Elliott Wave Principles

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2026-02-20T09:04:00.001-05:00

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Recession next? See what this time-tested indicator says…

2025-09-18T08:58:00.000-04:00

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Who is Elliott Wave International?
EWI is the world’s largest independent technical analysis firm.
Founded by Robert Prechter in 1979, EWI helps investors and traders to catch market opportunities and avoid potential pitfalls before others even see them coming.
Their unique perspective and high-quality analysis have been their calling card for nearly 40 years, featured in financial news outlets such as Fox Business, CNBC, Reuters, MarketWatch and Bloomberg.

2024-12-05T16:56:00.003-05:00

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Gold: Setting Near-Term Price Targets

2024-04-21T16:12:00.000-04:00

Gold: Setting Near-Term Price Targets
This was our "initial upside target" -- which has now been exceeded. What's next?

By Elliott Wave International

Around the first week of the year, the outlook for gold was not looking promising, at least according to this Jan. 5 headline (Reuters):

Gold set for weekly decline as dollar, yields climb

The rally in gold which started in early October continued to struggle for much of the rest of January.

Even though the mainstream media was looking to so-called fundamentals -- such as the action of the dollar or bond yields -- Elliott Wave International focused on the patterns of investor psychology -- as reflected by Elliott waves.

Indeed, on Jan. 24, the U.S. Short Term Update, a thrice weekly Elliott Wave International publication which focuses on major U.S. financial markets, said:

Spot [Gold] made its lowest close since January 17 today. Still, prices remain above $1972.89, which keeps the short-term bullish potential dominant. The [unfolding Elliott wave] should carry gold well above $2250 as the rally's pattern progresses.

Keep in mind that when this analysis was offered more than two months ago, the price of gold was trading around $2013 -- a far cry from our price target above $2250.

Now, fast forward to April 1 and this headline (CNBC):

Treasury yields jump to start second quarter

As you'll recall, rising bond yields were mentioned in the media as a negative for gold back in January.

But what did gold do on April 1? Correct -- it hit another all-time high.

Not only that, April 1 was the day that our price target was reached.

Here's a quote from the April 1 U.S. Short Term Update:

The initial upside target for [Gold] was "above $2250," which we first stated in the January 24 Short Term Update and reaffirmed throughout February and March. Gold hit this target today when spot prices pushed to $2263.64 intraday.

On April 2, gold traded even higher.

Remember, Elliott Wave International doesn't make forecasts for financial markets -- like gold -- based on common beliefs about "fundamentals" which investors cannot count on.

Instead, we arrive at price targets based on Elliott wave analysis.

If you'd like to learn more about Elliott wave analysis, read Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here's a quote from this "must read" book:

When after a while the apparent jumble gels into a clear picture, the probability that a turning point is at hand can suddenly and excitingly rise to nearly 100%. It is a thrilling experience to pinpoint a turn, and the Wave Principle is the only approach that can occasionally provide the opportunity to do so.

If you'd like to learn about the Wave Principle, know that you can gain complimentary access to the entire online version of Elliott Wave Principle: Key to Market Behavior for free.

Just follow the link and you can have the Wall Street bestseller on your computer in moments: Elliott Wave Principle: Key to Market Behavior -- get free and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline Gold: Setting Near-Term Price Targets. 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.

GameStop (GME): 88% Shellacking Yet No Lesson Learned

2024-02-23T09:09:00.003-05:00

GameStop (GME): 88% Shellacking Yet No Lesson Learned
"Every major peak gets cinematic treatment"

By Elliott Wave International

Back in early 2021, the meme stock craze was going strong.

As you'll recall that craze was all over the news and revolved around favorite stocks promoted by largely novice traders via social media. This January 27, 2021 New York Times news item sums up the frenzy surrounding one of those stocks:

'Dumb Money' Is on GameStop, and It's Beating Wall Street at Its Own Game

GameStop shares have soared 1,700 percent as millions of small investors, egged on by social media, employ a classic Wall Street tactic to put the squeeze -- on Wall Street.

A few days later, after GameStop shares had fallen hard, the February 2021 Elliott Wave Financial Forecast, a monthly publication which provides analysis of major U.S. financial markets, offered this warning:

Every major peak gets cinematic treatment and the current one is no exception. ... The Wall Street Journal reported, "Netflix, MGM Race to Produce Projects About GameStop Saga."

After that big decline in Gamestop shares in late January and early February 2021, the share price did bounce back, but has since fallen dramatically. Even so, some traders are not fazed, which is testimony to the high degree of overall optimism toward financial markets.

The recently published February Elliott Wave Financial Forecast provides an update with this chart and commentary:

The sustained public tolerance for falling prices is well illustrated by the resilience of retail demand for GameStop shares. GME is down 88% from its intraday high of $120.75 on January 28, 2021. But the faith in GME as a vehicle for wealth continues. ... On January 22, TheStreet's "meme maven" columnist added a host of "Reasons to Buy GameStop." There's just no quenching the demand for GME shares.

Again, this speaks to the high degree of optimism toward the market as a whole and our latest analysis of the main U.S. stock indexes is something you need to see for yourself.

As you might imagine, the main way Elliott Wave International analyzes financial markets is by employing the Elliott wave model.

If you'd like to learn the details of the Wave Principle, read Frost & Prechter's definitive text on the subject, Elliott Wave Principle: Key to Market Behavior. Here's a quote from this Wall Street classic book:

In the 1930s, Ralph Nelson Elliott discovered that stock market prices trend and reverse in recognizable patterns. The patterns he discerned are repetitive in form but not necessarily in time or amplitude. Elliott isolated five such patterns, or "waves," that recur in market price data. He named, defined and illustrated these patterns and their variations. He then described how they link together to form larger versions of themselves, how they in turn link to form the same patterns of the next larger size, and so on, producing a structured progression. He called this phenomenon The Wave Principle.

