VIDEO - The Importance of Patience and Persistence in Your Trading

The Importance of Patience and Persistence in Your Trading
 
View the lesson learned from a dramatic sell-off in the E-Mini S&P 500 in this educational excerpt
By Elliott Wave International

Learn how to overcome a problem that often arises in Elliott wave trading, then find out how you can gain access to a week of FREE educational videos. Read more.

A Two-Bar Pattern that Points to Trade Setups

 

Trader Education Week begins September 26!!
 

A Two-Bar Pattern that Points to Trade Setups  

September 25, 2012

By Elliott Wave International

Some people like to get outside on the weekends, maybe playing tennis or working in the yard. Some people like to visit their friends or cook a big meal or go out to see a movie. And some people who are passionate about their work -- such as Elliott Wave International's (EWI) analyst Jeffrey Kennedy -- like to stare at hundreds of price charts on their computer screen to find patterns that point to trade setups. We used to worry for his health but not anymore, because he's been doing it for years and he comes up with some amazing trading lessons. Enjoy this lesson on bar patterns from EWI analyst Jeffrey Kennedy.

[Editor's note: Elliott Wave International is hosting Trader Education Week, September 26 through October 3. During this event, analyst Jeffrey Kennedy will share video trading lessons that will empower you to improve the way you trade.]

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The Popgun
I'm no doubt dating myself, but when I was a kid, I had a popgun -- the old-fashioned kind with a cork and string (no fake Star Wars light saber for me). You pulled the trigger, and the cork popped out of the barrel attached to a string. If you were like me, you immediately attached a longer string to improve the popgun's reach. Why the reminiscing? Because "Popgun" is the name of a bar pattern I would like to share with you this month. And it's the path of the cork (out and back) that made me think of the name for this pattern.

The Popgun is a two-bar pattern composed of an outside bar preceded by an inside bar. (Quick refresher course: An outside bar occurs when the range of a bar encompasses the previous bar and an inside bar is a price bar whose range is encompassed by the previous bar.) In Chart 1 (Coffee), I have circled two Popguns.

So what's so special about the Popgun? It introduces swift, tradable moves in price. More importantly, once the moves end, they are significantly retraced, just like the popgun cork going out and back. As you can see in Chart 2 [not shown], prices advance sharply following the Popgun, and then the move is significantly retraced. In Chart 3 [not shown], we see the same thing again but to the downside: prices fall dramatically after the Popgun, and then a sizable correction develops.

How can we incorporate this bar pattern into our Elliott wave analysis? The best way is to understand where Popguns show up in the wave patterns. I have noticed that Popguns tend to occur prior to impulse waves -- waves one, three and five. But, remember, waves A and C of corrective wave patterns are also technically impulse waves. So Popguns can occur prior to those moves as well.

As with all my work, I rely on a pattern only if it applies across all time frames and markets. To illustrate, I have included two charts of Sirius Satellite Radio (SIRI) that show this pattern works equally well on 60-minute and weekly charts. Notice that the Popgun on the 60-minute chart [not shown] preceded a small third wave advance. Now look at the weekly chart [not shown] to see what three Popguns introduced (from left to right), wave C of a flat correction, wave 5 of (3) and wave C of (4).

There's only one more thing to know about using this Popgun trade setup: Just be careful and don't shoot your eye out, as my mom would say.

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A FREE trading event that will teach you how to spot trading opportunities in your charts Elliott Wave International is hosting a free Trader Education Week, Sept. 26 through Oct. 3. Register now and get instant access to 4 free trading resources from EWI analyst Jeffrey Kennedy -- plus you'll receive more lessons from Jeffrey as they're unlocked each day of the event. Don't miss this opportunity to learn how to spot trading opportunities in the markets you follow. Register Now >>

Unsuspecting Bond Fund Investors Are Set Up for a Shock

Another great example on how to deploy Elliot Wave Principals into your overall investment strategy...

 

Unsuspecting Bond Fund Investors Are Set Up for a Shock
 

Why risk in the rebalanced portfolio is ramping higher
September 19, 2012

By Elliott Wave International

During market pullbacks, financial advisors use a boilerplate response: "Let's rebalance the portfolio." Investors have heard that one for years.

The recommended allocation varies depending on a client's age and risk tolerance, but it typically involves shifting funds from stocks to bond holdings.

The evidence shows that many investors did just that in response to the 2007-2009 financial crisis - at the fastest rate in decades. Bond fund assets have risen eight-fold over the past 22 years.

Investors now hold more than $800 billion in bond funds. Just take a look at this chart from a June 6, Elliott Wave Theorist Special Report.



Investors who increased their bond allocation probably feel financially safer.
After all, bond funds have been more stable than stock funds, and they provided higher returns than money market funds.

Yet extrapolating the past into the future is often a major mistake.

During the coming collapse in the value of debt, investors' interest in diversified funds of all stripes-debt, equity and commodity-will fall precipitously. The drop will come as a shock, especially to those who "rebalanced" from stocks and commodities to bonds after the markets panicked in 2008.

The Elliott Wave Theorist, Special Report, June 2012

What should safety-conscious investors do?

The Theorist Special Report offers a clear answer, one that's just as relevant now as when it was published in June.

You will also learn about a striking parallel between the bond market of 1929-1932 and today and what to expect next.

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Apple's iPhone, Germany, the Fed: Why It's All Irrelevant to the Market's Trend

Apple's iPhone, Germany, the Fed: Why It's All Irrelevant to the Market's Trend

R.N. Elliott's other major insight: News events do not impact market price patterns
September 14, 2012

By Elliott Wave International

A lot of people know that R.N. Elliott discovered the Wave Principle.
Yet few are aware that Elliott made another observation during his years of studying the stock market.

