. Then, he handed me a ruler from the table and said:
"Simple tools are what separate us from the animals."
Without another word, he left us to finish our homework. Sadly, I don’t remember any of the geometric formulas that I was trying to master on that winter’s day. But you can bet that I have never failed to reach for a simple, practical tool since.
Here at Elliott Wave International, our technical analysts provide you with simple, practical tools that can help your analysis and trading. EWI Senior Analyst Jeffrey Kennedy has spent years using and mastering — among many other technical trading tools — several well-known moving average techniques. In the process, he has even developed his own personal moving average method that he calls the "Stoplight System."
For a limited time, the first two chapters of "How You Can Find High-Probability Trading Opportunities Using Moving Averages" are available FREE when you join (free) Club EWI.
In these excerpts, Jeffrey explains:
- Defining the Moving Average and Its Components
- The Dual Moving Average Cross-Over System
- Moving Average Price Channel System
- Combining the Crossover and Price Channel Techniques
- The Most Popular Moving Averages
Jeffrey’s insights are meant to help you become more successful and highly evolved in your endeavors. Here is one of the charts showing how moving averages are similar to the Wave Principle in signaling buying opportunities:
This chart of Corning shows how each time the market moves into the price channel (marked by the short vertical lines), it signals a buying opportunity. When Corning’s price breaks through the price channel (indicated by the short diagonal line), the trend has turned to the downside. So, we have a clear uptrend followed by a clear downtrend.
Remember, "Simple tools are what separate us from the animals."
We have extended our special offer — for a limited time, the first two chapters…
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The Fed and “Plunge Protection Team”: Are They Manipulating Stocks?
by Chart School - October 29th, 2010 4:19 pm
The Fed and "Plunge Protection Team": Are They Manipulating Stocks?
Rumors are, the U.S. government "is propping up the stock market."
By Elliott Wave International
You will find many intriguing Q&As at EWI’s Message Board. We offer it as a free way for our Club EWI members and subscribers to interact with EWI and the Socionomics Institute’s experts. We strive to answer every Message Board reader, and publicly post the best Q&As.
By far, the most frequent question we’ve been asked recently is:
"What is your take on the persistent internet chatter that the Federal Reserve is holding up the stock market via QE2, POMO, etc.? How can stocks ever decline again if the Fed is in control?"
We have several active Message Board posts that touch on "market manipulation." But here is an eye-opening chart that will help shed more light on this issue.
EWI President Robert Prechter published this chart in his October 2008 Elliott Wave Theorist. Review this chart carefully. For too many investors, the crash of 2007-2009 is becoming a hazy memory. And almost no one in the mainstream financial media talks about the utter panic in the markets in September-October 2008, the worst part of the crash.
If you think back to that time, you may remember that the Federal Reserve and U.S. government took many aggressive steps to help stop the collapse. Every time they would announce a new intervention, the market would cheer. Result? Prechter’s chart gives an unequivocal answer:
As you can see, announcements of bailouts, unlimited credit, bans on short sales, etc., were powerless against the biggest stock market collapse in 76 years. The DJIA kept sliding. It didn’t stop until March 6, 2009 — after it had slipped below 6,500.
So: Is the Fed and the "Plunge Protection Team" engaged in market manipulation? You can browse EWI’s Message Board for some answers, but one thing is clear: When stocks were crashing two years ago, few dared to suggest that the Fed was in the saddle. Bob Prechter puts it best:
"When markets go up, the Fed seems to be in control; when they go down, it seems out of control. But the control aspect is an illusion."
Get the 33-page Market Myths Exposed eBook for…
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The Fed and “Plunge Protection Team”: Are They Manipulating Stocks?
by ilene - October 29th, 2010 3:21 pm
The Fed and "Plunge Protection Team": Are They Manipulating Stocks?
Rumors are, the U.S. government "is propping up the stock market."
By Elliott Wave International
You will find many intriguing Q&As at EWI’s Message Board. We offer it as a free way for our Club EWI members and subscribers to interact with EWI and the Socionomics Institute’s experts. We strive to answer every Message Board reader, and publicly post the best Q&As.
By far, the most frequent question we’ve been asked recently is:
"What is your take on the persistent internet chatter that the Federal Reserve is holding up the stock market via QE2, POMO, etc.? How can stocks ever decline again if the Fed is in control?"
We have several active Message Board posts that touch on "market manipulation." But here is an eye-opening chart that will help shed more light on this issue.
