Yes, China has crashed. But what about the big picture?
Learn more in this new interview with Chris Carolan, Elliott Wave International's Global Opportunities Expert and recipient of the 1998 Charles H. Dow award.
On Tuesday, August 11, China abruptly devalued the yuan. See how Chris Carolan helped subscribers anticipate the devaluation of the yuan. See his charts and read his analysis from recent issues of The Asian-Pacific Short Term Update.
You've heard it all before:
Do you meet these qualifications, yet still struggle in the markets? If so, you may find some helpful advice in this quick trading lesson from Trader's Classroom editor, Jeffrey Kennedy:
We all know that the Elliott Wave Principle categorizes 3-wave moves as corrections and, as such, countertrend moves. We also know that corrective moves demonstrate a stronger tendency to stay within parallel lines, and that within A-B-C corrections the most common relationship between waves C and A is equality. Furthermore, we know that the .618 retracement of wave 1 is the most common retracement for 2nd waves, and that the .382 retracement of wave 3 is the most common retracement for 4th waves.
Knowing that all of these are traits of countertrend moves, why do traders take positions when a pattern demonstrates only one or two of these traits? We do it because we lack patience. We lack the patience to wait for opportunities that meet all of our criteria, be it from an Elliott wave or another technical perspective.
What is the source of this impatience? It could be from not having a clearly defined trading methodology, or not being able to control emotions. However, I think impatience stems more from a sense of not wanting to miss anything. And because we're afraid of missing the next big move, or perhaps because we want to pick up some lost ground, we act on less-than-ideal trade setups.
Another reason traders lack patience is boredom. That's because -- and this may sound odd at first -- "textbook" Elliott wave patterns and ideal, high-confidence trade setups don't occur all that often. In fact, I have always gone by the rule of thumb that for any given market there are only 2-3 tradable moves in your chosen time frame. For example, during a normal trading day, there are typically only two or three trades that warrant attention from day traders. In a given week, short-term traders will usually find only two or three good opportunities worth participating in, while long-term traders will most likely find only two or three viable trade setups in a given month, or even a year.
So as traders wait for these "textbook" Elliott wave patterns and ideal, high-confidence trade setups to occur, boredom sets in. Too often, we get itchy fingers and want to trade any chart pattern that comes along that looks even remotely like a high-confidence trade setup.
The big question then is, "How do you overcome the tendency to be impatient?" Understand the triggers that cause it: fear of missing out, and boredom.
The first step in overcoming impatience is to consciously define the minimum requirements of an acceptable trade setup and vow to accept nothing less. Next, feel comfortable in knowing that the markets will be around tomorrow, next week, next year and beyond, so there is plenty of time to wait for the ideal opportunity. Remember, trading is not a race, and over-trading does little to improve your bottom line.
If there is one piece of advice I can offer that will improve your trading skills, it is simply to be patient. Be patient and wait for only those textbook wave patterns and ideal, high-confidence trade setups to act. Because when it comes to being a consistently successful trader, it's all about the quality of your trades, not the quantity.
Developing patience isn't easy -- yet, if you are serious about improving the quality of your trades, it is vital.
How much more successful would you be if you could develop the patience to act only on high-confidence trade setups?
Deflation is a decline in the supply of money and credit relative to goods and services in an economy. History shows us that the most important deflationary episodes are invariably accompanied by comparable declines in equity, factory and retail prices. Read more.
Editor's note: You'll find the text version of the story below the video.
The financial media has recently featured stories with an upbeat outlook for the U.S. economy.
For example: The economy is on track for "the fastest growth in a decade" (Associated Press), and "Experts expect jobs aplenty in '15" (USA Today).
This upbeat tone is related to December's U.S. jobless rate of 5.6%, its lowest since June 2008.
But Jim Clifton, Chairman and CEO of Gallup, offers a different perspective on the jobs data. His February 3 article on Gallup's website was headlined, "The Big Lie: 5.6% Unemployment."
Right now, we're hearing much celebrating from the media, the White House and Wall Street about how unemployment is "down" to 5.6%. The cheerleading for this number is deafening.
