Better Trader

Read this New Special Report before Gold and Silver Drop Further

As I write this email, gold is down more than 3% for the morning of Friday, May 10.

Major pullbacks like Friday's are often followed by big bounces, but as gold and silver threaten to breach the recent April lows, many investors have an important question in mind:

Are we in the early stages of a gold and silver bear market, or is downward pressure on the metals setting up another buying opportunity for the bulls?

On April 23, Robert Prechter, a famed market technician known for calling the roaring bull market of the 1980s, the '87 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 pulled out a Special Two-Page Report for you to read -- for FREE.

Every issue of the Theorist provides 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.

Due to the timely nature of recent market action in gold and silver, EWI cannot make it available indefinitely, so they've agreed to offer it for free to you until Wednesday, May 15 -- at which time the report will return to the subscribers-only area of their website.

Please follow this link to get instant access to Prechter's urgent Special Two-Page Report, and get ahead of what's coming next in the Gold and Silver markets

How a Fibonacci Cluster Showed an Important Resistance Level in Gold

How a Fibonacci Cluster Showed an Important Resistance Level in Gold
Senior Analyst Jeffrey Kennedy shares techniques that helped spot a trading opportunity.

By Elliott Wave International

If you use Elliott in your technical analysis, you may already use Fibonacci ratios to determine targets and retracement levels in your charts.

But have you heard of "Fibonacci Clusters?"

Elliott Wave Junctures editor Jeffrey Kennedy shares his charts to illustrate this technique, which he recently used to identify a critical turning point in Gold. The following lesson is adapted from his March 26 video. Get more lessons from Jeffrey in the free report, 6 Lessons to Help You Spot Trading Opportunities in Any Market.

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Performing multiple Fibonacci calculations of a price move often yields concentrations of Fibonacci levels, which act as barriers to price moves.

How do you create a Fibonacci Cluster of support or resistance?

In the following chart, you can see how to draw a line from the most recent swing high to the relevant low� and then connect previous higher highs to the same pivotal low. In the rectangular box, notice where the advance in GCA reversed from a cluster:

Kennedy covers other examples to explain how slingshots, reverse divergence and positive/negative reversals highlight the same momentum signature:

A bullish slingshot forms when prices make higher lows while underlying momentum surpasses previous extremes. Conversely, a bearish slingshot occurs when prices make lower highs while momentum exceeds prior readings.

In subsequent days, Gold prices fell to below $1550.

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Learn How You Can Use Fibonacci to Improve Your Trading If you'd like to learn more about Fibonacci and how to apply it to your trading strategy, download the entire 14-page free eBook, How You Can Use Fibonacci to Improve Your Trading. EWI Senior Tutorial Instructor Wayne Gorman explains: The Golden Spiral, the Golden Ratio, and the Golden Section How to use Fibonacci Ratios/Multiples in forecasting How to identify market targets and turning points in the markets you trade And more! See how easy it is to use Fibonacci in your trading. Download your free eBook today >>

This article was syndicated by Elliott Wave International and was originally published under the headline How a Fibonacci Cluster Showed an Important Resistance Level in Gold. 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.

Top 3 Technical Tools Part 3: MACD

(Video) Top 3 Technical Tools Part 3: MACD
Enhance your trading confidence with a 2-minute lesson on how to combine Moving Average Convergence Divergence with other technical tools.

By Elliott Wave International

"Guessing or going by gut instinct won't work over the long run. If you don't have a defined trading methodology, then you don't have a way to know what constitutes a buy or sell signal. Moreover, you can't even consistently correctly identify the trend."

-Jeffrey Kennedy

Jeffrey Kennedy is an accomplished teacher and a Senior Analyst here at EWI. Yet he often says that the Wave Principle alone is not a trading methodology. It does not tell you how much trading capital you can afford to risk, or specific guidance about which entry or exit levels are best suited for your trading style or where to set your protective stop.

Kennedy also says that along with risk management and emotional discipline, the right technical tools are a vitally important part of supporting your wave count.

To enhance trading confidence, Jeffrey's 3 favorite technical tools are Japanese candlesticks, RSI, and MACD. (read Part 1 on Japanese Candlesticks and Part 2 on RSI ). Today's lesson shows you how MACD can help identify trading opportunities with an example from USDCAD.