Would you like to read the entire book for free?

All that's required for free access to the online version of the book is a Club EWI membership. Club EWI is the world's largest Elliott wave educational community and is free to join. Members enjoy complimentary access to a wealth of Elliott wave insights regarding financial markets, investing and trading.

Follow this link to read the book for free: Elliott Wave Principle: Key to Market Behavior.

This article was syndicated by Elliott Wave International and was originally published under the headline GameStop (GME): 88% Shellacking Yet No Lesson Learned. 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.

Stocks highest since the record levels of early 2000

2023-10-07T17:34:00.000-04:00

Investing: What You Can Learn from Mom and Pop
"The highest commitment to stocks since the record levels of early 2000"

By Elliott Wave International

We all love Mom and Pop and cherish the valuable lessons about life they've given us along the way.

Yet, when it comes to investing, Mom and Pop may need to learn some lessons of their own.

Keep in mind that the American Association of Individual Investors' (AAII) weekly survey is said to be representative of "Mom and Pop" investors, well-known for being quite cautious.

The August 2021 Elliott Wave Financial Forecast, a publication which provides analysis of major U.S. financial markets, discussed their behavior as the stock market was staging a significant rally:

In July [2021], the five-month average AAII stock allocation increased to 70.6%, a high level for this normally skittish cohort of investors. ... This is the highest commitment to stocks since the record levels of early 2000.

This sentiment indicator is not meant for precision market timing, and, indeed, it seemed like these normally cautious investors had made the right decision. The rally persisted for the remainder of 2021. But, by early January 2022, the Dow Industrials and S&P 500 hit their all-time highs and have traded lower since.

What does this have to do with today?

Here's an interesting chart and commentary from the August 2023 Elliott Wave Financial Forecast:

This chart shows a jump in the AAII bullish percentage to 59.5% on July 21. ... These mom-and-pop investors are traditionally cautious, so big moves and extreme readings generally reflect important capitulations.

Let me emphasize again that sentiment indicators are important yet you may not want to use them for market timing.

That said, when you combine time-tested sentiment indicators with Elliott wave analysis, you get a much clearer picture.

If you're unfamiliar with Elliott wave analysis, read Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here's a quote from the book:

Our friends at Elliott Wave International are sharing with you a special free report ($80 value).

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Foreign stock buyers' behavior: a red flag
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Tech stocks vs broad equities: What's the message here?
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P.S. From the inverted U.S. Treasury yield curve to the second-largest U.S. bank failure in history (care of the March Silicon Valley bank collapse) -- 2023 has been a year of eerie callbacks to the 2008 financial crisis. See what the rest of the year is likely to bring via our special report >>

This article was syndicated by Elliott Wave International and was originally published under the headline Investing: What You Can Learn from Mom and Pop. 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.

Euro Stoxx 600

2023-07-28T18:09:00.000-04:00

Euro Stoxx 600: "Following the Script"
"If the 2007 analogue holds, the current rally [will] persist ..."

By Elliott Wave International

On Oct. 24, 2022, Bloomberg said:

Forget about a Santa rally to rescue European stocks from their doldrums, say strategists from Goldman Sachs Group Inc. to Bank of America Corp.

A week and a half later, our November 2022 Global Market Perspective offered a different view:

If the 2007 analogue holds, the current rally [will] persist ...

As it turned out, not only did the rally in the Euro Stoxx 600 persist through the holiday season, it carried well into 2023.

The just-published July Global Market Perspective, an Elliott Wave International publication which offers forecasts for 50-plus financial markets, provided an update with these charts and commentary [keep in mind that wave labels are available to subscribers]:

The charts bring the forecast up to date. In April and May, the Stoxx 600 briefly exceeded its 75% retracement level. On June 18, prices fell back below it and have yet to look back. The wave structure shows a complete zigzag at the May 19 high (see Elliott Wave Principle, p. 41, for the definition of a zigzag). A decline beneath the wave B low ... will confirm the onset of [the next Elliott wave] down.

The July Global Market Perspective mentions that specific price level which will confirm the next sizeable leg down.

Do know that not all our forecasts work out so well. At the same time, the Elliott wave model is the best analytical tool of which we're aware so we'll continue to base our forecasts on the repetitive patterns of investor psychology.

As Frost & Prechter noted in Elliott Wave Principle: Key to Market Behavior:

The Wave Principle is governed by man's social nature, and since he has such a nature, its expression generates forms. As the forms are repetitive, they have predictive value.

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This article was syndicated by Elliott Wave International and was originally published under the headline Euro Stoxx 600: "Following the Script". 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.

Corporate Bonds: "The Next Shoe to Drop

2023-04-28T18:02:00.004-04:00

Corporate Bonds: "The Next Shoe to Drop"
"The neckline has been broken over the last few days"

By Elliott Wave International

A "calamity" is likely ahead for corporate bonds, says our head of global research, Murray Gunn.

Some of Murray's analysis involves the head and shoulders, a classic technical chart pattern. In case you're unfamiliar with it, here's an illustration along with an explanation from one of our past publications:

A head-and-shoulders is a reversal pattern that consists of three price extremes. Market technicians refer to [them] as the left shoulder, head, and right shoulder. ...it takes a break of the neckline to confirm a reversal... [and it's] not just a bearish reversal formation. Inverted head-and-shoulders mark bottoms.

