Posts Tagged ‘Elliott Waves’

How a Simple Line Can Improve Your Trading Success

Elliott Wave International’s Jeffrey Kennedy explains How a Simple Line Can Improve Your Trading Success. 

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. Now through February 7, you can download the 14-page eBook free. Learn more 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, Elliott Wave International’s Chief Commodity Analyst, 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. Download your free eBook.

 

This article was syndicated by Elliott Wave International and was originally published under the headline How a
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Deflation: The Trend That’s Become Too Obvious To Ignore

Deflation: The Trend That’s Become Too Obvious To Ignore

By Elliott Wave International

Pencil popping balloon

As the biggest credit bubble in history continues to shrink, consumer prices have stayed flat over the past several months, meaning there is no sign of inflation to come, despite growing commitments from the U.S. government.

So what’s keeping inflation at bay, given all the stimulus money promised? The answer: Deflation -- an overwhelming urge for consumers to liquidate their assets for cash. And this new economic phase is finally becoming too obvious to ignore, as explained in recent commentary from the world’s largest technical analysis firm.

"The economy is moving into a critical new phase, an outright deflation in which ‘prices fall because people expect falling prices.’ Obviously, this implies an element of recognition, as efforts to protect against indebtedness and falling prices contribute to further declines. We can tell deflation is entering a new stage because of the language and ideas that financial observers now use to describe it."
-- The Elliott Wave Financial Forecast (September 2010)

Here are a few recent comments about the new economic reality:

  • "[New Jersey Governor] Christie spelled out the details of his proposal Tuesday. They include: repealing an increase in benefits approved years ago; eliminating automatic cost-of-living adjustments; raising the retirement age to 65 from 60 in many cases; reducing pension payouts for many future retirees; and requiring some employees to contribute more to their pensions." -- Associated Press (Sept. 15)
  • "U.S. Home Prices Face Three-Year Drop as Inventory Surge Looms" -- Bloomberg (Sept. 15)
  • "Atlanta Awash in Empty Offices Struggles to Recover From Building Binge" -- Bloomberg (Sept. 14)
  • "The world economy faces a long, hard slog toward recovery and could slide into deflation and financial instability if leaders fail to deliver on promises of reform." -- Reuters (Sept. 10)
  • "Deflation seems to have the upper hand lately in the debate among investors about inflation versus deflation." -- Marketwatch (Sept. 8 )
  • "With the release of the August sales figures, one thing is clear for car shoppers — it’s a buyer’s market." -- Edmunds (Sept. 2)
  • "20 Funds to Guard Against Deflation" -- Smartmoney (Aug. 29)
  • "Dividend-Yield Signal Screams Deflation" -- Forbes (Aug. 25)

The word "deflation" also started appearing more in the financial media around 2002, but Robert Prechter, president of technical analysis firm Elliott Wave International and author of the 2002 New York Times best-seller Conquer the Crash, added in the updated 2009 edition of his book…
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The Stock Market Is Patterned — Here’s Proof

Proof?  Let’s see.  (My comments in red.) – Ilene 

The Stock Market Is Patterned — Here’s Proof
You don’t have to sift through the latest economic data as if they were tea leaves. 

Courtesy of Elliott Wave International

This is an excerpt from Elliott Wave International’s free Club EWI resource, "What Can a Fractal Teach Me About the Stock Market?" by EWI’s president Robert Prechter.

In the 1930s, Ralph Nelson Elliott described the stock market as a fractal — an object that is similarly shaped at different scales. Scientists today recognize financial markets’ price records as fractals, but they presume them to be of the indefinite variety. Elliott found something different:

You see that each “wave” within the overall structure subdivides in a specific way. If the wave is heading in the same direction as the wave of one larger degree, then it subdivides into five waves. If the wave is heading in the opposite direction as the wave of one larger degree, then it subdivides into three waves (or a variation).

Understanding how the market progresses at all degrees of trend gives you an invaluable perspective. No longer do you have to sift through the latest economic data as if they were tea leaves. You gain a condensed view of the whole panorama of essential trends in human social mood and activity, as far back as the data can take you.

OK, now you try it. Figure 3-7 shows an actual price record. Does this record depict two, three, four or five completed waves? Based on your answer, what would you call for next?

My answer (having blinded myself to the rest) is that you could argue either three or four waves have been completed. 