None of them will tell you this ... If you are so hopelessly out of work that you've stopped looking over the past four weeks -- the Department of Labor doesn't count you as unemployed. ... Right now, as many as 30 million Americans are either out of work or severely underemployed. ...
If you perform a minimum of one hour of work in a week and are paid at least $20 ... you're not officially counted as unemployed ... .
If you ... are working 10 hours part time because it is all you can find ... the government doesn't count you in the 5.6%.
There's no other way to say this. The official unemployment rate ... amounts to a Big Lie.
A Federal Reserve chart shows that the civilian labor force has been shrinking for 15 years.
The February Elliott Wave Financial Forecast comments:
Why is [the U.S. Labor Force Participation Rate] falling when job growth is rising? The answer, we think, is the emerging force of deflation. Notice that the peak participation rate of 67.3% came from January to March 2000, as the major stock indexes topped, after which inflation first began to falter. When stocks rallied to their 2007 top, there was a mild bounce in the rate, but the latest stock market rally failed to generate any sustained rise in the rate of work force participation. Workers appear so discouraged that the pool of available employees is back to where it was in 1978. The opening chapter of Conquer the Crash ...states, "The persistent deceleration in the U.S. economy is vitally important, because it portends a major reversal from economic expansion to economic contraction."
What will the jobless picture look like at the bottom of an economic contraction?
The third edition of Conquer the Crash published in July 2014 and forecast:
The true unemployment rate in the U.S. and in most countries around the world will rise and eventually exceed 25 percent ... .
In this free Special Report, you will learn about this unexpected but imminent risk to your portfolio AND you'll get 29 specific forecasts for stocks, real estate, gold, cultural trends -- and more (excerpted from Prechter's New York Times bestseller Conquer the Crash -- You Can Survive and Prosper in a Deflationary Depression).
Last chance to get prepared for the major moves in U.S. stocks, commodities, gold, USD and more for 2015 and beyond -- Elliott Wave International's free State of the U.S. Markets online conference ends Wednesday, January 28! Register now and get instant access to a free video presentation from market legend Robert Prechter plus all of the great insights from our most recent publications and presentations from our key analysts.
Editor's note: You'll find the text version of the story below the video.
On January 21, one of the biggest financial lawsuits in recent history came to a costly end. The accused, ratings behemoth Standard & Poor's, agreed to a $1.4 billion settlement for "inflating credit ratings on toxic assets," thus accelerating and exacerbating the 2008 subprime mortgage crisis.
Settlement aside, there is a far bigger issue here than business ethics or conflicts of interests, which is not likely to get a hearing in the court of mainstream finance.
Which is: The professionals who are supposed to assess investment risks are no better at it than you or I.
Case in point: Think back to November 30, 2001. The world's largest seller of natural gas and electricity has gone from cash cow to dry bone. Its share price had plummeted 99%, from $90 to just under $1. YET-- the company continued to enjoy an "INVESTMENT GRADE" rating.
The company's name: Enron. Four days later, it filed for the largest bankruptcy in U.S. history.
Enron seems like a distant memory, but what about the subprime mortgage debacle? Moody's rating service slashed the ratings of 131 subprime bonds due to higher than expected defaults, in July 2007 -- two years after the market for non-traditional mortgages had already turned.
Spot a trend here? The "experts" failure to anticipate huge trend changes in companies, and in the overall economy. In the first edition of his business best-seller Conquer the Crash, EWI president Bob Prechter wrote:
"The most widely utilized ratings services are almost always woefully late in warning of problems within financial institutions. They often seem to get news about a company around the time everyone else does... In several cases, a company can collapse before the standard ratings services know what hit it."
So here's the question: What are the experts not seeing now that you and I need to prepare for?
What about gold? In 2012, with prices nearly reclaiming all-time high territory, the Federal Reserve's quantitative easing campaign was supposed to keep the wind at gold's back.
"Ben Bernanke has just offered gold investors a... gilded invitation to participate in the greatest secular bull market of our time." (April 14, 2012, Motley Fool)
Then this happened:
The same goes for the 2008 peaks in oil and commodities -- two more "safe-havens" that were supposed to benefit from the Fed's money-printing campaign, but instead prices fell to lows not seen since the 2007 financial crisis.