As the Wave Principle forecasts the different phases or segments of a cycle, the experienced student will find that current news or happenings, or even decrees or acts of government, seem to have but little effect, if any, upon the course of the cycle. It is true that sometimes unexpected news or sudden events, particularly those of a highly emotional nature, may extend or curtail the length of travel between corrections, but the number of waves or underlying rhythmic regularity of the market remains constant [emphasis added].

R.N. Elliott, R.N. Elliott's Masterworks, pp. 158-159

What a stunning insight: Even major news does not alter the market's main wave pattern! This seems to defy logic because most people believe that news and events are the very things that drive the stock market.

Yet, it was barely 100 years ago when most people believed that only birds could fly.
And even then, most people would never believe that a steel-encased object weighing nearly a million pounds (Boeing's 747) could get airborne and fly at 500 miles per hour.

Yet, natural law is what governs airplane flight, the buoyancy of metal ships, the incandescent light bulb, radio transmission over the air and, yes, the Wave Principle.
Natural law is inherent in the pattern of stock prices. That's why outside events do not materially influence the pattern's behavior.

This is particularly relevant today: Recent news covered Apple's new iPhone, which is expected to boost U.S. GDP; the European Central Bank's pledge to make "unlimited bond purchases"; Germany's Supreme Court approving the eurozone's permanent bailout facility; and the expected Federal Reserve announcement on whether to initiate more quantitative easing.
None of this will have an effect on the market's overall price pattern.

Charts of the Dow Industrials reveal that changes in interest rates, the deficit, the price of oil, terrorist attacks, Fed announcements and even wars do not change the market's main trend.
How about government bailouts of troubled financial institutions during the 2007-2009 financial crisis?

Please try to pick out on the chart below when those bailouts occurred.

According to the exogenous-cause model, these historic pledges and bailouts should have had immediate results. ... According to the economists' beliefs, the only rational place for them to have taken place would be at the bottom of the market. The minute the authorities began flooding the market with liquidity is the minute it should have turned up.

[The chart below] shows that in fact these actions took place in the early portion of the biggest stock market decline in 76 years. These actions did not push stock prices back up. The market finally bottomed months later, at a time when nothing along these lines happened.

The Elliott Wave Theorist, March 2010

Now, look at this labeled chart to see how you did.


In the 70 years since R.N. Elliott observed that news does not alter the market's wave pattern, his insight has been proven time and again.

It's wise to keep your market eye on what really matters: the Wave Principle.

R.N. Elliott drew a chart by hand 70 years ago and the final label is the year 2012! Amazingly, today's wave analysis confirms that his decades-ago analysis may be precisely on target.
The herd keeps looking to irrelevant outside events to aid their investing decisions. It's time to break away from the herd and start investing independently. EWI is here to help ...

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Learn to Think Independently 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 >>

Pro Football Plays Defense Against Deflation

Pro Football Plays Defense Against Deflation
Downside pressure on prices has only begun
September 12, 2012

By Elliott Wave International

You've heard (and probably used) the phrase, "I'd rather watch the game on television."
It's what a sports fan says if he doesn't want to face traffic jams, inadequate parking, overpriced tickets, noisy crowds, and possibly a poor view of the game.

These days, however, something else is keeping professional football fans at home: deflation.
Since the economic slowdown that started in 2007, fewer people are willing to fork over money to attend games. In turn, NFL teams are forced to play defense with ticket prices.

A Sept. 10 Yahoo Finance article points out that "10 teams lowered ticket prices this year," and that, "average ticket prices to attend [an Atlanta] Falcons home game are down 8.1% this season. This is the biggest drop among the 30 NFL cities."

Overall, NFL attendance has dropped 4.5% since 2007.

The article goes on to say: "It's telling us that the overall economy still isn't as strong as it was back in 2007 ... . It's also telling us that the upper-end consumer is still retrenching, they're still pulling back. They haven't felt the burst of either better employment numbers or better income and they're actually attending fewer games."

A weak economy leading to lower game attendance leading to lower ticket prices is a "domino effect" -- and it says plenty about how deflation works in the larger economy.

The psychological aspect of deflation and depression cannot be overstated. When the social mood trend changes from optimism to pessimism, creditors, debtors, producers and consumers change their primary orientation from expansion to conservation. As creditors become more conservative, they slow their lending. As debtors and potential debtors become more conservative, they borrow less or not at all. As producers become more conservative, they reduce expansion plans. As consumers become more conservative, they save more and spend less. These behaviors reduce the "velocity" of money, i.e., the speed with which it circulates to make purchases, thus putting downside pressure on prices. [emphasis added] These forces reverse the former trend.

Conquer the Crash, second edition, p. 91

Even so, many observers say the economy is past due for a recovery. They promote this view despite the evidence, which points to the new deflationary trend.

Most economists are unwilling to abandon the growth consensus, but the reality of an economic contraction is starting to become unmistakable.

The Elliott Wave Financial Forecast, August 2012

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Learn Why Deflation Is the Biggest Threat to Your Money Right Now Discover Robert Prechter's views on the unfolding deflationary trend by reading the 90-page report, The Guide to Understanding Deflation. This guide will help you understand the signs of deflation and allow you to prepare for what's to come. Plan and prepare for your financial future. Download your FREE 90-Page Deflation eBook now. >>

Most Compelling FX Opportunity Right Now

Free Video: "Most Compelling FX Opportunity Right Now"

By Elliott Wave International
For a limited time, you can see Jim Martens' NEW 7-minute video featuring this high-confidence opportunity. Jim walks you through the Elliott wave evidence that every FX trader needs to see. Hurry! Free access to this video ends Tuesday, Sept. 4. Read More.