A Book Review: Fibonacci Analysis

A book recommendation from Forex Journey -

If you have experience trading Fibonacci levels might I suggest a good read in Fibonacci Analysis by Constance Brown. This is not a beginners book, however, if you have been exposed to the basics of Fibonacci numbers, ratios and confluence and want to take it to the next level then this book might be for you.

Ms. Brown's passion on the subject is obvious. She takes you through her approach in a building block fashion that leaves you knowing that your learning curve is just beginning. Connie also introduces the reader to some basic Gann principals and hints at how these analysis work in concert.

If you are a passionate Fibonacci trader and want to enhance your knowledge on trading using Fib levels then I highly suggest adding this to your collection.

Amerikan Intervention

Here's a blog post from Larry Levin on why oil pulled back over 8% yesterday. I thought you would enjoy this...

Oil was once again in the news today, but this time not for another price spike.

Yesterday I wrote, “While speaking at a Bloomberg breakfast in Washington Wednesday, Tax-Cheatin-Timmy of the Treasury admitted to central banking manipulation when he said, ‘The economy is in a much stronger position to handle’ higher oil prices. ‘Central banks have a lot of experience in managing these things.’ If anyone outside the Federal Reserve would have deep knowledge of how the ANTI-free market central banksters operate, it would be the head of the US Treasury. Moreover, Benron Bernanke has already admitted numerous times that his QE policy was designed to manipulate the stock market higher. Add oil to the list now, and soon the destruction of the gold and silver markets.”

From its high today, oil plummeted 8%. Tax-Cheatin-Timmy wasn’t bluffing, but I didn’t think he was anyway.

What got the oil market falling today was a rumor that the Libyan dictator Gaddafi had been shot and killed. With this news the initial reaction of the market was, “Great, now that that’s over relative calm will put Libyan oil back on the market.” My initial reaction was, “Wow, the central bankers just murdered Gaddafi.” It wouldn’t really be the first time that the global banking cartel put a hit on someone that interfered with its interventionist plans – would it?

The real news of what was slamming the oil market come out later: margins. The ICE exchange increased margins for both WTI and Brent crude oil contracts, while the NYMEX (now owned by the CME) increased the overnight margins for its WTI crude oil contract. Overnight margins were increased for speculators and hedgers alike.

With this news the reaction of the market was, “Damn it! I can’t afford to carry all of these long positions and this announcement will keep a lot of new traders from getting long and helping my current positions. SELL!” My reaction was, “Oh, so that’s how Tax-Cheatin-Timmy and Benron Bernanke manipulated the market – with a phone call. With one call from the Chairman of Intervention, the head of the CFTC was given his marching orders to bring oil down who in turn called the exchanges.”

Why didn’t EZ-Al Greenspin do the same with Nasdaq margins in 1999 and 2000? Oh yeah, because that would have brought sanity to the EQUITY bubble and we can’t have that. What was I thinking? My bad.

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.

larrylevin@tradingadvantage.com Trading Advantage (888) 755-3846__

When You Feel the Elliott Waves, Your Eyes Become Wide Open

When You FEEL the Elliott Waves, Your Eyes Become Wide Open
How the waves of social mood led to an investment method worth looking into
February 24, 2011

By Elliott Wave International

Have you ever been at the ocean body surfing, just waiting for that perfect wave? When you begin to truly feel it, your adrenaline starts pumping.

I came to work for Elliott Wave International in the late 1980s -- before the Internet, before ETFs, before smartphones. Part of my job was to review the many publications that came to our offices, in search of articles that spoke to the "mood" of the markets.

It was a task that constantly searched for an answer to the question, Is there a large cluster of articles in print right now to indicate that people are extremely "bullish" or "bearish"? At that time my searches related mostly to the commodities markets, but I also kept close tabs on stock market news.

At first it was tedious. When I found groups of articles that reflected a certain mood, I would clip and save them to a file for our analysts to review. Yet after several months, I actually began to develop a feel for the mood patterns in the articles. I started to use this to see if I could anticipate where the price trend would go over the next several days or weeks.

The idea was simple: When the mood in the news articles got extremely bullish – and our Elliott wave counts suggested that a rally was completed -- it would often represent a downside opportunity; when that mood became deeply gloomy, it was usually time to get bullish.