Let’s compare your answer with mine. From the simple idea that a bull market comprises five waves, The Elliott Wave Theorist in September 1982 called for the Dow to quintuple to nearly 4000 and on October 6 announced, “Super bull market underway!” The November 8 issue then graphed the forecast for the expected fifth wave up, as you can see in Figure 3-8.

As you can see, Elliott waves are clear not only in retrospect. They are often — particularly at turning points — quite clear in prospect. 

(I don’t know that I’d call this clear proof, but it is a valuable tool to market analysis anyway.)

Visit Elliott
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Popular Culture and the Stock Market

Educational, but too brief, video summary of Robert Prechter’s socionomics theory and social mood, based on Elliott Wave principles. EWI’s free report, "Popular Culture and the Stock Market," will provide more information. - Ilene

Popular Culture and the Stock Market

Stock market guru and best-selling author Robert Prechter says "You can almost hear the Dow going up and down over the airwaves." Watch this 11-minute clip from his documentary History’s Hidden Engine to see how social mood governs movements in the stock market and trends in popular culture. Access his 50-page report "Popular Culture and the Stock Market" FREE.

Access Robert Prechter’s 50-page report "Popular Culture and the Stock Market" FREE!

 


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Why You Should Care About DJIA Priced in Gold

Why You Should Care About DJIA Priced in Gold
"The Real Dow" has proven to be a good leading indicator for nominal DJIA.

Courtesy of Vadim Pokhlebkin at EWI
 
The following article is provided courtesy of Elliott Wave International (EWI). For more insights that challenge conventional financial wisdom, download EWI’s free 118-page Independent Investor eBook.
 
————-
 
Of the many forward looking market indicators we at EWI employ, one of the most interesting tools (and least discussed in the financial media) is the DJIA priced in gold — "the real money," as EWI’s president Robert Prechter calls it.
 
We’ve been tracking the Dow/Gold ratio for many years and it has served our subscribers well. It’s not a short-term timing tool, yet in the longer term, as our January 6 Short Term Update put it, "the nominal Dow eventually plays catch up to what is transpiring in the Dow/Gold ratio."
 
Here’s a good example. Remember when the nominal DJIA hit its all-time high? October 2007, just above 14,000. At that time, most investors expected new highs still to come. But our Elliott Wave Financial Forecast warned five months prior, in May 2007:
 
One key reason [for a coming top in the DJIA] is the undeniable bear market status of the Dow Jones Industrial Average in terms of gold, the Real Dow…
 
djia priced in gold
 
Notice, by contrast, the relative strength of the Real Dow versus the nominal Dow, the index in terms of dollars, from 1980 to 1982. By August 1982 when the Dow denominated in dollars bottomed, the Real Dow was rising strongly from its 1980 low… The nominal Dow soon played catch-up, and they both rallied more or less in sync until 1999.
 
Now, instead of soaring the Real Dow is crashing relative to the nominal Dow. In fact, it’s barely off its low of May 2006. This dichotomy reveals the weakness that underlies the financial markets’ push higher. When mood turns and credit inflation reverses, the ensuing drop in the nominal value of the market should be dramatic.

Dramatic drop" did indeed follow: Between October 2007 and March 2009, the DJIA lost 53%, high to low.

For more information, download Robert Prechter’s free Independent Investor eBook. The 118-page resource teaches investors to think independently by challenging conventional financial market assumptions.

 


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O Mandelbrot, O Mandelbrot

Binve discusses fractals and Elliott Wave analysis, at Market Thoughts and Analysis.

O Mandelbrot, O Mandelbrot

 

O Mandelbrot, O Mandelbrot
Your fractals are so pleasing
La la la laaaa la la la ……

Uncle binv is going to tell you a story about fractals, drawing heavily upon the **fantastic** post that columbia wrote in October – Fractals!!. Please read that post first.

One of the key behaviors / observations when it comes to Elliott Wave Analysis is that all market structures a) act on all degrees of trend simultaneously and b) are self-replicating on all degrees of trends. Thus, an impulse looks substantially the same whether it is a subminuette degree wave viewed on a 1 minute chart or a primary degree wave viewed on a weekly chart.

