EWI's Most Current Wave Analysis Of The S&P500

Here's what Elliott wave analysis is all about: You study charts to find non-overlapping 5-wave moves (trend-defining) from overlapping 3-wave ones (corrective, countertrend).

With that in mind, please take a look at this chart of the S&P 500, which our U.S. Intraday Stocks Specialty Service(FreeWeek is on now) posted for subscribers at 9:37 AM today (June 14):

Immediately, you can see that the S&P 500 has been moving sideways in a choppy, overlapping manner. That's the definition of a correction -- i.e., that is NOT the trend. The trend, as the U.S. Intraday Stocks Specialty Service editor Tom Prindaville said in the morning market overview, was higher -- at least in the short-term:

...sideways-to-up over the very near term will be expected. Simply put, overall higher near-term remains the intraday call -- to complete a corrective second wave.

And here's a chart of the S&P 500 at the close of the market that the Service posted at 3:34 PM on the same day:

To make this bullish forecast, the Service editor Tom Prindaville was simply following the Elliott wave model of market progression. The model called for a completion of the developing wave 2 -- in this case, "higher near-term."

Market corrections -- the sideways, choppy moves you see in both charts above -- are notoriously hard to forecast. And not every Elliott wave forecast works out. But you do get a real, practical roadmap of the expected market action.

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WANT TO TRY ELLIOTT WAVE FORECASTS -- FREE? You can -- now thru 12 noon on June 21 Try our U.S. Intraday Stocks Specialty Service forecasts of the S&P 500, DJIA and NASDAQ free for a week. No strings attached, no credit card required. Get the details and instant, FREE online access now >>

This article was syndicated by Elliott Wave International and was originally published under the headline S&P 500: Elliott Wave Forecasts, Simplified. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

80/20 Trading - An EWI Perspective

The 80/20 Trade: "Pounce Like a Cat"
Patience Can Be Rewarding 
June 04, 2012By Elliott Wave International

Copy the tiger when stalking and capturing a "pounce-ready" trade.

Tigers know the prey they covet is elusive: they show great patience and care when stalking the target.

I came across this description of the tiger's technique:

"When hunting, this cat...may take twenty minutes to creep over ground which would be covered in under one minute at a normal walk...the tiger will sometimes pause...move closer and so lessen that critical attack distance...before finally raising its body and charging.

"...they wait until a victim comes close and spring up...This ambush method of hunting uses less energy and has a greater chance of success."

You must "ambush" high confidence trades. Long-time professional trader and teacher Dick Diamond says patience is vital before the ambush.

I talked to Diamond about his famous 80/20 trade, which he means literally -- he says it has at least an 80 percent chance of success. It's the only trade set-up Diamond will take.

Q: Could you tell me about the 80/20 trade?

Diamond: The 80/20 trade is based on indicators that create a specific trading set-up. A trader must act on this set-up immediately. You must wait, and then pounce like a cat when the opportunity presents itself. Then you set stops. In shorter time frames, like trading from a five minute chart, the 80/20 set up may come along a few times a day. If you're trading a longer time frame, like off of a 120 minute or 240 minute chart, the 80/20 will come along less frequently, but when it does, the opportunity will be bigger. The 80/20 trade can be especially rewarding for position traders. Sometimes the indicators reveal what I call 90/10 or even 95/5 trades.

Q: What emotional factors do students need to work on the most?

Diamond: Traders must be calm and confident. You can't be a Nervous Nellie and succeed at trading. Calmness comes from learning the proper trading techniques.

Q: What's different about trading today vs. when you started out in the 1960s?

Diamond: When I started trading, execution took up to five minutes -- now it takes less than a second. Time is money, so computers provide a great advantage to today's trader compared to pre-computer days. At the same time, while computers allow the trader to see multiple indicators on the screen, one must avoid indicator overload. One must learn to narrow down the number of indicator

Economic Implosion? And What If?

How to Handle an Economic Implosion

April 18, 2012

By Elliott Wave International

I came across some research on the subject of worry. Here's how it was presented:

Things People Worry About:

• things that never happen - 40%
• things which did happen that worrying can't undo - 30%
• needless health worries - 12%
• petty, miscellaneous worries - 10%
• real, legitimate worries - 8%

Of the legitimate worries, half are problems beyond our personal ability to solve. That leaves 4% in the realm of worries peoplecan do something about.

