The widespread idea is that events around the world direct the financial markets. We are told to believe that the market reacts to the news and people’s mood changes accordingly. When the news are good, people feel good and they buy stocks they say. When the news are bad, people sell stocks according to the orthodox view. But is that really so? What if it was the other way around? What if the mood changed first and it’s economic, political and social effects became apparent later? Could it be possible? If not, why can’t the news editors trade the markets get rich? Would you get rich if you knew the news ahead of averyone else? If you are Rothschild, maybe. But for the rest of us, it is not so clear cut.
You get a review of ALL of the charts and ALL of the indicators that EWI has been watching over the past year or so — to provide you the full impact of what they are seeing. The entire picture will show you a rather radical conclusion about the future of stock prices.
Don’t delay! “Most Important Report for 2012″ is only available for a few more days.
Some cite the good earnings that we have had. According to Robert Prechter, good earnings, or record earnings actually appear at the stock market top or right after the top:
In this CNBC video Prechter explains his bearish view for the next few years. According to his analysis 2012 is likely to witness a bear market in stocks, commodities and there will be no place to hide, no place to diversify. Debt is the problem and there is too much of it now. This practically impossible to pay debt provides the deflationary pressures in the economy.
Stocks topped in April 2011, Gold topped in 2011, many foreign markets topped even earlier. 2012 is likely to be the year of US dollar. Ironically, the sickest currency US dollar is in short supply. Entire world went on a borrowing spree for decades and they promised to pay back with interest in the future. The future has arrived.
But what will the stocks do? Can the stock market survive 2012? Or is it going to be a year that goes into history as one of the great crashes of all time?
Social psychology precipitates economic depressions
Don’t blame Martin Van Buren for America’s first deflationary depression. Social mood rode higher in the saddle than did our 8th President, who only stood 5′ 6″.
Elected in 1836, by the time Van Buren assumed office in March 1837 a speculative bubble had burst and a banking crisis was at hand (sound familiar?) — the national mood had turned south and the “Panic of 1837″ followed. Van Buren was known as “The Little Magician,” but he could not pull an economic recovery out of the hat. He met defeat seeking a second term.
America’s first deflationary depression lasted until 1842. Van Buren blamed over-zealous business practices and a credit bubble (sound familiar 2x?). The panic precipitated bank failures; many speculators who bought land to capitalize on railroad expansion lost everything. The depression worsened as Van Buren continued Andrew Jackson’s economic policies. Businesses failed and unemployment was widespread. There were even “food riots” in several cities.
(Author’s note: Because of substantial revenue inflows into the Treasury during the boom of the early 1830s, the United States government became debt free in 1835. Ironically, this was the very year the depression began. Stock prices fell sharply despite the federal government paying off all of its debt. Conventional wisdom would have us believe reducing the national debt, or paying it off entirely, would lift stock prices. It didn’t happen in 1835, so there must be something else at work. That “something else” is social mood.)
The 1837-1842 deflationary depression comprised Supercycle Wave II, the end of which saw the beginning of the biggest economic expansion in history — Supercycle wave III! The 1929-1933 Great Depression still grabs more attention, but in fact the earlier Supercycle Wave II decline set the stage for the United States becoming the greatest economic and military power the world has ever known.
President Herbert Hoover held office during the 1929 Crash and onset of the Great Depression, a.k.a. Supercycle Wave IV. Yet no U.S. President has thus far been at the helm during a Grand Supercycle market decline. The last decline of that degree had its origin in the South Sea Bubble in 1720, when Great Britain’s King George I was on the throne. The rampant speculation of the time spread beyond the financial class, such that porters and ladies’ maids had enough money to buy their own carriages. Members of the clergy took part in the mania. Poof! Life savings were wiped out. England’s Postmaster General committed suicide. Hundreds of members of Parliament lost money. As for the directors of the South Sea Company itself, they were forced to give up their property and arrested to boot.
Martin Van Buren led the nation during our country’s first Supercycle depression — as President he was powerless to stop it. Who will occupy the Oval Office when the next Grand Supercycle depression develops? This we believe: That individual will be powerless to prevent it. He or she will only be a President.
What is more powerful than a President of the United States? The answer is “social mood.” How is this powerful force shaping the economy?
Discover the answer in the 90-page Free Report called the Deflation Survival Guide.
Now is the time to prepare for a deflationary depression. Start by reading the 90-page free eBook, Deflation Survival Guide, which includes Robert Prechter’s most important analysis and forecasts regarding deflation. This guide will help you survive a major deflationary trend, and even equip you to prosper.