This does *NOT* mean the all impulse wave are perfectly proportioned copies of each other. The market is made of people and we are not clones. We have variability and so does stock market behavior. There is variability in the structure of all waves. But waves that perform the same function within the wave structure look *similar* at all degrees of trend.

Since the peak in Oct 2007, we have had several 5-wave sequences (impulse waves) moving downward and several corrective waves back up. In Elliott Wave parlance, the move from Oct 2007 to March 2009 was a primary degree wave, and the move from March 2009 to now is another primary degree wave.

One thing to take note of as you look at the following charts is the wave structure down followed by the wave structure up. The wave proportions for the Wave 1′s are not *identical*, but they are similar.

First – Minor (Blue) 1 of Intermediate (Pink) 1 of Primary 1. [click on charts to enlarge]

Wave 2 is 0.618 * Wave 1 in points
Wave 2 is 0.236 * Wave 1 in duration

Second – Intermediate (Pink) 1 of Primary 1.

Wave 2 is 0.500 * Wave 1 in points
Wave 2 is 0.500 * Wave 1 in duration

Third – Minor (Blue) 1 of Intermediate (Pink) 3 of Primary 1

Wave 2 is 0.500 * Wave 1 in points
Wave 2 is 0.618 * Wave 1 in duration

Before putting this in perspective in the larger count, notice that the structure…
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Bullishness at a Contrarian Extreme

Bullishness at a Contrarian Extreme

Courtesy of Michael Panzner at Financial Armageddon

As a long-time student of the markets, I’ve learned that traditional "fundamentals" don’t always tell the full story. For me, at least, it’s also important — essential, actually — to take technical, sentiment, and macro factors into account when trying to figure out which way prices are headed.

That doesn’t mean I always get it right. In fact, I’ve had more than my fair share of bad calls, especially when it comes to the shorter-term outlook. Regardless, I’ve found that my odds tend to improve when the aforementioned elements are all pointing in the same direction.

With that in mind, the following chart (courtesy of Elliott Wave International) and remarks by Tim Knight, from a post at his Slope of Hope blog (another long-time favorite of mine), entitled "Some Insights from EW," suggest that bullishness has reached a contrarian extreme:

The [following] chart shows the perverse relationship sentiment has with stocks. In early March, when stocks were a ridiculous bargain and multi-thousand percentage gains were just waiting to be plucked, the sentiment reading was an unheard-of 2% bulls.

Now, however, with stocks at (in my opinion) insanely-overpriced levels, and with all those multi-thousand percent gains already part of financial history, people are ga-ga about stocks.

Sentiment


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A Massive Chart Dump – P2 Analysis Wrap-Up

A Massive Chart Dump – P2 Analysis Wrap-Up

Courtesy of Binve at Market Thoughts and Analysis

…. And by "Chart Dump", I don’t mean all these charts belong in the toilet :)

So like I said on Friday, I wish Primary 2 was done, I *want* Primary 2 to be done. I just don’t think it is done. But I do think it is very close to being done, next week looks very likely for the top.

But the whole point of this post is to look at a whole host of indices, sectors, asset classes, and sentiment indicators to show that there are some very substantial divergences taking place. Some of the "leader indices" show that they have already potentially topped (are not making higher highs with the broader markets). The Dollar and the VIX may have already bottomed. Volume is drying up (or at least substantially declining) in most of the indicies. In short a lot of the signs that we expect to see with Primary Wave 2 have occurred, and things are more or less "on track" for a large trend change in equities.

The other reason for this massive update this weekend is that our first born child is due any day now, and my blogging and chart updates will drop off dramatically next month. binve’s life is about to get a lot more interesting.

This post contains a lot of charts that I show often, but every chart is completely updated with new annotations and analysis. I believe it is a useful post and tells the picture of the markets from a macro view. Enjoy!

The Primary Wave 2 Checklist

There are several signals that we should see that help to let us know we are at the end of Primary Wave 2. There are some characteristics that Elliott (and then Frost and Prechter later) put forth that would describe some of the technical, fundamental and sentiment aspects of Wave 2. Here are some of those (modified to be bullish, as this Wave 2 is bullish):

From EWP: “Second Waves often retrace so much of Wave one that most of the losses endured are gained back by the time it ends. At this point investors are thoroughly convinced that the bull market is here to stay. Second waves typically end on very low volume…
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After the bell, Update

After the bell, Update

Courtesy of Michael Eckert at EW trends and charts

$SPX chart

Welcome to my nightmare, this is one of the most confusing one day charts I have looked at in quite a while. From afar, the larger counts look like a 4th wave, but the micro count is a REAL mess, almost like an on going "B", or "X" wave, the triangle I have labeled as a-b-c-d-e, breaks the first rule, wave "A", is a five count, we need a 3-3-3-3-3 count for the triangle to be valid.