With that in mind, here's a chart and commentary which Murray provided for the April Global Market Perspective, a monthly Elliott Wave International publication which covers 50-plus financial markets:

The chart ... shows the relative performance of corporate bonds, as proxied by the iShares iBoxx $ Investment Grade Corporate Bond ETF (ticker LQD) versus the iShares 7-10 Year Treasury Bond ETF (ticker IEF). A distinct Head and Shoulders pattern exists where the neckline has been broken over the last few days. The corporate bond market has held in reasonably well over the last year, but we fully expect this sector to be the next shoe to drop.

Don't count on the ratings services to provide timely warnings. In the past, downgraded ratings have sometimes come only after most if not all the damage was done.

Remember Enron? The company still had an "investment grade" rating just four days before it collapsed. Ratings services also missed the 1995 debacle at Barings Bank. Olympia and York of Canada is another historical example: the largest real estate developer in the world at the time had a AA rating on its debt in 1991. Less than a year later, it went bankrupt.

Getting back to the present, Murray Gunn also notes:

When ... corporate loans are re-set this year, there are going to be a few deep breaths being taken, and more than a fair share of tightened sphincters!

And, speaking of chart patterns of financial markets, another way to monitor the bond market is to use Elliott wave analysis.

If you'd like to delve into the details of this method of analysis, read Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here's a quote from the book:

If indeed markets are patterned, and if those patterns have a recognizable geometry, then regardless of the variations allowed, certain price and time relationships are likely to recur. In fact, experience shows that they do.

It is our practice to try to determine in advance where the next move will likely take the market. One advantage of setting a target is that it gives a sort of backdrop against which to monitor the market's actual path. This way, you are alerted quickly when something is wrong and can shift your interpretation to a more appropriate one if the market does not do what you expect. The second advantage of choosing a target well in advance is that it prepares you psychologically for buying when others are selling out in despair, and selling when others are buying confidently in a euphoric environment.

If you'd like to read the entire online version of Elliott Wave Principle: Key to Market Behavior, you may do so for free once you become a member of Club EWI, the world's largest Elliott wave educational community. A Club EWI membership is also free.

Join now by following this link: Elliott Wave Principle: Key to Market Behavior -- get free and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline Corporate Bonds: "The Next Shoe to Drop". 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.

Crude Oil: Will "Banking Crisis Send Prices Even Lower"?

2023-04-02T11:24:00.000-04:00

Crude Oil: Will "Banking Crisis Send Prices Even Lower"? Ha!
SVB failed in March. Oil was destined to fall as early as February – here’s why;

By Elliott Wave International

The failures of Silicon Valley Bank, Silvergate Bank and Signature Bank have prompted a lot of discussion about the potential of a domino effect. People are wondering "what's next?"

The financial press is linking just about every downward price move in just about every financial market to the woes in the banking sector.

As a March 15 headline noted (CNBC):

Oil tumbles to lowest level since December 2021 as banking crisis routs markets

At the time that headline published, West Texas Intermediate had fallen around 5% during that trading session.

But, first of all, if you're failing to see an immediate connection between bank failures and crude oil prices, you're not alone. I see no connection, either. What's more, Elliott Wave International was forecasting the price of crude oil to decline well before the bank failures hit the news.

On Feb. 3, the February Global Market Perspective, a monthly Elliott Wave International publication which covers 50-plus financial markets, published with this chart and commentary (Elliott wave labels are shown to subscribers):

Crude Oil's trend still looks down... [a strong Elliott wave] decline still seems like the likely path.

During the next month, oil largely traded sideways. Sometimes, Elliott wave analysis requires patience. On March 3, our March Global Market Perspective updated its crude oil analysis with this chart and commentary:

Crude Oil still looks lower. Crude has yet to step into the meat of the [strong Elliott wave decline] we're anticipating, but it still seems like the likely path.

As you probably know, the price of crude oil has moved lower since our March Global Market Perspective published.

As with all financial markets, countertrend moves will inevitably occur. Yet, Elliott wave analysis provides context and a basis for forecasting before the news; without any news.

If you’d like to learn the details of the Elliott wave model, read Frost & Prechter’s Elliott Wave Principle: Key to Market Behavior. Here’s a quote from this Wall Street classic:

The Wave Principle is governed by man’s social nature, and since he has such a nature, its expression generates forms. As the forms are repetitive, they have predictive value.

Sometimes the market appears to reflect outside conditions and events, but at other times it is entirely detached from what most people assume are causal conditions. The reason is that the market has a law of its own. It is not propelled by the external causality to which one becomes accustomed in the everyday experiences of life. The path of prices is not a product of news. Nor is the market the cyclically rhythmic machine that some declare it to be. Its movement reflects a repetition of forms that is independent both of presumed causal events and of periodicity.

The market’s progression unfolds in waves. Waves are patterns of directional movement.

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This article was syndicated by Elliott Wave International and was originally published under the headline Crude Oil: Will "Banking Crisis Send Prices Even Lower"? Ha!. 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.

Why the Recession Consensus Might Be Too Optimistic

2023-02-21T17:38:00.003-05:00

Why the Recession Consensus Might Be Too Optimistic
"Major stock market declines lead directly to..."

By Elliott Wave International

The verdict seems to be in: The economy is headed for a recession.