So, that leaves the remaining outlier -- equities, which have climbed to record highs. And, according to the experts, the path of least resistance remains up. A December 14, 2014 article in the New York Times:
"We don't see a lot on the horizon that could derail the U.S stock market in particular."
Our January 2015 Elliott Wave Theorist urges caution with this single chart of the S&P 500's year-end valuations since 1927. Every major peak of the last 90 years landed well outside the normal range: 1929, 1987, 2000, and 2007.
We believe the precarious placement of 2014 sends a similar message: "The stock market and the economy are not in a new multi-decade recovery as economists believe, but very late in a transition phase from boom to bust."
LAST CHANCE to Join Elliott Wave International's free State of the U.S. Markets online conference -- Ends Wednesday, January 28.
Get prepared for the major moves in U.S. stocks, commodities, gold, USD and more for 2015 and beyond. Register now and you can still get instant access to a free video presentation from market legend Robert Prechter plus all of the great insights from our most recent publications and presentations from our key analysts. Hurry - Ends Wednesday, January 28.
For the economies of Europe, the past few months have felt like one long ice-bucket challenge that never ends: A perpetual state of shock induced by the bone-chilling fact that deflation
"...has become a reality in many European countries." (Oct. 24, New York Times)
At last count, eight European nations are now in outright deflation, including:
And no, in case you were wondering, it's not the warm and fuzzy kind of "good deflation" being touted here in the United States, where the only consequence is lower prices. In Europe, it's the
"...pretty awful kind." "Titanic Europe headed for shipwreck" KIND OF awful (Nov.14, The Telegraph)
So, we ask you: What could possibly be scarier than deflation? How about -- not even being able to foresee it?
Yes, deflation was a surprise to the financial authorities. Says one Oct. 12 financial blog post:
"It seems the entire world is cooling off in ways most political leaders and central bankers never saw coming. Global finance ministers are now up against a beast none have known in their professional lives."
That's what should keep adults like you and me up all night -- the "never-saw-it-coming" part. Just how safe is our future if the people whose job it is to keep the world's economies stable lack the tools to predict one of the most dangerous economic conditions?
This recent lack of foresight jives with what former Federal Reserve chairman Alan "The Maestro" Greenspan said in 2008:
"We can tell a bubble only after it burst."
It also jives with what some big wig at the Organization for Economic Co-operation & Development said in 2012:
"The responsibility of the 'latest' financial crisis, which no one saw coming, should be borne by all of us."
But the fact is -- there was -- and is -- a way to see these deflationary economic sea changes coming.
This chart of the UK Consumer Price Index is a reliable bellwether for inflation in Europe. You can see that price expansion peaked in September 2011 at 5.2%:
At the time, the "D" word was completely off the mainstream radar. Soaring oil, grain, and commodity prices, alongside a stimulus-happy European Central Bank fueled widespread fears of runaway inflation.
One month before the top, Elliott Wave International's August 2011 European Financial Forecast laid the opposing groundwork:
"We maintain our stance, however, that the looming threat is not inflation but deflation. Far from a sense of relief, the Banks' paramount feelings should soon develop into an unrelenting dread."
Here's what made us take a contrarian stance (among many other reasons):
[In the August 2011 issue,] for instance, we showed a chart of eurozone manufacturing production and British GDP growth. Both were falling, not rising, indicating Europe's likely return to economic contraction.
[This] chart is another key piece of deflationary evidence... It shows the relentless downward trajectory of Swiss, German and British 10-year bond yields, which is one of the thorniest problems for those who take the inflationist worldview.
Bond yields aren't just falling: 10-year Swiss, German and British yields collectively dropped to record lows last month. The unrelenting demand for Europe's safest debt is a smoking howitzer that is blowing the inflationists' case to pieces.
