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An Urgent New Resource from Market Technician Bob Prechter

On Tuesday afternoon (April 23), Robert Prechter, a famed market technician known for calling the roaring bull market of the '80s, the 1987 crash and the March 2009 stock market low, published an urgent new issue of his Elliott Wave Theorist.

This issue is so powerful -- and so urgent -- that EWI has unlocked the first two pages for you to read with no obligation to buy.

Every issue of the Theorist provides you with a unique look at tomorrow's news today. This issue meets that high standard and more. It's one of the most powerful and revealing issues of the Theorist subscribers will ever read. Now, Prechter is not always right. Unfortunately, no market analyst is. But there's one thing his readers know for certain: When Prechter revs up his urgency, he sees something big on the horizon.

Due to the timely nature of this issue, EWI cannot make the first two pages available indefinitely, so they've set a date of May 8 to end this special promotion -- at which time the first two pages will no longer be available for free.

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The Most Important Investment Event You'll Attend in 2013 (and it's free)

Consider yourself warned.

The global market outlook is far less rosy than world leaders would have you believe.

Global stocks are near multi-decade, technical price junctures.
Regional economies recently said to be "recovering" are now slipping back into recession.
Despite a multi-year rally in stocks, the AP reported on Dec. 27 that mainstream investors are selling shares at breakneck pace. "It's the first time ordinary folks have sold during a sustained bull market since relevant records were first kept during World War II."

In their speeches, proclamations and world economic summits, politicians and central bankers reassure investors that the credit crisis of 2007-2009 will turn out to be nothing more than a footnote in market history -- despite the compelling evidence that it never truly ended.

Meanwhile, US Congress is once again facing a dangerous deadline for solving its gargantuan budget woes, Europe remains in turmoil, and Asian-Pacific regions and emerging markets are charting surprising courses of their own.

ASK YOURSELF:

As the year 2013 goes forward, do I have the means to prepare for tomorrow's news today?

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    Understanding the Extraordinary Value of the Wave Principle (Robert Prechter, Feb. 9)
    Buy & Hold or Sell and Fold? Where Are the US Markets Headed in 2013? (Hochberg, Feb. 13)
    Europe: Is it as Bad as it Looks? Or is it Worse? (Whitmer, Feb. 14)
    And more, including a 40-minute keynote from Robert Prechter on Feb. 17 and a Q&A video presentation Feb. 20.

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IMPORTANT: Please don't make any investment decisions without reading EWI's report first.

EUR/USD 2012: There and Back Again

By Kathryn James

“The greatest adventure is what lies ahead” J.R.R. Tolkein

At the start of 2012 the EUR/USD opened the year at 1.2930. Today it is currently 1.2985. In between we’ve had the roller coaster effect of Greece that has taken the euro lower into Q3 and then back to where we sit today. Analysis of the daily chart doesn’t offer much help in trying to ascertain the next direction for the currency pair. 1.3000 provides resistance and 1.2700 support. But the price would need to trade above the 1.3171 resistance high made in September to mark a higher low and allow a new uptrend to be drawn. To confirm the bear case a break below the recent low of 1.2660 would need to occur. The RSI is nearing overbought, I’m watching this for further clues to the next direction - either a pop-and-dropto sell into or a short term pullback to alleviate the overbought conditionswould offer potential short term trading opportunities.

 

The long term monthly chart shows the bigger picture and the large bearish descending triangle that has been building since 2008. There’s still room for more volatility in the range, however we are moving nearer a break that may determine the next trend direction.

 

As a visual guide I have overlaid GBP/USD and EUR/USD. They are both range bound in triangle patterns but the comparison shows that cable was hit harder than the euro in the financial crisis of 2008/09. Its triangle pattern is typically a continuation pattern.Both these patterns are bearish, however one thing to bear in mind is that a break of longer term support could take months rather than weeks or days to occur.

 

 

So where next for the dollar?

If you placed an inverted EUR/USD chart over the DXY dollar index chart you’d practically have the same image. The dollar index is moving sideways between 70.00 and 90.00. A break in either direction would confirm what lies ahead and perhaps mark the start of the nextchapter.

 

Get a Free Week of U.S. Stocks, Bonds, Gold, Silver, USD Forecasts

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Get 2 Free Weeks of U.S. Market Forecasts

When it comes to market forecasts, conventional analysts look at all the wrong indicators: the Federal Reserve, the latest economic data, the political campaign, or the trending financial scandal of the week.

At Elliott Wave International, we don't. Readers often ask us, "Why?"

Our answer is simple:
"Because the financial markets have a life of their own."

In other words: We know that today's news only describes what already happened -- by definition, it cannot alert readers to what's next.

By contrast, EWI focuses on one thing: Delivering tomorrow's news today. In turn, we help our subscribers see now what other investors see eventually.