These headlines from the past few months show what I'm talking about:

A 2023 recession would mean job losses for most industries ... (USA Today, Feb. 3)
Recession watch: U.S. economy is on shaky ground (MarketWatch, Jan. 28)
There's close to 100% certainty there will be a recession in the U.S. this year, CIO says (CNBC, Jan. 25)
Bank of America CEO sees 'mild recession' in 2023 (Fox Business, Jan. 21)
Guggenheim CIO: We are predicting the recession to start mid-year (CNBC, Jan. 18)
World Bank ... says globe is 'perilously close' to recession (CNBC, Jan. 10)
A Recession Is Widely Expected. Here's How to Prepare (Time, Dec. 10)

This is a way whittled down list of headlines. I included as many as I did to emphasize that the expectations for recession are widespread.

Yet, the consensus is rarely correct. So, this might mean that there will not be a recession. On the other hand, it could imply that the expectations for a recession are way too conservative -- too optimistic. In other words, something worse might be ahead.

This speculation is not just based on the majority being wrong most of the time, but on the historical observation that the economy tends to follow the stock market.

In other words, if the stock market gets into a great bull market, a major economic boom tends to follow. On the other hand, if stocks experience a major bear market (think 1929-1932), the economy tends to suffer a depression.

As Robert Prechter noted in Last Chance to Conquer the Crash:

Major stock market declines lead directly to depressions.

This chart is from that must-read book:

Robert Prechter shows that three of the biggest market declines of the past 300 years did indeed lead to economic depression: 1720-1784, 1835-1842 and 1929-1932.

Many people believe economic conditions lead to depressions. But as the chart makes plain, the stock market leads the economy.

If the stock market declines deeply in 2023 (and perhaps beyond), a depression may follow.

Indeed, here's what Robert Prechter wrote in his must-read book, Last Chance to Conquer the Crash:

For the purposes of this book, all you need to know is that the degree of the economic contraction that I anticipate is too large to be labeled a "recession" such as our economy has experienced thirteen times since 1933. If my outlook is correct, by the time the...

Learn more -- waymore -- by getting free access to the first two chapters of Last Chance to Conquer the Crash.

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This article was syndicated by Elliott Wave International and was originally published under the headline Why the Recession Consensus Might Be Too Optimistic. 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.

Major Fed Myth: Debunked

2022-12-29T16:46:00.004-05:00

The Fed is reactive in setting rates – not proactive

By Elliott Wave International

The days of near-zero interest rates are long gone -- at least for now.

As we look back on 2022, we know that it's been a year of rising interest rates, and many observers say it's all due to the Fed.

But it's a flat-out myth that the Fed determines the trend of interest rates. The market does. The Fed merely follows.

Here's a chart and commentary from the December Elliott Wave Theorist, a monthly publication since 1979 which covers major financial and cultural trends:

The chart updates the Fed's interest-rate activity since mid-2021. As you can see, the Fed's rate changes have continued to lag rate changes in T-bills as set by the market. The Board's decisions are not magical or even thoughtful. They look at the market rate, and they adjust the Fed Funds Rate accordingly. That's all there is to it. That's all there ever has been to it.

So, given that the market sets rates and the Fed follows, a key takeaway is that the Fed's interest-rate actions produce no outcomes (for example, "stepping on the brakes" of the economy) that wouldn't have happened through regular market forces.

Other central banks around the world also lag the market. Consider the European Union. Here's a historical snapshot from Robert Prechter's book, The Socionomic Theory of Finance:

The chart plots monthly data for the interest rate of the freely-traded, 3-month euro generic government bond versus the European Central Bank's (ECB's) main refinancing operations rate, which is Europe's equivalent to the U.S. federal funds rate. As these graphs show, rate-setting actions by the ECB have lagged the freely traded debt market at all seven major turning points in interest rates since 1999. The lags vary from one to ten months, and the average lag is 5.3 months.

You can find the same principle at work in the United Kingdom, Australia and other global central banks.

It may be difficult for central bank watchers to latch onto the idea that markets guide central banks rather than the other way around. Yet, no data show otherwise.

The December Elliott Wave Theorist provides you with more financial insights, including warning signs about the stock market.

And, speaking of warning signs about the stock market, you may want to become familiar with the Dow Industrials' Elliott wave pattern -- which can help you to anticipate what's next.

As Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior, notes:

The Wave Principle often indicates in advance the relative magnitude of the next period of market progress or regress. Living in harmony with those trends can make the difference between success and failures in financial affairs.

If you'd like to learn the details of the Wave Principle, here's good news: You can access the entire online version of the book for free once you become a member of Club EWI, the world's largest Elliott wave educational community.

Joining Club EWI is a great way to start 2023 because all the free Elliott wave resources which accompany a Club EWI membership will help to provide you with an independent perspective on financial markets which you may not be getting from other sources.

And, by the way, a Club EWI membership itself is also free.

So, get started now by following this link: Elliott Wave Principle: Key to Market Behavior.

This article was syndicated by Elliott Wave International and was originally published under the headline Major Fed Myth: Debunked. 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.

Why You Should Expect a Pickup in Stock-Market Volatility

2022-08-31T19:14:00.010-04:00

Why You Should Expect a Pickup in Stock-Market Volatility
"Traders are convinced the market volatility will remain subdued"

By Elliott Wave International

When things get quiet in a horror movie, that's when you need to really brace yourself. The monster or the killer will soon be on the scene.

That's a close enough analogy to what can happen in the stock market. Just when investors get comfortable with a stretch of low volatility -- wham! -- volatility picks up in a major way.

Back on Nov. 27, 2019, our U.S. Short Term Update, a thrice weekly Elliott Wave International publication which provides near-term forecasts for major U.S. financial markets, showed a chart titled "Calm Before the Craziness," and said:

The CBOE volatility Index (VIX) closed below 12.00 for the third straight session... In fact, investors are so complacent that, paradoxically, it signals a coming pick up in volatility.