EWI President Robert Prechter published this chart in his October 2008 Elliott Wave Theorist. Review this chart carefully. For too many investors, the crash of 2007-2009 is becoming a hazy memory. And almost no one in the mainstream financial media talks about the utter panic in the markets in September-October 2008, the worst part of the crash.
If you think back to that time, you may remember that the Federal Reserve and U.S. government took many aggressive steps to help stop the collapse. Every time they would announce a new intervention, the market would cheer. Result? Prechter’s chart gives an unequivocal answer:
As you can see, announcements of bailouts, unlimited credit, bans on short sales, etc., were powerless against the biggest stock market collapse in 76 years. The DJIA kept sliding. It didn’t stop until March 6, 2009 — after it had slipped below 6,500.
So: Is the Fed and the "Plunge Protection Team" engaged in market manipulation? You can browse EWI’s Message Board for some answers, but one thing is clear: When stocks were crashing two years ago, few dared to suggest that the Fed was in the saddle. Bob Prechter puts it best:
"When markets go up, the Fed seems to be in control; when they go down, it seems out of control. But the control aspect is an illusion."
Get the 33-page Market Myths Exposed eBook…
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The Hindenburg Omen
by ilene - August 24th, 2010 5:33 pm
Here are a couple Hindenburg Omen articles. Zero Hedge points out the third confirmation has occurred, and Elliott Wave Int. discusses the meaning of the Hindenburg signs. See also The Hindenburg Omen was triggered today! - Ilene
Third Hindenburg Omen Confirmation
Courtesy of Tyler Durden
The market is now down 3.4% from the August 12 open, when the first Hindenburg Omen was sighted, on route to validating the prediction of a 5% drop. However, in the process it continues getting worse and worse – today we just got a third H.O. confirmation, and a 4th standalone HO event, as the market seems to be getting ever more schizophrenic, with increasing new highs and new lows, while the undercurrent is one of ever increasing implied correlation as noted earlier, as ever more asset managers simply rely on levered beta "strategies" to redeem their year. Unlike 2009, however, this time the trick won’t fly, as it appears the market’s downside potential is finally starting to be appreciated.
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Elliott Wave International Chief Market Analyst Steve Hochberg Sheds Light on a Feared Technical Indicator
The Hindenburg Omen — Omen-ous or Not?
By Elliott Wave International
On Aug. 12, volatile market action coincided with a technical signal called the Hindenburg Omen, whereby a relatively high number of new highs and lows in individual stocks occur at the same time.
This indicator instantly gained an enormous amount of media attention. So we sat down with Steve Hochberg, EWI’s chief market analyst and close colleague of Robert Prechter, to ask him about the now-infamous Hindenburg Omen.
EWI: Steve, recently a market indicator called the Hindenburg Omen has been in the news, what is going on?
Steve Hochberg: Discussion of this indicator certainly has been everywhere. Someone emailed us and said they even saw it mentioned on the front page of the Drudge Report! Look, headline-grabbing names grab headlines. Essentially it measures the fractured nature of market action. Over the years, we’ve discussed numerous times in our publications how a fractured market is often times an unhealthy market. The multiple non-confirmations registered at the recent August 9 stock high, which we talked about in the Short Term Update, are another manifestation of this bearish behavior. The message is consistent with how we view the Elliott wave structure.
EWI: Why are people interested in this particular indicator?
SH: That’s a…
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Technicals vs. Fundamentals: Which are Best When Trading Crude Oil and Natural Gas?
by Chart School - August 11th, 2010 4:17 pm
Technicals vs. Fundamentals: Which are Best When Trading Crude Oil and Natural Gas?
By Elliott Wave International
If "fundamentals" drive trend changes in financial markets, then shouldn’t the same factors have consistent effects on prices?
For example: Positive economic data should ignite a rally, while negative news should initiate decline. In the real world, though, this is hardly the case.
On a regular basis, markets go up on bad news, down on good news, and both directions on the same news — almost as if to say, "Talk to the hand cuz the chart ain’t listening."
Unable to deny this fly in the fundamental ointment, the mainstream experts often attempt to reconcile the inconsistencies with phrases like "shrugged off," "defied" or "in spite of."
That begs the next question: How do you know when a market is going to cooperate with fundamental logic and when it won’t? ANSWER: You don’t.
Unlike fundamental analysis, technical analysis methods don’t rely on the news to explain or predict market moves. They look at the markets’ internals instead.