Market had a sharp decline 2 months ago. We are well below 200 day average, and we have bounced off of 38.6% fibonacci retracement level a few times. Price support level has been holding well. Now the sentiment in the mainstream media is that this is a healthy pullback, a buying opportunity in the stock market. One needs to consider the big picture and ask the question: Have we seen the stock market bottom yet?
Here’s why you SHOULDN’T get too comfortable
Bear markets are cunning beasts.
Don’t get me wrong — we are not in the bear market territory yet. At least, not officially. But if this is the beginning of a bear market, then what we are seeing is a bear market rally.
An “official” bear market begins when the stocks indexes decline 20%. The DJIA’s decline from the May 2, 2011 high to the September 21 low is about 17%. Close, but no cigar.
Add to that the strong rallies we’ve seen over the past few weeks (Sept. 12-20: +685 points in the Dow, for example) — and lots of people conclude that despite the volatility, things aren’t so bad.
But let’s get some perspective. The stock market has been around a while. Only when you look at its history do you realize just how cunning — and fast, and strong — bear markets can be. Past recessions and depressions have displayed examples of extraordinary bear market rallies before the prices hit the ultimate stock market bottom.
Here’s a chart we’ve shown readers before. It’s worth printing out and keeping on the wall above the desk where you open your brokerage statements.
This is the DJIA between 1930 and 1932, one of the worst bear markets in history. Robert Prechter, EWI’s president, took the time to measure the percentage gain of each bear market rally during the 2-year period — you can see them in this chart.
When you routinely see double-digit rallies (11 percent, 18 percent, even 39%) over the course of two or three years, it’s easy to be lulled into thinking that maybe things aren’t so bad. Here we are counting 7 bear market rallies some of which would make you feel like a bull market with is time length and price gain.
The reality, of course, is that the bear market’s chokehold grows tighter around your neck with every drop-rally sequence. (Think back to the 2007-2009 collapse, and you’ll remember the same behavior.)
Which brings us to here and now. Rallies and declines of 300-400+ points have been so common since August that we’re kinda getting used to them.
The question is: Are we in a bear market, or is it that “maybe things aren’t so bad”?
You need some perspective to answer that question. The research we do here at EWI can help.
Free Report: Stocks — Buying Opportunity or Another “Free Fall” Ahead?Find out what these market moves mean to your investments with current analysis from Elliott Wave International. Bob Prechter has just released a FREE report — with urgent analysis from his August and September 2011 Elliott Wave Theorist market letters, including another video excerpt from the special video issue of the August Theorist.
Stocks — Buying Opportunity or Another “Free Fall” Ahead? will help you put these uncertain markets into perspective so that you’ll be better positioned to both protect your investments when needed and prosper when opportunities arise.
(Video) Bob Prechter Explains ‘Triple Top’ Forming in U.S. Stock Market
This excerpt from the special video issue of the August Elliott Wave
Theorist brings you Bob Prechter’s analysis of the triple top
that has been forming in the U.S. stock market over the past 12 years.
Watch as Bob himself explains what this pattern means for you and the markets.
You can get even more analysis – including an 84-year
study of stock values – that will help you gain perspective
about the recent market moves with Elliott Wave International’s FREE
report, “Reality Check: Studying the Past to Bring
Clarity to the Future.”
You’ll get a glimpse into the in-depth analysis Robert Prechter presents
each month in his Elliott Wave Theorist with 3 excerpts from
his most recent issues.
Don’t let extreme market volatility leave you confused and scared. Prepare
yourself for today’s critical market juncture with your FREE report from
Robert Prechter.
J.P. Morgan saved the banking system back in 1907. Then the Federal Reserve was created to protect the system in 1913. While the FED was at the helm, we had the Great Depression and the inflationary period of 70s. If we look at the stock market charts, it looks like market volatility has actually increased after the FED during the past century! Trying to help the economy, Bernanke said he is going to keep the rates low until 2013. So, he is going to make further borrowing easy. We are already awash in debt, so the plan is to increase borrowing with the help of low rates. Sounds like a plan?
“The Panic of 1907″ vs. the “Debt Crisis” of 2011
By Elliott Wave International
If “legendary Wall Street figure” ever described anyone, it was turn-of-the-last-century financier J.P. Morgan. You can throw in “bigger than life” to boot.