About three months later, our Feb. 24, 2020 U.S. Short Term Update noted:

The VIX surged 69% intraday and is now up 130% since the November 26 low. The VIX should eventually move even higher as stocks prices work lower.

As you may recall, a hair-raising stock market decline that had started in mid-February continued to plummet into March 23 of that year.

What does this have to do with today?

This chart and commentary from our August 15, 2022 U.S. Short Term Update provides the answer:

We have inverted the scale to align the VIX with prices. The DSI Indicator (trade-futures.com) has declined to 15, the lowest reading since March 29 (DSI of 13), which coincided with [an Elliott wave high]. The VIX itself declined to 19.12 on August 12 and traders are convinced the market volatility will remain subdued. As shown by the vertical dashed lines, the prior two times that traders were equally confident that volatility will remain muted occurred at or near prior market highs.

Indeed, an August Yahoo Finance headline reflects an example of this confidence:

10 reasons to be bullish on stocks right now, according to [a strategist at the largest U.S. bank]

That strategist may turn out to be correct.

On the other hand, volatility has already picked up since our August 15 analysis published. Of course, during periods of high volatility, there's the potential for big moves on the up- as well as downside.

Now it's time to learn what the Elliott wave pattern of the stock market is suggesting.

If you’re new to Elliott wave analysis or need a refresher, you may want to read Elliott Wave Principle: Key to Market Behavior by Frost & Prechter. Here’s a quote from the book:

It is a thrilling experience to pinpoint a turn, and the Wave Principle is the only approach that can occasionally provide the opportunity to do so.

The ability to identify such junctures is remarkable enough, but the Wave Principle is the only method of analysis that also provides guidelines for forecasting.

You can read the entirety of this Wall Street classic for free once you become a member of Club EWI, the world’s largest Elliott wave educational community (about 500,000 worldwide members).

You can join Club EWI for free and members enjoy complimentary access to a wealth of Elliott wave resources on financial markets, investing and trading without any obligations.

Just follow this link to get started right away: Elliott Wave Principle: Key to Market Behavior – get instant access – free.

This article was syndicated by Elliott Wave International and was originally published under the headline Why You Should Expect a Pickup in Stock-Market Volatility. 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.

Too Much Stock Market Optimism

2022-05-08T18:15:00.000-04:00

Stocks: What to Make of the "Overhanging Optimism"
This "is consistent with the early stage of a long bear market"

By Elliott Wave International

Intraday on April 27, the S&P 500 is trading 12.10% lower than it was at the start of the year.

Right -- not a huge setback -- but negative nonetheless.

Of course, it's always possible that this is just the start of a temporary correction that so many market observers mention.

Then again, the decline thus far this year could be the start of a bear market.

Corporate executives are certainly behaving in a way which is consistent with the start of a major financial downturn.

You see, history shows that companies usually buy back their own shares at a record pace near major stock market tops.

With that in mind, here's a March 22 Wall Street Journal headline:

Stock Buybacks Are on Course for Another Record

Analysts at Goldman Sachs recently said they anticipate buybacks to reach a record $1 trillion in 2022 -- at least, that's their forecast. However, investor behavior -- whether on Main Street or in corporate suites -- can change dramatically from what is expected.

Way before the end of the year, investor psychology may darken considerably.

The April Elliott Wave Financial Forecast, a monthly publication which provides analysis of major U.S. financial markets, picks up the story from here with this chart and commentary:

In the fourth quarter of 2021, S&P 500 companies bought $270.1 billion worth of their own shares. Record buybacks in the first quarter of 2000 and the third quarter of 2007 attended major tops. The latest record is a real barnburner, up a full 15.21% from the previous quarter's total. ... The Wall Street Journal reports that firms announced another $238 billion in buybacks in the first two months of 2022. ... This overhanging optimism is consistent with the early stage of a long bear market.

Of course, "overhanging" optimism refers to companies buying back shares even though the market may have already started a downtrend.

Also keep in mind that just because the market turned down severely in 2000 and 2007 after record buybacks doesn't mean it will do so again -- or immediately.

However, the recent flurry of buybacks is something to keep in mind. And, so is the stock market's Elliott wave structure, which puts the buybacks into context.

Read this quote from Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior:

Although it is the best forecasting tool in existence, the Wave Principle is not primarily a forecasting tool; it is a detailed description of how markets behave. Nevertheless, that description does impart an immense amount of knowledge about the market's position within the behavioral continuum and therefore about its probable ensuing path. The primary value of the Wave Principle is that it provides a context for market analysis. This context provides both a basis for disciplined thinking and a perspective on the market's general position and outlook. At times, its accuracy in identifying, and even anticipating, changes in direction is almost unbelievable.

Learn more about the Wave Principle -- and how you can apply it to your analysis of financial markets -- by reading the entire online version of the book for free.

All that's required for 100% free and unlimited access to Elliott Wave Principle: Key to Market Behavior is a Club EWI membership.

Club EWI is the world's largest Elliott wave educational community and is free to join. Members enjoy free access to a treasure trove of Elliott wave resources on financial markets, investing and trading with zero obligation.

Simply follow this link to get started now: Elliott Wave Principle: Key to Market Behavior -- free and instant access.

2021-10-20T17:29:00.005-04:00

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End of the Bull Stock Market

2021-09-16T20:17:00.001-04:00

Stocks: Is This the "Kiss of Death" for the Bull Market?
Stock market prices usually decline after this occurs

By Elliott Wave International

Many market observers believe that the catalyst for the next bear market will be a piece of extraordinarily bad news.

However, Elliott Wave International has shown time and again that the stock market's price action is often "entirely detached from what most people assume are causal conditions."