I thought about our gigantic national debt and weak economy. These seem to fit into both subcategories of "real" worries. Youcan't do much as an individual to solve the nation's debt and economic problems, yet you can prepare for a worsening economic downtrend.

Do we see evidence for an economic turn for the worse?

Well, consider that the evidence is so overwhelming that it took 456 pages of the second edition of Robert Prechter's book,Conquer the Crash, to cover it. And since that book published, Prechter has consistently devoted his monthly Elliott Wave Theorist to the facts and evidence behind his forecast.

Here's a chart from the book that was updated by Elliott Wave International in March 2012:

The downturn from 2008 is critically important, as it shows that after an almost unbroken 60-year climb, the contraction is underway. It surely has much further to go, because it is still a third higher than it was at the outset of the last debt deflation in 1929.
-- The Elliott Wave Financial Forecast, March 2012

The rating agencies are well aware of what the above chart means. You probably know that Standard & Poor's downgraded U.S. debt from the nation's long-standing triple-A to AA+. Now, another rating agency has taken their rating even lower:

Rating firm Egan-Jones cuts its credit rating on the U.S. government to "AA" from "AA+" with a negative watch, citing a lack of progress in cutting the mounting federal debt.
-- CNBC.com, April 5

Robert Prechter's bestseller, Conquer the Crash, provides practical information about what you can do to protect your finances in the coming economic implosion. And right now, Elliott Wave International is offering 8 lessons from Conquer the Crash in a free 42-page report that covers:

• What to do with your pension plan
• How to identify a safe haven
• What you should do if you run a business
• A Short List of Imperative "Dos" and Don'ts"
• And more

In every disaster, only a very few people prepare themselves beforehand. Discover the ways you can be financially prepared and safe.

Get Your FREE 8-Lesson "Conquer the Crash Collection" Now >>

This article was syndicated by Elliott Wave International and was originally published under the headline How to Handle an Economic Implosion. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Tens of Billions at Significant Risk

Public Pension Funds: Tens of Billions at Significant Risk Is now the time to gamble with retirement?  April 04, 2012 By Elliott Wave International To meet ambitious investment return targets, some public pension funds must now swing for the fences. But many are down two strikes already, due to their previous big bets with hedge funds. ....the [pension] funds with a third to more than half of their money in private equity, hedge funds and real estate had returns that were more than a percentage point lower than returns of the funds that largely avoided those assets. They also paid nearly four times as much in fees. New York Times, April 1 The same article describes how other pension funds have embraced this risky strategy, and how funds generally have their assets at risk. In 2007 pension funds allocated 10.7 percent to "high-growth" investments; by September 2011 they had increased that bet to 19 percent. All the while, hedge funds have underperformed, as this chart from our January 2012 Financial Forecast shows: The [HFRX Global Hedge Fund Index] hit a new low on December 14, producing a rash of articles about how hedge funds got tripped up in 2011. "Many hedge-fund managers who came into 2011 riding a wave of momentum ended the year scratching their heads and nursing losses, whipsawed by markets that seemed to punish them month after month." "Head scratching" is just right for this still-early stage of the bear. Through the first ten months of 2011, 123 Asian hedge funds shut their doors, the second highest number of closures since 2008, the year world markets collapsed. Financial Forecast, January 20 The California Public Employees' Retirement System (CalPERS) is the nation's largest public pension fund. It recently lowered its investment return target from 7.75 percent to 7.5 percent. The system's actuary had recommended lowering it to 7.25 percent.> The CalPERS board members were told by their staff that they had only a 50 percent chance of hitting or surpassing the 7.5 percent target, yet they adopted that assumption. Others say the odds are even worse than that. If CalPERS loses the bet, as it is likely to, the next generation will pay the shortfall... ....if CalPERS or any other public-pension system banks on higher-investment returns, it must take greater risks to meet the target...Cal-PERS chief investment officer told Pensions and Investments newspaper last year, his system has "a reasonably ambitious return target" and "needs to have a portfolio with a lot of growth exposure." San Jose Mercury News, March 24 Is now the time to take greater risks? You saw the 2011 performance of hedge funds, and that was a year when the DJIA was up. Imagine the scenario if the market takes a serious tumble. As an independent thinker, you have a way to prepare for your retirement: An unbiased, objective analysis of the facts and the future. That's exactly what you get when you download the free 50-pageIndependent Investor eBook. It's filled with analysis that will help you prepare for your financial future. You'll get some of the most groundbreaking and eye-opening reports ever published in Elliott Wave International's 30-year history; you'll also get new analysis, forecasts and commentary to help you think independently in today's tumultuous market. Download Your Free 50-Page Independent Investor eBook Now This article was syndicated by Elliott Wave International and was originally published under the headline Public Pension Funds: Tens of Billions at Significant Risk . EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the  world.