Morgan was used to getting his way. His steely eyes cast a “ferocious glare.” His bulbous nose added to his imposing presence.
Beyond appearance and persona, Morgan was a one-man central bank. Historians credit him with bringing calm, and loads of liquidity, to the “Panic of 1907.”
While he “stared down” that financial crisis, even J.P. Morgan would be no match for today’s national debt. In 1907, the Wall Street legend gathered New York City’s biggest bankers into his office and demanded that they had 10 minutes to collectively pledge $25 million to keep the NYSE open. Morgan got his way.
At the time that was a lot of money. But let’s see how far an equivalent sum (constant dollars) would go today.
I used several methods to calculate constant dollars from 1907, and the highest estimate (relative share of GDP) converts $25 million then to some $11 billion today.
Yet $11 billion doesn’t even make a dent in our $16 trillion national debt.
Interestingly, the 1907 Panic eventually led to the 1913 creation of the U.S. Federal Reserve. Then as now, the central bank’s function is “financial stability.”
Specifically, the Federal Reserve serves as a “lender of a last resort” — the role Morgan and his banker friends played in 1907.
Fast-forward ninety years: In 2002, Robert Prechter published Conquer the Crash (now in its second edition), and said this about the central bank:
“Congress authorized the Fed not only to create money for the government but also to ’smooth out’ the economy by manipulating credit (which also happens to be a re-election tool for incumbents). Politics being what they are, this manipulation has been almost exclusively in the direction of making credit easy to obtain.”
Sounds a lot like today, doesn’t it?
And just a few weeks ago, Fed Chairman Ben Bernanke said he wants to keep interest rates very low:
“Issuing a grim new assessment of the American economy, a divided Federal Reserve said it now expects to hold short-term interest rates near zero for at least two more years.”
Los Angeles Times, (8/10)
Since the start of the Great Recession, the Fed’s easy money policy has not restored health to the economy. Why should the same policy work in the next two years?
Notice how the above quote uses the phrase “a divided Federal Reserve.” With that in mind, here’s what Prechter published as recently as July 16:
“…when the trend in social mood turns down again, dissension will increase. The Fed is fracturing internally…”
Elliott Wave Theorist, July 2011
The U.S. Federal Reserve was created almost a century ago. Has it kept us financially stable? What does the future look like for America’s central bank?
Get your Free Report titled Understanding the Fed, and learn more about America’s “lender of last resort.”This complimentary report goes way beyond the history of the U.S. Federal Reserve, and shines a bright spotlight on the central bank’s machinations today. Most importantly, your free eBook helps prepare you and your family for the “economy of tomorrow.” We see big changes just ahead.Gain instant access to Understanding the Fed by simply joining Club EWI — a membership community of over 300,000 of the independently-minded. Membership is also free. Simply follow this link for your quick and easy sign-up>>
We are witnessing one of those times that future generations will read in history books just like we read about the great stock market crash of the Great Depression. It is rare that decades and centuries of economic cycles top all together at the same time to form the perfect storm. The World’s debt problems, stock market bubble, housing bubble, credit bubble, are all coming together to threaten the capitalist economies as we know them. Past decade has witnessed multiple degrees of Elliott Waves end their final 5th of 5th waves. This is a rare top that happens once in 400 years. Kondratieff cycle is going through it’s Kondratieff Winter phase that is about to strengthen it’s deflationary grip on the economy. And if you are lucky enough to be sitting with a pile of cash, then you will first witness one of the greatest short opportunities in the stock market, followed by the greatest buying opportunity of a life time. Good luck.
Bob Prechter Discusses Market Forecasts on CNBC Closing Bell
“The problem is deeper than just a minor recovery or a minor recession.”
Robert Prechter joins CNBC hosts Bill Griffeth and Maria Bartiromo on Closing Bell to talk about the still-unfolding forecasts presented in his New York Times bestsellerConquer the Crash.
We invite you to watch the interview below. Then download Robert Prechter’s free stock market report that uses an 84-year study of stock market values to help you prepare for and understand today’s critical market juncture.
Download Robert Prechter’s Free Report To Discover How You Can Prepare For Today’s Critical Market Juncture
While we’re sure you’re reading countless articles and analysis about the market’s recent volatility, if you’re not reading what EWI’s subscribers read, you’re missing the valuable, prescient perspective contained in each issue of Prechter’s market letter, TheElliott Wave Theorist.
Access Robert Prechter’s free report and read in-depth analysis, including an 84-year study of stock values, that will help you prepare for and understand today’s critical market juncture.