The basis of the Elliott wave model of market forecasting is not complex, but it is counterintuitive. Human beings are creatures of habit. Their collective behavior is patterned, and those patterns are recognizable. Once you learn to recognize those patterns, you will be able to anticipate when the turns and trends are likely to unfold.

Because pattern recognition is our bread and butter, our work always features lots of price charts.

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    The conventional experts failed to alert you to the 78% crash in oil prices in 2008,
    They failed to warn you about a topping real estate market in 2005,
    They failed to talk about the risks of a major reversal in stock prices leading up to the 2008 crash,
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Our friends at Elliott Wave International have just announced the start of their popular FreeWeek!

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    There's the upcoming Obama/Romney U.S. Presidential election
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USD, JPY & EURJP​Y

By Ashraf Laidi

USDJPY is up 0.57% on Tuesday, posting its biggest 1-day percentage since June 21st and approaching a key combination of resistance levels near 78.80; the trendline extending from the June 25; the 55-day and 55-week moving averages.

Most FX traders are familiar with the characteristics of both USD and JPY underperforming  other currencies during improved risk appetite (rising equities) while outperform during risk aversion. Japans zero interest policy prevailing since the mid 1990s has been behind investors carry trade machinations-- borrowing in yen to invest in higher yielding currencies and financial assets. This practice escalated around 2004, leading to a clear inverse relation between the yen and equity indices (direct relation between yen crosses and equities).

USD's safe haven status owing to the safety of US treasuries and later the Fed's ZERO interest rate policy were the main factors behind the USDs inverse relation with equities during risk aversion.

Although the yen did lose some of these traits during the deepening recessions and deflations in 2009 and 2011, the relationship remains generally intact. The yen-selling interventions by the Bank of Japan September 2010, March 2011 and August 2011 succeeded in dragging down
the currency for no more than 2-3 weeks, before the currency resumed to its old ways.

The decline (increase) in the yen during equity rallies (selloffs) has been especially pronounced against the Aussie, loonie, Kiwi and sterling. EURJPYs declines have proven more considerable during risk aversion than EURJPY rallies during improved risk appetite.

What about USD vs JPY ?

Yet, one aspect remaining of relative mystery to traders has been the USDJPY relationship. Since both USD and JPY behave similarly vs. others, how do they behave against one another? The general pattern has been for JPY to underperform all currencies including the USD (USDJPY rises)
during rallying stocks, especially when positive US reports are the cause of the gains. Conversely, yen often outperforms USD (USDJPY falls) during selloffs in equities.

The use of the above information can help in assessing implications for non-USD yen crosses, whose movements tend to be greater than in USDJPY. Exploiting higher volatility in non-USD yen crosses can be attained when technical signals emerge in USDJPY. The characteristically limited
nature of USDJPY fluctuations may leave some traders frustrated, but these signals could be suggestive for other yen crosses.

Onto EURJPY

Today, the somewhat bullish dynamics for USDJPY (see below) may suggest the stabilization in EURJPY could accumulate fresh ground to as high 97.80 , which is just under the 55-DMA. The 55 DMA has not been broken since April. Weekly oscillators currently suggest only a 40% probability
that the 80.00 figure will be broken. Support remains underpinned at the July 25 trendline, with 96.30 as final support.

USDJPY

USDJPY is up 0.57% on Tuesday, posting its biggest 1-day percentage since June 21st and approaching a key combination of resistance levels near 78.80; the trendline extending from the June 25; the 55-day and 55-week moving averages. Subsequent barriers are not too far off above
the 200-day MA at 79.20. Considering the positive near term oscillators on the daily chart and medium term oscillators on the weeklies, there stands a chance for USDJPY to extend its run-up towards its 100 DMA (79.80). With upside surprises in US data such as Tuesdays retail sales
delaying the timing of any additional QE from the Fed, USDJPY is likely to remain underpinned. A break above 79.00 seems inevitable, but the prospects for a definitive breakout above 80.10, remains unlikely, especially as the figure coincides with the 100-week MA, a technical figure prevailing over the last 19 weeks. Thus, the likely consolidation may emerge with a support at 78.20s and upside capped at near 79.80s. Such is likely to remain the consolidation for a non-inspiring (but consistent) 2 weeks ahead of the Jackson Hole Fed symposium later this
month.

Ashraf Laidi is Chief Global Strategist at Leading Spread Betting Company - City Index

The Never Happening QE3

By Spreadbet Magazine

Minutes from the last FOMC meeting held on June 19-20 were released on Wednesday. Investors, traders, spread betters, and all other market participants were desperately expecting the report to give some clues that QE3 is being cooked to be served up soon but it seems the FED is just kicking the can down the road (like our European brethren too…).