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One tool that many traders find helpful in evaluating the markets’ internals is Elliott Wave Theory. Elliott Wave International is offering readers a free trading eBook put together by its senior analyst, Jeffery Kennedy. The eBook contains practical trading lessons which may help you trade any market with more confidence. According to EWI,
This complimentary 32-page collection entitled Commodity Trader’s Classroom (valued at $59) provides you with essential lessons no trader should be without.
Here’s what the eBook covers:
- How to Make Yourself a Better Trader
- How the Wave Principle Can Improve Your Trading
- When to Place a Trade: Jeffrey’s very own "Ready, Aim, Fire" approach
- How to Identify and Use Support and Resistance Levels
- How to Apply Fibonacci Math to Real-World Trading
- How to Integrate Technical Analysis into an Elliott Wave Forecast
- And much more!
Learn more and download your copy of Commodity Trader’s Classroom now.
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Understanding Robert Prechter’s ‘Slope of Hope’
by ilene - July 16th, 2010 8:03 pm
Whatever you might say of Robert Prechter, one thing he isn’t is ambiguous. – Ilene
Understanding Robert Prechter’s ‘Slope of Hope’
Courtesy of Elliott Wave International
Almost everybody who follows financial markets has heard about climbing the "wall of worry": the time when prices head up bullishly, but no one quite believes in the rally, so there’s more worry about a fall than a rise.
What’s the opposite condition in the market?
Bob Prechter named it the "slope of hope," meaning that as prices head down, no one wants to believe the market really has turned bearish, so there’s more hope for a rise than fear of a fall.
The market has been rising recently, following a bearish decline from late April through the end of June, which makes now the perfect time to learn more about the slope of hope.
* * * * *
Excerpted from The Elliott Wave Theorist by Robert Prechter, published June 18, 2010
According to polls, economists are virtually unanimous in the view that the “Great Recession” is over and a recovery is in progress, even though “full employment will take time,” etc. Yet mortgage writing has just plunged to a new low for the cycle (see Figure 1), and housing starts and permits just had their biggest percentage monthly drop since January 1991, which was at the end of a Primary-degree recession. But the latest “recession” supposedly ended a year ago. How can housing activity make new lows this far into a recovery? The answer is in the subtitle to Conquer the Crash, which includes the word depression. The subtleties in economic performance continue to suggest that it “was” not a “recession.” It is a depression, moving forward, in punctuated fashion, slowly but inexorably.
Despite this outlook, keep in mind what The Elliott Wave Theorist said last month: “Even though the market is about to begin its greatest decline ever, the era of hope is not quite finished.” For as long as another year and a half, there will be rallies, fixes, hopes and reasons to believe in recovery. Our name for this phase of a bear market is the Slope of Hope. This portion of the decline lasts until the center of the wave, where investors stop estimating upside potential and start being concerned with downside potential. Economists in the aggregate will probably not recognize that a depression is in force until 2012 or…
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DJIA’s 200-Day Moving Average: Will the Dow stay above or below this demarcation line?
by Chart School - June 23rd, 2010 3:00 pm
DJIA’s 200-Day Moving Average: Will the Dow stay above or below this demarcation line?
By Elliott Wave International
Moving averages are one of the most widely followed indicator in technical analysis. Simply put, when the price of an index or stock stays above a particular price moving average line on a chart, that price level serves as support -- a level where buyers reside. If the price falls below a moving average line and "can’t" break through from the underside, this price level is a line of resistance -- a price level where sellers hover. That’s an easy explanation of moving averages for you.
A commonly watched line is the 200-day moving average.
After the DJIA fell below its 200-day moving average in May, prices remained mainly below the line until June 15, when the market rose 213 points. But, as this chart from Elliott Wave International’s June 16 Short Term Update shows, the NYSE volume has remained muted:
"There was no follow-through today. More stocks closed down than up on the day on the NYSE, within the S&P 500 and also for the DJ Composite. Today’s Big Board volume was similarly slow relative to yesterday. …" -- Steven Hochberg, Short Term Update, June 16, 2010
With a lack of buying conviction, how long will the stock indexes remain above the 200-day moving average?
For the answer, you need to look at the DJIA’s Elliott wave structure. It strongly suggests the market will move in a definite direction in a matter of days or weeks.
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Learn to integrate Elliott wave analysis with other technical disciplines. Read the FREE Ultimate Technical Analysis eBook to discover some of the favorite technical analysis methods used by the analysts at Elliott Wave International. Learn more and download your free, 50-page technical analysis ebook here.