A simple zig-zag is still possible, but wave "C" needs to be the largest for that count to work.

The other possibility is that we have had a top put in, I have seen numerous counts in the last 24 hours that have a five wave count completed, the micro-counts in them might be off, but at this point I am keeping that option on the table until the impulse count from 1037.63 is invalidated.

One other option, which I had a chart up of yesterday on my public list, is this whole rally counting out as an a-b-c-x-a-b-c, making wave b of B, of P2, an expanding triangle with the a of B ending at 979. This could really surprise the bears if we start heading down to make new lows, then quickly reverse in wave "C" up.

****

See Michael’s longer term chart (below) for the bigger picture:

Michael:  P stands for primary wave.  As soon as P2 ends, we will be in P3, down. P2 is the wave from 666 to the present, P1 was the wave from late ’07, till this year when it finished at 666.  Ilene, I am very-very bearish, as soon as this rally is over we will be testing the lows of the year, and even quite possibily breaking them, wave 3′s are the mother of all waves, very violent and swift.

 

 

 


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Social Safety Nets Mask Deflationary Depression

Social Safety Nets Mask Deflationary Depression

Courtesy of Mish

In a recent video Robert Prechter says the Dollar’s Hit a "Major Bottom" and that a deflationary depression is coming.

According to Prechter, the Elliott Wave pattern in the US dollar confirms we recently hit the fifth wave down. Next stop is up. He also notes that sentiment has reached an extreme:

"The Dollar Sentiment Index for the Dollar Index reports just 3% bulls among traders, an extreme level only five times in the past 20 years, usually near an important low," Prechter wrote on Aug. 5. "The last time we saw readings like this was March-July 2008, just before the dollar soared." In other words, the "short the dollar" trade is overly crowded.

I mentioned the wave pattern on July 31 in Ewave Count on the US Dollar Suggests Move Up is Coming.

Here is an updated chart.

US$ Weekly Chart

click on chart for sharper image

Note that bearish sentiment on the dollar is at an all time high even though the dollar index is substantially higher than it was in April and July of 2008. That’s bullish for the dollar.

I still show two "?" on the chart because technically wave 5′s can extend. However, fundamentally and technically I do not expect expect it to extend, at least by much.

Social Safety Nets Mask Deflationary Depression

Prechter is looking for a "major economic depression". I think it is clear we are already in one.

The only reason it is not more readily visible is people are living in foreclosed houses unable or unwilling to pay their mortgage, one in nine living in the US is on food stamps, and unemployment insurance has been extended twice. Congress is now debating extending it a third time.

If Congress does not act 500,000 Will Exhaust Unemployment Benefits by September, 1.5 Million by Year-end.

Although the official unememployment rate is a mere 9.5% alternative measures show it is over 16%. Moreover, an unprecedented 4.4 million workers have been unemployed and looking for work for 26 weeks or longer. Please see Jobs Contract 19th Straight Month and US Payrolls Less Than Meets The Eye for details about jobs.

In simple terms, more social safety nets are in place now than during the great depression.

Steepest Credit Contraction in
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Phil's Favorites

5 reasons the coronavirus hit Italy so hard

 

5 reasons the coronavirus hit Italy so hard

A nursing home resident in Rome is moved to a hospital. Mauro Scrobogna/LaPresse via AP

Sara Belligoni, University of Central Florida

Italy is one of the nations worst hit by the global coronavirus pandemic. As a scholar in the field of security and emergency management who has studied and worked in Italy, I have determined that there are at least five major reasons why the country is suffering so much.

1. Lots of old people

Italians have the ...



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Biotech/COVID-19

5 reasons the coronavirus hit Italy so hard

 

5 reasons the coronavirus hit Italy so hard

A nursing home resident in Rome is moved to a hospital. Mauro Scrobogna/LaPresse via AP

Sara Belligoni, University of Central Florida

Italy is one of the nations worst hit by the global coronavirus pandemic. As a scholar in the field of security and emergency management who has studied and worked in Italy, I have determined that there are at least five major reasons why the country is suffering so much.