In the FED statement it was made clear that the committee is much more bearish on the economy than it was on April’s meeting. Growth was cut to 1.9% from 2.4% for the current year and unemployment expectations increased whilst and core inflation expectations were reviewed down. Ben Bernanke’s team does not expect the job market to recover much during this year and even though growth will most certainly occur, it is likely to be at a moderate pace. Everything seems fine until this point for all QE3 believers. The problem is that voting by policymakers didn’t show a real desire to press ahead with more easing at this point. Markets have been rising on the expectations of additional easing being injected in the market but the minutes from the FOMC didn’t point in that direction and so were a major disappointment to investors as todays early price action pays testimony too with a sharp fall right from the get go.

Although QE3 will probably be avoided for now, many still believe Bernanke will announce something at his next public appearance next week at Congress or, maybe at the next policy meeting to be held at the end of July. If that fails, then investors hope that September will be when he will announce QE3 for sure! In the fight between faith and reality, it seems that faith is winning…

The problem is that the costs of implementing QE3 are much higher than it’s benefits at this point. Japan has been trying to get out of a liquidity trap that started in the 90s and isn’t yet over. Since cutting its key interest rate to below 1% in 1995, the Bank of Japan has never able to push it up again. It was shown that the effects of any easing become limited and the Government tried to compensate for the relative ineffectiveness of monetary easing with fiscal policy which just resulted in a skyrocketing government debt that currently sits above 200% of the country’s GDP - the highest in the world.

The FED has also tried the game of buying long term securities in exchange for selling short term debt - so called ‘Operation Twist’. But let’s be realistic, mortgage rates hit a new record low this afternoon at 3.56% and 10-year Treasury bond yields are at 1.48%, a level that is back near historical lows. What can the FED do? What is the aim of buying Treasuries or mortgage securities?

The likelihood of engaging in another monetary easing program decreases the nearer the proximity of the US election to be held in November. The FED would certainly want to avoid being seen as Obama-friendly.

Ben Bernanke is acting as an illusionist, applying his tricks to entertain investors. Sooner or later he will be spotted.

Research provided by Spreadbet Magazine

Between EURUSD &​ USD Index

By Ashraf Laidi

This week may have seen "light news flow from Europe but it did not prevent a 1.4% loss in EURUSD in the last 4 days so far, hitting fresh 2-week lows. The core of the losses over the past 24 hours has been attributed to something we long warned about-The realization that Operation Twist from the Fed will not be sufficient in overturning negative market eroding sentiment suffering from the negative macro figures, without the coordinated help of liquidity operations from the ECB and Japan.
Three weeks ago, we anticipated EURUSD to deliver a few more false rebounds before charting a gradual descent on its sub-1.20 path. The pair retested the $1.27 figure only once since its close below $1.25 in late May. Now that EURUSD has hit fresh 2-year lows at $1.2167 and the
US dollar index hit new 2-year highs at 83.61, the broadening case for a higher greenback is more apparent.

We already highlighted the technical case for further run-ups in the USDX on here:

As the central banks of the once-powerful commodity currencies are forced to adopt more accommodative policies, the downside in their own currencies grows more ample. This would force traders to diversify their USD longs away from EUR-pairs and onto a classic deleveraging play
against commodity currencies. The Bank of Canada has already issued more dovish comments, but has yet to mention rate hikes in its policy reports.

And SINCE CAD IS INCLUDED in the 6-currency index of the US dollar index, making up 4% of the basket vs. 57% for EURUSD, the next leg of declines in the loonie resulting from more BoC dovishness is likely to trigger more amplified moves in the USD basket. Thus, with $1.2050 seen
as the next viable stop in EURUSD and USDCAD likely to retest 1.0320, USDX U-turn should likely continue, with 85.00 standing as the next key resistance, 76% retracement of the decline from the June 2010 high to the May 2011 low.

Ashraf Laidi is Chief Global Strategist at Leading Spread Betting Company - City Index

Cable Update: US Dollar Trend Steady and Strong

By Kathryn James

With the markets flipping direction daily and volatility still at the fore, I felt compelled to do an update on yesterday’s analysis on cable (GBP/USD). I mentioned yesterday that cable was showing signs of strength on the short term hourly chart and looked to be breaking free from the downtrend on the daily chart. I was hoping to use this strength to sell into and capture a trade on the longer-term trend of cable – which is down. Unfortunately the currency pair reversed sharply and doesn’t look to be offering that opportunity as caution remains high. It is now trading below the head on the hourly inverse head and shoulders pattern and has gone back below the downtrend line on the daily chart. It’s a good example of a failed pattern and trend reversal and false breakout. (See chart below)

By adopting the strategy of waiting to trade the strongest trend, as confirmed by the longer term weekly chart, I made sure my fingers didn’t get burned by not going long. Confirmation of the strength behind this trend can be viewed (in reverse) on the US Dollar cash index chart, the index broke the neckline of a long-term inverse head and shoulders pattern in May - this was tested in recent weeks where the support line held, a rally ensued followed by a move to new highs. A series of higher highs and higher lows are clearly defined on the weekly chart as the broader trend continues to push the index closer to 90. The trend is becoming well-established and looks poised to challenge fresh highs.