This 2-minute video and overview of MACD are adapted from Jeffrey's Elliott Wave Junctures educational service (which empowers subscribers with information on nearly every aspect of trading. Try it risk-free for 30-days >> ).

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Moving average convergence divergence (MACD) is a momentum indicator developed by Gerald Appel. It consists of two exponential moving averages, the MACD line and Signal line. The difference between these two lines yields an additional indicator, MACD Histogram.

Since these studies evaluate momentum, they work optimally in trending markets. When combined with reversal candlestick patterns, MACD and MACD Histogram can increase confidence in these patterns as well as continuation of the larger trend.

MACD divergence occurs when prices move one way and MACD moves the other. Bearish divergence forms when prices make new highs and MACD does not. Conversely, new price lows without lower MACD readings is bullish divergence. These conditions aid traders in identifying potential changes in momentum and trend.

MACD is constructed using two lines referred to as the MACD line and the Signal line.

When the MACD line appears to penetrate the Signal line, but fails to do so, a hook forms. The significance of a hook is that it coincides with countertrend price moves.

MACD is excellent technical tool provided you know how to use it and what to look for.

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Learn the Best Technical Indicators for Successful Trading This free report from Elliott Wave International will teach you how to incorporate technical indicators into your analysis to improve your trading decisions. You'll learn which technical indicators are best for analyzing chart patterns, which are best for anticipating price action, and which are best for spotting high-confidence trade setups. You'll also learn how technical indicators can be used to complement Elliott wave and other technical methods. Get your technical indicators report now >>

This article was syndicated by Elliott Wave International and was originally published under the headline (Video) Top 3 Technical Tools Part 3: MACD. 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.

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.

Please follow this link to get instant access to the first two pages of Prechter's urgent market letter

Top 3 Technical Tools Part 2: Relative Strength Index (RSI)

By Elliott Wave International

EWI senior analyst Jeffrey Kennedy shows you how to identify quality trade setups with supporting technical indicators.

EWI's senior analyst shows you a beautiful example of how supporting indicators help identify a trade setup in Halliburton (HAL). Read more.

How Market Losers Think, and How to Stop Doing It

To become an independent investor, you have to crawl before you walk and walk before you run.

Even after you're on your feet, the first step isn't easy: A nudge in the right direction can help.

Robert Prechter's recent keynote speech, "How Market Losers Think, and How to Stop Doing It," is that nudge.

It was only a few months ago -- in a packed ballroom at the world's largest investment conference with attendees on the edge of their seats -- that Prechter overturned several of the most widespread investment myths.

In turn, he provided the evidence-based alternative for market causality.

Only the few hundred people who sat in that room have seen this presentation -- until now.

If you mistrust the conventional notions that markets are always efficient, investors are always rational and prices always reflect value, give Prechter 23 minutes of your time.

In those 23 minutes, you will discover …

    How events like 9/11 and the Enron scandal have a relationship to markets that is shockingly different than what you think.
    The surprising link between interest rates and stocks.
    Inflation and deflation's impact on hard money.
    Central bankers' supposed power to turn trends.
    What new data says about the long-term viability of investment models based on earnings and value.
    And more, including the secret force that drives the decisions of futures traders, investment advisors, money managers, hedge fund managers and economists.

The video is free, and it's just a couple of clicks away. Find a quite location, and watch it now.

Follow this link to learn more and to watch Prechter's speech now -- it's free

Sentiment Drives Stock Prices

By Thierry Laduguie

If you are on Twitter you will have noticed an increase in the number of posts about gold. Gold crashed earlier this week and that’s why everyone is talking about it. It appears that many traders were on the wrong side. The yellow metal has been in a bull market for years, and as we know, bull markets always come to an end. The question is: is this the end of the bull market in gold? It could be but I won’t bet on it, I am not an expert on gold. What I can say is that commodity prices, like stocks prices can suddenly drop at a time when there is no evidence of deteriorating fundamentals. This is caused by a change in sentiment.

On 20th March, the BTI, a sentiment indicator, turned bearish. From that moment I knew that stocks were at the forefront of a significant decline.