Examples of stocks rising when the news is bad -- and falling when the news is good -- are so numerous that a library shelf of books would be inadequate to show a fair representation of them. For the most recent vivid example, just think back to March 2020, when the first wave of the pandemic hit and shuttered the entire global economy -- yet, stocks (around the world!) happily found a bottom and haven't looked back since.

No, the stock market is governed by the psychology and behavior of investors themselves.

One of the noteworthy behaviors is investors' use of margin debt.

Indeed, back in 1980, The Elliott Wave Theorist, a monthly publication which provides analysis of financial markets and social trends, said:

[A] failure of margin debt to expand in an advancing market [can be] the 'kiss of death' to a bull trend.

With that in mind, consider this chart and commentary from the recently published September Elliott Wave Financial Forecast, a monthly publication which covers key U.S. financial markets:

The arrows on the chart of the year-over-year change in New York Stock Exchange margin debt show that [The Theorist's] statement has been true at three major market tops over the last 24 years: at the market top in August 1987 ... the S&P's March 2000 top ... and at the October 2007 peak. As the latest arrow shows, a rapid expansion in margin debt has, once again, reversed trend.

Keep in mind that the stock market does not always decline after a year-over-year drop in margin debt. However, if the use of margin debt substantially falls just after reaching a record high, history does show that stock prices usually tumble thereafter.

That said, in June, margin debt reached a record high of $882 billion, which makes the July retreat of $37.7 billion especially significant.

The Elliott wave model pinpoints the patterns of investor psychology even more precisely.

As our September Financial Forecast said, the current unfolding Elliott wave of the Dow Industrials is "one for the ages."

If you'd like to learn how the Wave Principle can help you analyze and forecast financial markets, Elliott Wave Principle: Key to Market Behavior, is the go-to book for doing so. Here's a quote from this Wall Street classic:

Because applying the Wave Principle is an exercise in probability, the ongoing maintenance of alternative wave counts is an essential part of using it correctly. In the event that the market violates the expected scenario, the alternate count puts the unexpected market action into perspective and immediately becomes your new preferred count. If you're thrown by your horse, it's useful to land right atop another.

Always invest with the preferred wave count. Not infrequently, the two or even three best counts comfortably dictate the same investment stance. Sometimes being continuously sensitive to alternatives can allow you to make money even when your preferred count is in error. For instance, after a minor low that you erroneously consider of major importance, you may recognize at a higher level that the market is vulnerable again to new lows. This recognition occurs after a clear-cut three-wave rally follows the minor low rather than the necessary five, since a three-wave rally is the sign of an upward correction. Thus, what happens after the turning point often helps confirm or refute the assumed status of the low or high, well in advance of danger.

You can read the entire online version of the book for free when you become a Club EWI member. Club EWI is the world's largest Elliott wave educational community and is free to join. Members enjoy free access to a wealth of Elliott wave resources on financial markets, investing and trading.

Get started by following this link: Elliott Wave Principle: Key to Market Behavior -- free and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline Stocks: Is This the "Kiss of Death" for the Bull Market?. 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.

What drives Gold prices?

2021-06-23T18:51:00.007-04:00

What Drives Gold Prices? (Don't Say "the Fed!")

By Elliott Wave International

Excerpted from Elliott Wave International's new FREE report "Gold Investor's Survival Guide: 5 Principles That Help You Stay Ahead of Price Turns."

There is a glaring hole in the popular understanding of what drives gold's price.

Mainstream finance believes the Federal Reserve's monetary and interest rate policies shape the trend.

That sounds like a solid explanation... except, the Fed officials themselves disagree!

Consider their own statements:

In July 2013, Fed chairman Ben Bernanke told Congress he "doesn't pretend to understand gold prices... nobody does."

Bernanke's successor Janet Yellen later concurred: "I don't think anybody has a very good model of what makes gold prices go up or down."

And at the 2014 New Orleans Investment Conference, perhaps the most famous Fed chair, Alan "the Maestro" Greenspan, explained that gold's "value...is outside the policies conducted by governments." (You know, like the highly revered quasi-government institution he used to be the head of.)

Despite the uncertainty voiced by the three most recent Fed chairs, mainstream analysts today still believe the Fed's monetary policy pushes around gold's price.

Investors accept this idea as fact because they hear it endlessly. But the notion is simply not accurate. As a result, these investors find themselves on the wrong side of the trend time and time again.

Fortunately, you don't have to be one of them.

Principle #1: Forget the fallacy that "gold follows the Fed."

Consider this chart of gold prices alongside the Fed's monetary policy since 2011.

First red arrow: In 2011-2015, gold prices plunged 40%. By mainstream logic, gold's freefall must have coincided with hawkish Fed -- because higher rates make other investments besides gold more attractive, so gold prices fall. Right?

In fact, it was just the opposite. During the same period, in 2011-2015, the Fed left interest rates at their lowest level ever, 0% to .25%. But that's not all. The Fed also injected $4.5 trillion in stimulus into the markets and economy during this time via quantitative easing. According to conventional wisdom, either action should have pushed gold's price higher -- and together, MUCH higher.

Yet... gold fell over 40%!

First green arrow: Now look at December 2016 - August 2019, when gold prices moved mostly higher. That must mean the Fed was LOWERING interest rates at the time -- right?

Nope! During this time, the Fed RAISED rates eight times -- and QE had long been retired. Gold rose anyway.

Second green arrow: Next, look at November 2019 - July 2020. The Fed cut rates five times and launched QE4 in January 2020. Gold fell, right?

Ha! Despite the dovish Fed and the new QE, gold's rally resumed.