The market is falling and has just broken the neck down in the widely watches head and shoulders pattern. Those who are trading stocks, the savvy ones who prefer stock market timing instead of buy and hold are shorting the stocks. Most people pay attention to the news and events and they try to buy sell accordingly. But news and events do not move the stocks. News are about the past and they hardly predict the future. It is like looking at the rear view mirror and trying to drive. There are various other technical indicators some of which do have predictive value. One of these is the traders sentiment. How many people are bullish? And how many people are bearish. The reasoning is simple: If everyone is already bullish, then every who can buy has already bought. We are out of buyers, therefore only 1 thing can happen: They can change their mind and start becoming bearish again. And when they do so, they sell stocks, driving the prices down. Going to the recent stock market top, we had these indicators ring the bells.
In this video excerpt, Elliott WaveFinancial Forecast Editor
Steve Hochberg explains one of the most important things to keep in mind when
assessing a market, “Extreme opinions, shared widely, constitute the single
most reliable indicator of an impending change of direction for a market.” Enjoy
your video excerpt.
To find out more about the Wave Principle, be sure to watch the Club EWI video
series: Learn the Why, What and How of Elliott Wave Analysis. This 3-video series
is a great way to get started with the Wave Principle. You can watch these
videos free with a Club EWI Membership.
The European Banking Authority announced Friday that 8 banks had failed their stress tests and 16 more had narrowly passed. But the results drew much criticism from analysts, who said that the stress test is not strict enough.
Indeed, this is something that European Financial Forecast readers have known since the first stress test last summer.
For a unique perspective on Europe’s sovereign debt crisis, we invite you to read a free 6-page report by Elliott Wave International’s European Financial Forecast editor Brian Whitmer, “Credit Crisis in Europe.” Brian has been anticipating and tracking the credit contagion across Greece, Ireland, Spain, Portugal and other EU nations for months.
Below is a quick excerpt from this report, written just after the first stress test. For details on how to read it in full now, look below.
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Credit Crisis in Europe: How the Stability of an Entire Region is Teetering on the Edge of a Major Collapse
By EWI’s European Financial Forecast editor Brian Whitmer (excerpt)
Panic Now and Avoid the Rush — July 30, 2010
The market’s collective sigh of relief is also reflected in authorities’ stress testing of 91 European banks. In case you missed last Friday’s results, their message is clear: relax. The Committee of European Banking Supervisors (CEBS) gave passing grades to nearly every bank on its list. The group, for example, passed both Irish banks and all four UK banks that it evaluated. The CEBS gave clean bills of health to all four Portuguese banks, all five Italian banks, and five out of six Greek banks that it analyzed. Even with share prices that sit 29%-66% beneath their 2009 countertrend highs, the CEBS says that the Bank of Ireland, Piraeus Bank, Banco Popolare, and Banco Santander are all in good shape. In fact, just seven of the 91 banks failed to make the grade. Five were in Spain, one in Greece, and one, Germany’s Hypo Real Estate, is entirely owned by the German government anyway. Everyone else — 84 institutions in all — are supposed to be strong enough to withstand another economic shock.
It’s not so much the stellar results that expose the optimism of a Primary degree rally, but rather the Banking Committee’s stress tests themselves. They are notable primarily because they failed to test for any real stress in the first place. As the chart shows, the Committee’s “adverse scenario” regarding economic performance assumed a mere 3% deviation from the European Commission’s GDP forecast. Another test looked at banks’ resilience to a sovereign risk shock, yet the analysis merely used conditions similar to those of May 2010. In other words, just like the UK budget office, the CEBS is utilizing a woefully diluted version of the economic deterioration that is about to grip the continent.
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FREE REPORT: Discover what Europe’s debt crisis means for the future of the continent and your investments. Get your FREE 6-page report filled with unique analysis on Europe, the PIIGS and the sovereign debt crisis.EWI’s European Financial Forecast editor Brian Whitmer gives you the context for what’s happening in Europe and gets you up to speed on the reality of the situation. Download your free report now.
Technical analysis helps in recognizing the markets direction and possible turning points. There is no one-size fits all silver bullet solution to get you ahead of the crowd all the time. By definition, only the few will make money in the stock market. And we can use some tools to enhance the odds in our favor. Here is one such tool to help us in our stock market trades:
A Four-Chart Lesson in Spotting Trade Setups
You can find low-risk, high-probability trading opportunities by trading with the trend. The trick is to find the end of market corrections, so you can position yourself for the next move in the direction of the trend.