Contrary to popular opinion, economic and corporate news do not drive stock prices. Stock prices and many other assets such as gold are driven by sentiment. Positive sentiment is bullish for stocks while negative sentiment is bearish. It does not matter whether the news is positive or negative, what matters to the market trend is the state of investors’ sentiment. Corporate and economic news have a temporary impact on prices when they are released, and we can not ignore this fact, but short to long term trends are built on sentiment.

So how do we measure sentiment?

I measure sentiment with the BTI which is a proprietary indicator. This indicator moves up and down according to sentiment, when it reaches an extreme, stock markets change direction.

 

Note on the above FTSE 100 chart, the BTI turned up on 29 November 2012 and continued to rise until 19 March. This period was under the influence of positive sentiment, stock prices rose. The BTI turned down on 20 March, indicating a period of negative sentiment. Stock prices declined.

Another indicator derived from the BTI gave an early warning signal in early March:

 

Positive sentiment was receding as shown by the declining line after 28 February (the top). During the period that followed the stock market continued to rise but the sentiment indicator continued to decline (bearish divergence). That was a warning that the FTSE 100 trend would turn down.

If you've been taken by surprise by the recent sell off I suggest that you subscribe to my FTSE short term forecast. Click here to subscribe.

New 5-Part Video Resource for Commodity Investors & Traders

If you read commodity news, you've probably noticed a trend: Seems like no one likes commodities any more! Here are some recent headlines:

    "Hedge Funds Cut Bets Most Since ’08 as Prices Slump: Commodities "
    "Credit Suisse Lowers Price Targets on Commodities, Prices Sink "
    "World Markets Drive Down Commodity Prices"

The recent downtrend has caught many traders off guard.

So, our friends at Elliott Wave International have released a free video report for commodity traders and investors: "15 Commodity Opportunities You Should Be Watching Right Now."

This free report was designed to help you capture the next big moves in commodities.

Over the course of 5 days, EWI's Chief Commodity Analyst Jeffrey Kennedy will walk you through the biggest trading opportunities in 15 major commodity markets for 2013 and beyond.

The action begins Monday, April 22, when the first video posts. The 5-part video series will be released each day through Friday, April 26.

Learn more about EWI's new commodity resource and sign up to get an email alert as soon as the first video goes online

Top 3 Technical Tools Part 1: Japanese Candlesticks

By Elliott Wave International

EWI senior analyst Jeffrey Kennedy shows you how to identify quality trade setups with supporting technical indicators.

Learn how Japanese Candlesticks can help support your technical trading decisions. Read more.

FTSE 100: Near Important Resistance

By Thierry Laduguie

Yesterday we saw the S&P 500 make a new all time high above 1576. All time highs have a powerful influence on sentiment, when a market makes a new all time high investors turn bullish but this bullish mood is temporary. Furthermore the market rose on earnings reports. As always investors believe that earnings will beat expectations so they turn bullish during the earnings season.

Despite all this the fundamentals are deteriorating. Christine Lagarde warned "improvements in financial markets have not translated into improvements in the real economy". Last week's nonfarm payrolls miss is another reminder that the economy is struggling to recover. Yesterday's FOMC minutes show that the Fed is ready to slow the the QE3 programme with a view to stop the flow of stimulus at the end of the year. President Obama announced a series of spending reductions and tax rises yesterday. And today we learn that Australian unemployment data showed a surprise rise. Yet, despite all this, investors ignored the risks and pushed markets higher. In my view it's just a matter of time before stock markets collapse.

The mood, as recorded by our BTI, is down, an indication that the FTSE is already in a downtrend. The UK index should NOT recover to new high. This downtrend is also clearly visible in the German Dax. US markets are rising on optimism, I believe European investors are not as  naive as US investors. They know the party won't last. The S&P has reached a critical level on the monthly chart:

 

 

Note that this long term chart show a potential expanding triangle [a,b,c,d,e] since 2000. Prices are now near the upper line which is major resistance. The line passes in an area between 1590-1600. I am not saying this pattern will unfold but it's a possibility and must be ready for it. There is an alternate scenario which I will not discuss, unless the S&P breaks above 1600. For now the disconnect between the economy and the stock market has the potential to turn global stock markets into a bear market of epic proportion. If the S&P pulls back from current levels and fails to break above 1600, this long term pattern will become my top wave count.

On the FTSE intraday chart the current rally is wave (ii) of a five-wave decline. A target for wave (ii) is 6440.

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