Second red arrow: Lastly, look at August 6, 2020. The Fed said it'd keep rates near 0% indefinitely and inject trillions in new stimulus money. Did gold rally?

Yeah, right! Gold prices peaked and turned down.

If anything, since 2011, the mainstream's understanding of the Fed/gold relationship has been backward.

Except, there is an even better explanation. Read it now in EWI's new "Gold Investor's Survival Guide." You'll learn an objective method to help you forecast gold's price moves, how to identify and stick with gold's trend and more. A $49 value, yours FREE. Get it now at elliottwave.com.

Forecasting Stock Markets

2020-07-15T07:12:00.001-04:00

Here's Why You Can Forecast Markets Just by Looking at Chart Patterns
Here are two illustrations of the fractal form of financial markets

By Elliott Wave International

Nature is full of fractals.

Fractals are self-similar forms that show up repeatedly. Consider branching fractals such as blood vessels or trees: a small tree branch looks like an approximate replica of a big branch, and the big branch looks similar in form to the entire tree.

Fractals also form in the price charts of financial markets, at all degrees of trend, in both up- and downtrends. In fact, without knowing the time or price labels, you can't tell if you're looking at a 2-minute chart, a daily chart -- or a yearly one.

Fans of Elliott wave analysis have been using this information to their advantage for decades. Our March 2020 Elliott Wave Theorist gave subscribers two important real-time examples of fractals at work. Here's the first one along with the commentary:

This figure offers a good illustration of the fractal nature of markets. It shows the correction in T-bond futures of 2016-2018 on a weekly chart against the correction in the last four months of 2019 on a daily chart. They look quite similar, and each one led to a run to new highs.

And here's the next example, along with commentary from the March Theorist:

This figure shows another example of the market's adherence to forms. The top graph shows the 10-minute range for the S&P futures contract on March 4, and the bottom graph shows the same for March 5. Don't they look similar?

In fact, however, the trend of the market in the top graph was up, and the trend shown beneath it was down. We simply inverted the bottom graph for our illustration. Prices rose on March 4, and they fell on March 5, in the same pattern.

Here's what this means for investors and traders: The fact that price charts unfold in repetitive and recognizable patterns makes financial markets predictable.

As Elliott Wave Principle: Key to Market Behavior by Frost & Prechter noted:

Scientific discoveries have established that self-similar pattern formation is a fundamental characteristic of complex systems, which include financial markets. Some such systems undergo "punctuated growth," that is, periods of growth alternating with phases of non-growth or decline, building into similar patterns of increasing size.

Learn more about these self-similar pattern formations and how they can help you to anticipate turns in widely traded financial markets, including the stock market.

You can do so by reading the online version of Elliott Wave Principle: Key to Market Behavior, 100% free.

All that's required is a Club EWI signup. Club EWI is the world's largest Elliott wave community and allows you access to a wealth of Elliott Wave International's resources on investing and trading. Club EWI membership is also free.

Just follow the link to start reading the Wall Street classic book, Elliott Wave Principle: Key to Market Behavior.

This article was syndicated by Elliott Wave International and was originally published under the headline Here's Why You Can Forecast Markets Just by Looking at Chart Patterns. 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.

Emerging Markets Stock Trend

2020-05-22T11:54:00.001-04:00

An Eye-Opening Perspective: Emerging Markets and Epidemics

By Elliott Wave International

People across the entire planet remain very much aware of the COVID-19 health threat.

The global disruption associated with the pandemic far surpasses other major health scares in modern history.

Even so, you may recall 2009 news articles similar to this one from the New York Times (June 11, 2009):

It came as no surprise [on June 11, 2009] when the World Health Organization declares that the swine flu outbreak had become a pandemic.

The disease has reached 74 countries ... .

And, going further back in time, the World Health Organization provided this July 5, 2003 update on the Severe Acute Respiratory Syndrome, known as SARS:

To date, 8439 people have been affected, and 812 have died from SARS.

The reason for briefly reviewing the swine flu and SARS is to point out that, as surprising as it may be, both outbreaks marked not the start, but the end of a downtrend in emerging markets stocks.

That's a big reason why, amid the COVID-19 scare, Elliott Wave International's April 2020 Global Market Perspective, a monthly publication which covers 40+ worldwide financial markets, showed this chart and said:

The dramatic drop has created an enormous [bullish] opportunity in the form of a completed contracting triangle pattern in emerging markets overall, as shown by the Vanguard FTSE Emerging Markets ETF, which is the largest emerging markets ETF by market capitalization.

The current, May Global Market Perspective follows up with this chart of the MSCI Emerging Markets Index. The last quarterly bar shows the substantial jump in prices since the March lows. Our global analyst remarked:

That this [price rise] has begun amid the COVID-19 pandemic only adds to the evidence supporting it: Asian-Pacific and emerging markets also began bull markets amid the SARS epidemic of 2003 and the Swine Flu pandemic of 2009, as the chart shows.

Of course, COVID-19 and past outbreaks didn't "cause" stock prices to climb. The point -- as our Global Market Perspective has said -- is that epidemics tend to occur at the end of major sell-offs.

"Tend to" is the key phrase here, of course. There are no guarantees in financial markets. Besides, this outbreak is a full-blown pandemic with social and economic consequences that have already far surpassed anything we saw in 2003 or 2009.

Having said that, emerging markets did rebound, which is something Global Market Perspective subscribers were prepared for, and it's worth noting. What happens next depends on the Elliott wave patterns in market psychology, which our global analysts are tracking in emerging markets (and developed ones) right now.