-- The European Financial Forecast, Sept. 2011
However, the widespread call for inflation only continued to intensify in the mainstream finance. In fact, in February 2012, when the U.K. producer price inflation came in higher than expected, it prompted this word of advice from economists:
"PPI: Another wake-up call for apoplithorismosphobes, the clinical term for those who fear deflation. We recommend that sufferers 'seek therapy.'" (March 12, Wall Street Journal)
Yet, our July 2012 European Financial Forecast remained committed to its counter claim:
"Our models say that inflation rates will keep failing until they're again measuring the rate of deflation as they last did briefly in 2009."
So, it's now 2014 and deflation in Europe is no longer a specter or a figment of an unbalanced imagination. Here's a comment from the September 2014 European Financial Forecast:
"The central bank's latest deflation-fighting contrivance is a €400 billion package of targeted LTRO loans, which are designed to compel banks to lend to ordinary business owners... The ECB has slashed its main refinancing rate to 0.15% and now charges for banks' overnight deposits. The result? Shown below, Europe's largest economy, Germany, just contracted 0.2%; French economic output has ground to a halt; and Italy just entered its third recession since 2008."
Now that deflation in Europe is a reality, the question is -- will it get better? Is this just a temporary economic condition that will be soon replaced with another one -- the condition that economists are much more familiar with, inflation?
We don't think deflation will surrender quite so easily. Want to learn more about deflation before it could potentially affect your investments?
Today, we invite you to read a free report from Elliott Wave International titled, What You Need to Know About Protecting Yourself from Deflation. This 10-page report will help you understand how you can better prepare yourself for its devastating effects.
In this brand-new video interview, EWI Senior Currency Strategist Jim Martens shows you his approach to the forex markets -- and how the "simplicity" of Elliott wave analysis has guided him through 23 years of forecasting.
Watch this new interview -- and follow the link below the video to learn how to get a full week of his currency forecasts - FREE - during Forex FreeWeek (Nov 4-11).
Join thousands of your fellow Elliott wave fans from around the globe during EWI's Forex FreeWeek.
Forex FreeWeek is a 7-day event where you get unrestricted, 24/7 access to intraday, daily, weekly and monthly forecasts -- including charts and videos from our premium-grade Currency Pro Service.
Currency Pro Service's team of four currency experts brings you forecasts for these popular FX pairs:
We have just obtained an engaging -- and perhaps even an enraging -- new report that chronicles 200 years of ineptitude, 100 years of theft and failure, and 50 years of economic regression by the Fed and the U.S. government -- committed against YOU.
The government and the quasi-governmental bank, the U.S. Federal Reserve, do not want you to read this report we are about to share with you, because it uncovers the devastating impact they have had on the nation's money (YOUR money), as well as the U.S. economy and financial markets.
Operating under a government mandate and a carefully maintained perception of transparency, the Fed works with the government to actually "hide behind technicalities in cleverly crafted laws, which shroud the effect of their acts."
"The reality ... is that the government, while claiming to do good works, has conspired with the Fed to loot the country," reveals Robert Prechter, author of the new report and founder of Elliott Wave International, the world's largest market forecasting firm.
As you know, threats are much less dangerous when you can prepare for them in advance. So, before you learn how to protect your accumulated wealth from this unprecedented threat, we want you to know these four things:
Who is perpetrating the theft of your money
How they are doing it so that you barely notice
Why it matters to you and your portfolio right now
How a market professional who's been around the block a few times expects it to play out in the immediate future -- so that you can protect yourself and even prosper now, as well as when the government's secret strategy ultimately crumbles and comes to light
Only the savvy traders, investors and entrepreneurs who understand how these threats will play out can hope to turn them into serious moneymaking opportunities.
Those who remain in the dark ... well, we don't like to think about what will happen to them and their money. It will not be pretty.
Don't be one of those who is in the dark. Read the 10-page report I just read from Robert Prechter. It's a quick read with dozens of insights we have not seen elsewhere.
If nothing else, you will come away with an expert-level understanding of the past 200 years of government intrusion into the U.S. money supply, economy and investment markets.
Click the link below to download and read your very own copy of this eye-opening new report.
Yes! I want to read this new report from Robert Prechter, then learn how to protect my accumulated wealth and even prosper when the government's schemes ultimately unravel