I was amazed -- my adrenaline was pumping. I actually started to get a feel for the waves -- a feeling for the direction of the market! I was hooked, so I took it to the next level.

I had read Prechter and Frost’s Elliott Wave Principle – Key to Market Behavior before I interviewed for my position. It was interesting, but it didn’t really speak to me. But after I had personally experienced and understood what it means to feel the mood of the markets, I read it again. The second time took on a whole new meaning.

If you read Elliott Wave Principle a long time ago, or wish to read it for the first time, Elliott Wave International has just released an online edition of this investment classic, free to members of Elliott Wave International’s Club EWI. Membership is free. This is your chance to learn how the waves of social mood can change the way you invest forever.

Follow this link to become a member, and to receive FREE online access to Elliott Wave Principle, and the many other free investment and trading reports available to Club EWI members.

Elliott Wave Principal

Every successful trader or investor has a method that they rely on to make investment decisions. Without a method, investors must rely on the advice of others or their own emotions to make these decisions.

Elliott Wave analysis provides an objective method to forecast the direction of the markets. This theory was first brought to the public’s attention in 1978, in Frost and Prechter’s text Elliott Wave Principle. This classic book continues to sell thousands of copies each year. If you are at all familiar with technical analysis, you have probably heard about this method and read analysis based on the theory. It is used by successful investors and traders across the globe.

Now you can learn how to apply Elliott Wave analysis to the markets you follow FREE. For the first time ever, Robert Prechter has released an online edition that gives you instant access to the full 248-page book.

Until now this online edition was only available as an added benefit to subscribers of Elliott Wave International.

Elliott Wave Principle will teach you the 13 waves that can occur in the charts of the financial markets, the basics of counting waves, and the simple rules and guidelines that will help you to apply Elliott Wave for yourself. In addition to the theory, you will also learn the mathematical background, including Fibonacci analysis, and you’ll see examples of Elliott applied in indexes, stocks, and commodities.

As Prechter and Frost state in the Author’s Note:

“We trust our readers will be encouraged to do their own research by keeping a chart of hourly fluctuations of the Dow until they can say with enthusiasm, ‘I see it!’ Once you grasp the Wave Principle, you will have at your command a new and fascinating approach to market analysis.”

If you are looking for an objective, time-tested approach to trading the markets, try learning the method that successful investors have used for decades!

Access your online edition of Elliott Wave Principle - Key to Market Behavior, now. It's FREE.

Happy Trading and keep following the trend!!

Debate: Deadbeat Homeowner vs. The Banker

Analysis of Interest

from analyst David Rosenberg of Gluskin Sheff...

So Ben Bernanke focuses on equity valuations and yet there is a wide array of other “asset classes” that have been affected by the Fed’s massive liquidity infusion. Just as equity wealth has an indirect impact on spending, higher commodity prices squeeze margins for many producers and pinch real purchasing power for those households who are not owners of equity but have to fill their kids’ tummies nonetheless and find a way to get to work if they live more than a mile away. Looking at what food and energy has done since August; it would seem a little circumspect to be fingering Asian demand as the primary reason for the latest leg in the explosive commodity price rally.

Here we are, with 91% of all equity holdings in the United States held by the top 20% income group in the country. The top 1% own 38% of all the equity valuation. The lower 80% of the income strata own the asset class that the Fed wants so desperately to reflate (and with unmitigated success to be sure!). That same 80% are now being crushed by the indirect impacts of monetary policy — the ones that Bernanke dismisses — and are also ones that are seeing their cash flow drained by the surging gas and grocery bill. Geez — real wages deflated 0.5% in November, by 0.1% in December, and by what looks like at least 0.3% in January. The last time real work-based income fell three months in a row was when the economy was plumbing the recession’s depths from April to June of 2009.

Then again, who cares? No hedge fund investor does that is for sure (we don’t intend to be mean — that comment only covers the hours that the market is open). As long as Bernanke is juicing it up for the equity investor, and Uncle Sam is looking after the poor sucker with 99 weeks of unemployment insurance, 43 million food stamp recipients, and a nice dip into the Social Security Fund to finance a payroll tax cut, then all must be good and we must therefore have a sustainable recovery on our hands.