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‘Defensive’ Stocks: Are They the Ticket in a Downturn?
by ilene - June 3rd, 2010 3:45 pm
‘Defensive’ Stocks: Are They the Ticket in a Downturn?
In a severe sell-off, 99 percent of ALL stocks can fall.
By Elliott Wave International
Approximately three out of four stocks go down in a bear market. This ratio doesn’t just apply to high beta names; historically, 75 percent of all stocks go down when the general market falls.
Considering we could be headed into a severe bear market (read Bob Prechter’s latest special two-issue Elliott Wave Theorist, if you haven’t yet), we could see more than 75 percent of stocks take a dive. In that case, even a basket of "defensive" or "quality" names isn’t likely to help your portfolio. What good are dividends when you’re losing far, far more through capital depreciation?
On May 20, when the DJIA lost 376 points, 497 out of the S&P 500 stocks ended the day lower. (In other words, 99 percent of stocks fell.) Yet a financial television host recommended "defensive" names the day after. Wouldn’t his viewers be better served if he said, "You may want to step aside for now"? Apparently, stocks of one kind or another must be recommended — no matter what the market is doing or is expected to do.
How about "quality" stocks that don’t fit the "defensive" category, like blue chips or major technology names? The 1973-1974 bear market provides a clue. The "nifty fifty" stocks were "glamour" stocks; pundits said the "nifty fifty" should "be bought and never sold." However, by the time the bear market bottomed,
- Polaroid cratered 91% (eventually went bankrupt)
- Avon nose-dived 86%
- Xerox fell 71%
- Standard Brands Paint (eventually went bankrupt)
Here’s what Prechter said on the matter in his September 2009 Theorist: "When the stock market overall ended its bear market in the fourth quarter of 1974, the nifty fifty had fallen substantially from their highs, and many investors continued to hold them under the belief that they would come roaring back. But they underperformed most other groups of stocks throughout the rest of the 1970s and into the 1980s." [emphasis added]
Similarly, big-name stocks that fell in 2007-2009 have yet to come close to fully recovering. Today’s favored stocks could likewise nose-dive.
Learn from the past. Avoid the mistake of holding a defensive or quality stock "all the way down."
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Read Part One of Robert Prechter’s Latest Two-Part, April-May Theorists FREE
The April-May Theorist series entitled "Deadly Bearish Big Picture" reveals a lucid…
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“On Schedule for a Very, Very Long Bear Market”
by ilene - May 25th, 2010 7:41 pm
Prechter on Yahoo! Finance: "On Schedule for a Very, Very Long Bear Market"
Via Elliott Wave International
Robert Prechter discussed the recent global sell-off that has sent all major U.S. averages 10% below their 2010 highs with Yahoo! Finance Tech Ticker host Aaron Task on May 20, 2010. Prechter says that the current climate shows that "we’re in a wave of recognition" where the fundamentals are catching up to the technicals and that it’s time to prepare for a "long way down."
For more information from Robert Prechter, download a FREE 10-page issue of the Elliott Wave Theorist. It challenges current recovery hype with hard facts, independent analysis, and insightful charts. Robert discusses why he things the worst is NOT over and what you can do to safeguard your financial future.
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New Analysis About Euro and European Debt
by ilene - May 21st, 2010 3:15 pm
Complimentary Report: New Analysis About Euro and European Debt
Courtesy of Elliott Wave International
European Debt: Market moves around the world can impact your portfolio. So whether you know it or not, you probably have a stake in Europe’s financial future. We’ve been anticipating and tracking the growing debt crisis in Europe, and we’re giving away our forecasts and analysis of the region — for free. Learn more and download your free report now >> .
Europe’s debt crisis has been a mainstay in the news — and in the minds of investors — over the past few months. The Greek bailout has calmed some nerves, but it has failed to recognize the true cause for the crisis.
Back in February, when the modern-day Greek tragedy appeared to be contained by all media accounts, EWI anticipated yet another wave of debt woes across Europe. Here’s what EWI’s European chief market analyst, Brian Whitmer, wrote on Feb. 26:
"Greece’s woes aren’t over, and neither are its neighbors, meaning that more surprises are sure to come."
What’s next for the euro and European solidarity? Whitmer and his colleagues have been anticipating and tracking the growing debt crisis in Greece, Spain, Portugal and other European nations. Their valuable and time analysis reveals the REAL story on Europe — independent from media assumptions and conjecture — read this prescient new report from EWI.
Download your free report, "European Debt: An Elliott Wave Perspective," now.
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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...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site