Diagonal: Straight Shot to a Trading Opportunity

Diagonal: Straight Shot to a Trading Opportunity

April 05, 2012

By Elliott Wave International

Today we sit down with Elliott Wave International's Futures Junctures Editor and Senior Tutorial Instructor Jeffrey Kennedy to discuss his favorite wave pattern of all: the diagonal.

EWI: You say if you had to pick just ONE of all 13 known Elliott wave structures to spend the rest of your technical trading life with, it would be the diagonal. First, tell us what the diagonal is.

Jeffrey Kennedy: The diagonal is a five-wave pattern labeled 1 through 5, in which each leg subdivides into three smaller waves: 3-3-3-3-3. Unlike impulse waves, however, diagonals are the only five-wave structures in the direction of the main trend in which wave 4 almost always moves into the price territory of wave 1. (See illustrations below.)

EWI: So, what makes this pattern so darn special?

JK: As you can see in the above charts, the diagonal is a terminating pattern. They can only occur in waves 5 of impulses or C-waves of corrections. This is why they're so exciting. Diagonals precede a dramatic change in trend. And, when they end, prices tend to retrace the entire pattern, or more, and fast -- in 1/3 to 1/2 the time it took the pattern to form.

Put simply: If you see a diagonal, you know the train of change is coming into the station.

EWI: Well, in your Daily Futures Junctures service, you do, in fact, see a diagonal underway in the recent price action of a major grain market. There, you present the following Elliott wave chart (some Elliott labels have been removed, while I took the liberty to draw a blue circle around the diagonal pattern for clarity):

JK: Yes. This is a classic diagonal unfolding in the final wave of the larger trend. As you can see, prices have put the finishing touches on wave (v) of c (circled). And, if my wave count is correct, this market's prices are about to board the "Exciting Southbound Turn" Railway.

EWI: Thank you so much for taking the time to explain the ins and outs of your favorite structure, the diagonal. And also, for alerting readers to the possible DRAMA in store for this major grain market thanks to this Elliott wave pattern.

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Learn More about Diagonals and Other Elliott Wave Patterns Get a better understanding of Elliott wave analysis with our Elliott Wave Patterns educational feature. You'll have access to basic lessons on Elliott wave patterns, along with video clips from our online courses which will explain the pattern, the rules and the guidelines. Plus, you'll see real-life examples that show you how each pattern fits into the overall wave structure. Some patterns will even offer a brief quiz to test your knowledge and ensure that you understand the material. Access the free Elliott Wave Patterns feature now.

This article was syndicated by Elliott Wave International and was originally published under the headline Diagonal: Straight Shot to a Trading Opportunity. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Has the US become European?

Is the United States Headed Down Europe's Financial Road?

The recent Greek debt deal produced a big collective sigh of relief, plus some cheers for that massive liquidity injection into Europe's banking system.

It was time to grab a glass and offer a toast to the coming economic recovery of the European Union, right?

Alas, it turns out that Europe's private sector economic activity is contracting faster than expected.

The latest Markit composite purchasing managers' index fell to a three-month low. And the survey for that index was conducted in Germany and France, two of the eurozone's bigger economies.

Markit's chief economist told Marketwatch (3/22) "The euro-zone economy contracted at a faster rate in March, suggesting that the region has fallen back into recession..."

Citigroup's chief economist told CNBC (3/22) that Europe's financial problems have merely been delayed for another day. "We have really just paused for breath," he said. "It [the long-term refinancing operation] really hasn't solved the problem, and for Europe the worst is still to come."

Our Financial Forecast has said for years that the bailouts and the European Union itself would come to grief, even as other observers were optimistic.