1. Lots of old people

Italians have the ...



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Zero Hedge

Stocks Bid Into Month-End Despite Americans' Unprecedented Scramble For Cash

Courtesy of ZeroHedge View original post here.

Amid an ever-escalating guess at the size of pension fund re-allocations funds (latest we saw was $150 billion) into month-end, both bonds and stocks were bid early on today, but as the day wore on, bonds weakened as stocks gained (driven by record IG issuance-driven rate-locks)...

Source: Bloomberg

But while some are rebalancing into stocks, the scramble for cash among average Americans has almost never been more panicky...



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Kimble Charting Solutions

Tech Testing 9-Year Support, With Fear Levels At 2009 Highs!

Courtesy of Chris Kimble

Is an important Tech Index sending a bullish message to investors? It is making an attempt!

Does that mean a low in this important sector is in play? Humbly it is too soon to say at this time!

This chart looks at the Nasdaq Composite Index over the past 25-years on a monthly basis.

The index has spent the majority of the past 9-years inside of rising channel (1), as it has created a series of higher lows and higher highs. It created bearish reversal patterns in January & February as it was kissing the underside of the top of the channel and...



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Insider Scoop

With Everybody Stuck At Home, Investor Conferences Are Going Virtual

Courtesy of Benzinga

With the world at a COVID-19-induced standstill, many conference organizers have either gone online (Benzinga is one of them) or had to cancel upcoming events altogether. There is no clear timetable on how much longer we will be in this state.

Publicly traded companies are already limited in wh...



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Members' Corner

10 ways to spot online misinformation

 

10 ways to spot online misinformation

When you share information online, do it responsibly. Sitthiphong/Getty Images

Courtesy of H. Colleen Sinclair, Mississippi State University

Propagandists are already working to sow disinformation and social discord in the run-up to the November elections.

Many of their efforts have focused on social media, where people’s limited attention spans push them to ...



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Digital Currencies

While coronavirus rages, bitcoin has made a leap towards the mainstream

 

While coronavirus rages, bitcoin has made a leap towards the mainstream

Get used to it. Anastasiia Bakai

Courtesy of Iwa Salami, University of East London

Anyone holding bitcoin would have watched the market with alarm in recent weeks. The virtual currency, whose price other cryptocurrencies like ethereum and litecoin largely follow, plummeted from more than US$10,000 (£8,206) in mid-February to briefly below US$4,000 on March 13. Despite recovering to the mid-US$6,000s at the time of writin...



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The Technical Traders

These Index Charts Will Calm You Down

Courtesy of Technical Traders

I put together this video that will calm you down, because knowing where are within the stock market cycles, and the economy makes all the difference.

This is the worst time to be starting a business that’s for sure. I have talked about this is past videos and events I attended that bear markets are fantastic opportunities if you can retain your capital until late in the bear market cycle. If you can do this, you will find countless opportunities to invest money. From buying businesses, franchises, real estate, equipment, and stocks at a considerable discount that would make today’s prices look ridiculous (which they are).

Take a quick watch of this video because it shows you ...



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Chart School

Cycle Trading - Funny when it comes due

Courtesy of Read the Ticker

Non believers of cycles become fast believers when the heat of the moment is upon them.

Just has we have birthdays, so does the market, regular cycles of time and price. The market news of the cycle turn may change each time, but the time is regular. Markets are not a random walk.


Success comes from strategy and the execution of a plan.















Changes in the world is the source of all market moves, to catch an...

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ValueWalk

Entrepreneurial activity and business ownership on the rise

By Jacob Wolinsky. Originally published at ValueWalk.

Indicating strong health of entrepreneurship, both entrepreneurial activity and established business ownership in the United States have trended upwards over the past 19 years, according to the 2019/2020 Global Entrepreneurship Monitor Global Report, released March 3rd in Miami at the GEM Annual Meeting.

Q4 2019 hedge fund letters, conferences and more

The Benefit Of Entrepreneurial Activity ...

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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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About Phil:

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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Ilene is editor and affiliate program coordinator for PSW. Contact Ilene to learn about our affiliate and content sharing programs.