This excerpt from Jeffrey Kennedy’s free 47-page eBook How to Spot Trading Opportunities explains where to find bullish and bearish trade setups in your charts and how to zero-in on these opportunities. If this lesson interests you, the full 47-page eBook is free through July 6.
On the left-hand side of the illustration below, there are two bullish trade setups. As traders, we want to wait for the wave (2) correction to be complete so we can catch the move up in wave (3) – this is the trade. What we are trying to do in this bullish trade setup is anticipate the potential for profits on the buy-side as prices move up in wave (3). Another bullish trade setup is at the end of wave (4).
As traders, we are looking to buy the pullback and position ourselves within the direction of the larger up-trend. Remember, three-wave moves are corrections, which means that they are countertrend structures. On the other hand, five-wave moves define the larger trend. As traders, we want to determine what the trend is and trade in the direction of the trend. Our buying opportunity to rejoin the trend is whenever the trend pauses and forms a correction.
Now, let’s look at the right-hand side of the illustration where we see two bearish setups. When a five-wave move is complete, it is retraced in three waves as a correction. The end of the five-wave move presents the first trading opportunity that we can take advantage of the short side (or the sell side) as the wave (A) down begins.
Notice the second bearish trade setup gives us another shorting opportunity as wave (B) tops.
So, within the classic wave pattern of five waves up and three waves down, we have four high-probability trading opportunities in which we are either positioning ourselves in the direction of the trend or identifying termination points of a trend. I want to share with you some tricks I have picked up over the years about how to analyze corrective waves and their termination points. The single most important thing I’ve learned from analyzing corrections is that corrective or countertrend price action is usually contained by parallel lines.
As shown above, draw the parallel lines by beginning at the origin of wave A and going to the extreme of wave B. You draw a parallel of that line off the extreme of wave A. So basically you have a small, slightly angled downward price channel. This will show you the containment region for wave C. It also shows you an area toward the bottom of the lower trend line where you can expect a reversal in price.
Here is another example. Again, you draw the parallel lines off the origin of wave A, the extreme of wave A and the extreme of wave B.
Toward the upper end of the upper trend line, you will usually see a reversal in price.
This example shows how countertrend price action is contained by parallel lines in the British pound, 60-minute, all sessions. Why is it important to know parallel lines contain the corrective or countertrend price action? Number one, it will increase your confidence that you are indeed labeling a countertrend move properly. Number two, it identifies areas where you will likely see prices reverse. For example, we see this reversal up near the top.
This brief trading lesson is just a small example of the opportunities you can find once you learn to identify key market patterns. Learn more in your free 47-page eBook, How to Spot Trading Opportunities. This valuable eBook is regularly $79, but you can get it free through July 6. Download your free copy of How to Spot Trading Opportunities.
Now is the time to prepare for a deflationary depression. Start by reading the 90-page free eBook, Deflation Survival Guide, which includes Robert Prechter’s most important analysis and forecasts regarding deflation. This guide will help you survive a major deflationary trend, and even equip you to prosper.
Free Report: Stocks — Buying Opportunity or Another “Free Fall” Ahead?Find out what these market moves mean to your investments with current analysis from Elliott Wave International. Bob Prechter has just released a FREE report — with urgent analysis from his August and September 2011 Elliott Wave Theorist market letters, including another video excerpt from the special video issue of the August Theorist.
Get your Free Report titled Understanding the Fed, and learn more about America’s “lender of last resort.”This complimentary report goes way beyond the history of the U.S. Federal Reserve, and shines a bright spotlight on the central bank’s machinations today. Most importantly, your free eBook helps prepare you and your family for the “economy of tomorrow.” We see big changes just ahead.Gain instant access to Understanding the Fed by simply joining Club EWI — a membership community of over 300,000 of the independently-minded. Membership is also free. 
While we’re sure you’re reading countless articles and analysis about the market’s recent volatility, if you’re not reading what EWI’s subscribers read, you’re missing the valuable, prescient perspective contained in each issue of Prechter’s market letter, The Elliott Wave Theorist.
FREE REPORT: Discover what Europe’s debt crisis means for the future of the continent and your investments. Get your FREE 6-page report filled with unique analysis on Europe, the PIIGS and the sovereign debt crisis.EWI’s European Financial Forecast editor Brian Whitmer gives you the context for what’s happening in Europe and gets you up to speed on the reality of the situation. 