Case in point, this excerpt from the December 2006 Financial Forecast:

Much of what's come together in Europe will come apart in coming years.
The crux of the forecast dates back to 1999, when the inclusionary force of the Great Bull Market was at its peak and The Wave Principle of Human Social Behavior argued that the post-World War II transformation toward a harmonious and borderless Europe had reached its limit:
"[The] European Union was consummated following 1,500 years of repeated conflict in the region...This multi-year pageant of apology, concession and agreement and the concurrent wonderful atmosphere of international peace and cooperation are consistent with my Elliott wave case that an uptrend of Grand Supercycle degree is ending."
That year, euro-phoria hit peak pitch, as 11 European countries surrendered their currencies to adopt the new euro and a shared monetary authority, the European Central Bank. For the next eight years, the European Union focused on expansion. This trend was perfectly consistent with the positive social mood trend, which reached its extreme in 2007. As the long and winding global financial topping process completes its final upward surges, the pageant of concession and agreement has desperately focused not on expansion but on rescue and preservation.
...The current level of unpayable debt is too big to bail.

So we're not surprised that Citigroup's chief economist just said that "...for Europe the worst is still to come."

And in the United States, the national debt has already climbed to $15.6 trillion; the federal government's own projections forecast a rise to $25-trillion by 2022. Moreover, we also know that many states and municipalities today suffer major financial woes.

Is America headed down the same financial road as Europe? And what about the future of the European Union itself?

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What the European Debt Crisis Could Mean for YOUR Investments Elliott Wave International has been anticipating and tracking the credit contagion across the European Union. Read this FREE report from EWI, The European Debt Crisis and Your Investments, with commentary and analysis from February 2010 through today, to gain a unique perspective on the European debt crisis and get ahead of what is yet to come. Download Your Free Report Now.

This article was syndicated by Elliott Wave International and was originally published under the headline Is the United States Headed Down Europe's Financial Road?. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Can You Be Overcautious?

Capital Safety: Is There Such a Thing as "TOO Safe"
See the latest capital safety tips from Robert Prechter in his new Elliott Wave Theorist 
March 22, 2012

We all know that the stock market has been rising for 3 years. Many economic measures -- unemployment, consumer spending and confidence, etc. -- also show strong improvement. Yet is that a good reason to stay bullish on stocks?

What a silly question, some people might say. But before you give a reply, please take a look at these financial news headlines -- and then guess when they were published:

• Fed chief predicts economy will rebound despite housing woes (AP)
• IMF predicts an energetic world economy (StarTribune.com)
• US Treasury says economy strong...? (Reuters)
• Job Growth Strengthens Economy (Washington Post)
• Several Signs the Economy Is Reviving (New York Times)

Did they publish this week? Last week? Last month? No. All published in mid-2007, right before the global financial crisis cut the DJIA by 54%; S&P 500 and CRB Commodities Index by 57%; oil by 78%. Gold, emerging markets, and real estate also fell hard. Even bonds were no "safe haven," as 2009 was the worst year on record for U.S. 30-year Treasury bonds and 10-year T-notes: down 26% and 9.7%, respectively.

This chart shows you just how mistaken all that "strong fundamentals" optimism really was (courtesy: Bloomberg):

The lessons are obvious:

1. Don't be lulled by "improving fundamentals." As EWI president Robert Prechter points out,
   
   "You can't say, 'The economy looks good, so I'm bullish on stocks.' This approach...doesn't work at the turns."
   -- March 2012 Elliott Wave Theorist



2. The stock market knows how to surprise the unprepared majority of investors. It's never too soon to safe-guard your capital.

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Learn the Best Ways to Protect Your Capital with 8 Free Lessons from Conquer the Crash In every disaster, only a very few people prepare themselves beforehand. Financial analyst Robert Prechter warns that the doors to financial safety are closing all over the world. He believes prudent people need to act while they still can. This free 8-lesson report (42 pages) from Prechter's bestseller, Conquer the Crash, gives valuable lessons that are critical to your financial survival, including: Should you rely on the government to protect you? What to do with your pension plan What should you do if you run a business A Short List of Imperative "Do's" and Don'ts" And more Get Your FREE 8-Lesson Conquer the Crash Collection Now

This article was syndicated by Elliott Wave International and was originally published under the headline Capital Safety: Is There Such a Thing as "TOO Safe". EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Are the Efforts of the World Central Banks Working?

Are the Efforts of the World Central Banks Working?

March 19, 2012

By Elliott Wave International

The Fed is not the world's only central bank dealing with debt. Watch as Steve Hochberg, EWI's chief market analyst, shows what has happened to GDP in countries around the world as other central banks try to "inject liquidity" into the system.