As we have said time and again, there will be a reward for being patient. After all, this equity rally has already achieved in 20 months what it took 60 months to accomplish from 2002 to 2007. In other words, double from the lows.

Friends — there is going to be day of reckoning. Trying to time it is futile. Just know it is coming and sooner than many think. Stop watching the talking heads on bubblevision and start boning up on the history of how post-bubble credit collapses end up playing out, especially once the government runs out of gas. Please don’t be tempted into the same mistake you may have made in 2007 and 2008 by jumping in to the riskiest parts of the markets at this juncture. In our view, it is currently appropriate to be focused on long-short strategies where an investor can manage or hedge out market risk and at the same time generate significant risk-adjusted returns. We understand what the market did from the 2009 lows, but we also know what they did from the 2000 highs. And the 2007 highs. Don’t be burnt thrice.

Happy Trading and keep following the trend!!

On the Docket: The Case Against Diversification

On the Docket: The Case Against Diversification
Just because investment banks and stock brokerages say you should diversify doesn't make it true
February 7, 2011

By Elliott Wave International

Talk with an investment advisor, and what's the first piece of advice you will hear? Diversify your portfolio. The case for diversification is repeated so often that it's come to be thought of as an indisputable rule. Hardly anyone makes the case against diversifying your portfolio. But because we believe that too much liquidity has made all markets act similar to one another, we make that case. Heresy? Not at all. Just because investment banks and stock brokerages say you should diversify doesn't make it true. After all, their analysts nearly always say that the markets look bullish and that people should buy more now. For a breath of fresh air on this subject, read what Bob Prechter thinks about diversification.

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Excerpt taken from Prechter's Perspective, originally published 2002, re-published 2004

Question: In recent years, mainstream experts have made the ideas of “buy and hold” and diversification almost synonymous with investing. What about diversification? Now it is nearly universally held that risk is reduced through acquisition of a broad-based portfolio of any imaginable investment category. Where do you stand on this idea?

Bob Prechter: Diversification for its own sake means you don’t know what you’re doing. If that is true, you might as well hold Treasury bills or a savings account. My opinion on this question is black and white, because the whole purpose of being a market speculator is to identify trends and make money with them. The proper approach is to take everything you can out of anticipated trends, using indicators that help you do that. Those times you make a mistake will be made up many times over by the successful investments you make. Some people say that is the purpose of diversification, that the winners will overcome the losers. But that stance requires the opinion that most investment vehicles ultimately go up from any entry point. That is not true, and is an opinion typically held late in a period when it has been true. So ironically, poor timing is often the thing that kills people who claim to ignore timing.

Sometimes the correct approach will lead to a diversified portfolio. There are times I have been long U.S. stocks, short bonds, short the Nikkei, and long something else. Other times, I’ve kept a very concentrated market position. My advice from mid-1984 to October 2, 1987, for instance, was to remain 100% invested in the U.S. stock market. During the bull market, I raised the stop-loss at each point along the wave structure where I could identify definite points of support. If I was wrong, investors would have been out of their positions. The potential was five times greater on the upside than the risk was on the downside, and five times greater in the stock market than any other area. Twice recently, in 1993 and 1995, I have had big positions in precious metals mining stocks when they appeared to me to be the only game in town. In 1993, it worked great, and they gained 100% in ten months. Diversification would have eliminated the profit. And every so often, an across-the-board deflation smashes all investments at once, and the person who has all his eggs in one basket, in this case cash, stays whole while everyone else gets killed.

* * * * *

Excerpt from The Elliott Wave Theorist, April 29, 1994

It is repeated daily that “global diversification” is self evidently an intelligent approach to investing. In brief, goes the line, an investor should not restrict himself to domestic stocks and bonds but also buy stocks and bonds of as many other countries as possible to “spread the risk” and ensure safety. Diversification is a tactic always touted at the end of global bull markets. Without years of a bull market to provide psychological comfort, this apparently self evident truth would not even be considered. No one was making this case at the 1974 low. During the craze for collectible coins, were you helped in owning rare coins of England, Spain, Japan and Malaysia? Or were you that much more hopelessly stuck when the bear market hit?

The Elliott Wave Theorist's position has been that successful investing requires one thing: anticipating successful investments, which requires that one must have a method of choosing them. Sometimes that means holding many investments, sometimes few. Recommending diversification so that novices can reduce risk is like recommending that novice skydivers strap a pillow to their backsides to “reduce risk.” Wouldn’t it be more helpful to advise them to avoid skydiving until they have learned all about it? Novices should not be investing; they should be saving, which means acting to protect their principal, not to generate a return when they don’t know how.

For the knowledgeable investor, diversification for its own sake merely reduces profits. Therefore, anyone championing investment diversification for the sake of safety and no other reason has no method for choosing investments, no method of forming a market opinion, and should not be in the money management business. Ironically yet necessarily given today’s conviction about diversification, the deflationary trend that will soon become monolithic will devastate nearly all financial assets except cash. If you want to diversify, buy some 6-month Treasury bills along with your 3-month ones.

Want More Reasons Why Diversification Should be Diverted from your Portfolio? Get our FREE report that explains the holes in the diversification argument. All you have to do is sign up as one of our Club EWI members. It's free, and it will give you access to more than this diversification report. Follow this link to instantly download this special free report, Death to Diversification – What it Means for Your Investment Strategy.

Good Article - QE2 and Inflation

Here's a blog article that was sent to me that covered what's happening in the markets today and the the potential for inflation form the Feds actions.

The headlines are screaming at the top of every financial media outlet tonight: The Dow Closes Above 12,000 For the First Time in Two Years!

What's going on here? Is the recovery well and truly underway? And, if it is, why is the Fed dropping hints again that "QE3 may get discussed" at future Fed meetings, as Kansas City Fed President Thomas Hoenig said on Feb 1st?

The full article can be found here at:

http://www.chrismartenson.com/blog/how-long-can-party-in-stocks-last/52040

Happy Trading and Follow the Trend!!

Trendlines: How a Straight Line on a Chart Helps You Identify the Trend

Trendlines: How a Straight Line on a Chart Helps You Identify the Trend
A free 14-page Club EWI report shows you 5 ways trendlines can improve your trading decisions
January 31, 2011

By Elliott Wave International

Technical analysis of financial markets does not have to be complicated. Here are EWI, our main focus is on Elliott wave patterns in market charts, but we also employ other tools -- like trendlines.

A trendline is a line on a chart that connects two points. Simple? Yes. Effective? You be the judge -- once you read the free 14-page Club EWI report by EWI's Chief Commodity Analyst and Senior Tutorial Instructor Jeffrey Kennedy.

Enjoy this free excerpt -- and for details on how to read this report in full, free, look below.

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Trading the Line -- 5 Ways You Can Use Trendlines to Improve Your Trading Decisions
(Free Club EWI report, excerpt)

Chapter 1
Defining Trendlines

Before I define a trendline, we need to identify what a line is. A line simply connects two points, a first point and a second point. Within the scope of technical analysis, these points are typically price highs or price lows. The significance of the trendline is directionally proportional to the importance of point one and point two. Keep that in mind when drawing trendlines.

A trendline represents the psychology of the market, specifically, the psychology between the bulls and the bears. If the trendline slopes upward, the bulls are in control. If the trendline slopes downward, the bears are in control. Moreover, the actual angle or slope of a trendline can determine whether or not the market is extremely optimistic, as it was in the upwards sloping line in Figure 1-1 or extremely pessimistic, as it was in the downwards sloping line in the same figure.

You can draw them horizontally, which identifies resistance and support. Or, you can draw them vertically, which identifies moments in time. You primarily apply vertical trendlines if you’re doing a cycle analysis.

Chapter 2
Drawing Trendlines

In this section, I’ll show you how I draw trendlines. I’ll start with the most common, simple way to draw them...

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For more free trading lessons on trendlines, download Jeffrey Kennedy's free 14-page eBook, Trading the Line – 5 Ways You Can Use Trendlines to Improve Your Trading Decisions. It explains the power of simple trendlines, how to draw them, and how to determine when the trend has actually changed. Download your free eBook.