You can get free access to analysis from our global market experts in "5 Global Insights You Need to Watch," which is a short, 5-video series (plus, two quick reads).

You get our latest forecasts for cryptocurrencies, crude oil, interest rates, deflation and the future of the European Union -- all in just 13 minutes.

The 5 videos and 2 excerpts are straight from the Global Market Perspective -- so yes, this is premium, subscriber-level.

All that's required to access "5 Global Insights You Need to Watch" is a free, Club EWI membership.

Changes in Social Mood

2020-05-01T14:32:00.000-04:00

Gold and Silver: Pay Attention to This Noteworthy Record High
Here's what usually occurs in related financial markets when "big changes in social mood are afoot"

By Elliott Wave International

Related financial markets tend to move together. For example, gold and silver.

Or, consider stocks. When the Dow Industrials are up on a given trading day, the NASDAQ is usually in the green too. The same applies when the Dow is down. Other major stock indexes tend to close in negative territory as well.

However, when a trend is near exhaustion -- whether bullish or bearish -- "non-confirmations" often happen. A non-confirmation occurs when one market makes a new high (or low), but a related market does not.

Let's stick with the example of stocks as we look at this chart and commentary from Elliott Wave International's November 2019 Global Market Perspective:

Notice that while the FTSE 100 is off 6% since its May 2018 high, the Small-Cap index and the AIM 100 are down 9% and 23%, respectively. These non-confirmations are important, because markets almost always splinter when big changes in social mood are afoot. ... It's only a matter of time before the broad indexes abandon the bull-market party.

As we all know, abandon it they did -- in a very dramatic way.

Now, let's look at what's going on with gold and silver.

Here's a chart and commentary from EWI's April 27, 2020 U.S. Short Term Update:

Gold is massively overvalued relative to physical commodities and the ratio of gold-to-silver recently jumped to a record high. There remains a large non-confirmation between gold and silver.

Even so, here's an April 21 headline (CNBC):

Bank of America raises gold forecast by a whopping $1,000 to $3,000 because of zero rates

Well, this major bank's outlook for gold might turn out to be correct.

On the other hand, it's obvious -- as you've just seen -- that the gold and silver markets are significantly splintered.

Plus, the Elliott wave model is also providing clues about the next big moves in the gold and silver markets.

And, speaking of Elliott wave analysis, EWI has just made available a 1-hour course titled: The Wave Principle Applied. You can access this valuable resource 100% free through May 15, 2020.

How?

Simply join Club EWI. Membership is also free.

When you avail yourself of The Wave Principle Applied, you will learn how to spot Elliott wave patterns on a price chart. Plus, you'll acquire trading insights.

As Frost & Prechter's Elliott Wave Principle: Key to Market Behavior noted:

After you have acquired an Elliott "touch," it will be forever with you, just as a child who learns to ride a bicycle never forgets. Thereafter, catching a turn becomes a fairly common experience and not really too difficult. Furthermore, by giving you a feeling of confidence as to where you are in the progress of the market, a knowledge of Elliott can prepare you psychologically for the fluctuating nature of price movement and free you from sharing the widely practiced analytical error of forever projecting today's trends linearly into the future. Most important, the Wave Principle often indicates in advance the relative magnitude of the next period of market progress or regress.

Simply follow the link for your free membership into Club EWI, and then you can access The Wave Principle Applied -- 100% free -- through May 15 (EWI normally sells the course for $99).

This article was syndicated by Elliott Wave International and was originally published under the headline Gold and Silver: Pay Attention to This Noteworthy Record High. 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.

Stocks as a Safe Investment

2020-03-19T15:44:00.000-04:00

You Won't Believe WHEN Pension Funds "Embraced Stocks as a Safe Investment"

By Elliott Wave International

Pension funds were already in a highly precarious position before the DJIA's February 12 high and the subsequent start of the high drama in stock moves.

The 2018 edition of Robert Prechter's Conquer the Crash noted:

The bull market in stocks has gone on so long that pension funds, formerly boasting conservative portfolios, have embraced stocks as a safe investment. ... This is a setup for disaster.

Fast forward to Nov. 5, 2019 when the Wall Street Journal said:

Public Pension Plans Continue to Shift Into U.S. Stocks

Discussing the same theme, our January 2020 Elliott Wave Financial Forecast showed this chart and said:

At the end of the third quarter, alternative investments such as private equity and who-knows-what made up 5.6% of [U.S.] public pension fund portfolios, a new record. At 47.3% in 2019, equities exceed the allocation at the stock market peak of 2007. " ... As in 2008, pension funds are doubling down. Once again, the strategy will prove a miserable failure.

Yes, deficit-plagued pension funds were nearly half invested in stocks -- just when the main indexes started to plunge a few weeks ago.

On March 9, the Guardian, a British newspaper, put a positive spin on pensions and the market's rapid downturn:

How badly has my pension been hit?

It's bad, but not as grim as the headline falls in the FTSE or Dow suggest. As a rule of thumb, for every 10% fall in the FTSE, the value of your pension investments falls by about 5% to 6%.

Well, whether one chooses to call it "bad" or "grim," one thing's for sure: the British and U.S. stock markets have fallen even more since that article published.

Many observers believe the coronavirus "triggered" the big plunge in stock values. However, you may be interested in knowing that the Elliott wave model pointed to a big decline in the equity market well before the coronavirus became widespread frontpage news.

As example, our January 2020 Elliott Wave Financial Forecast (published Jan. 10) said:

The new year has coincided with new highs in the Dow Jones Industrial Average, but key pieces of evidence indicate that the rally is at or very near an end. ... Now is the time to be prepared for a change of trend, which very few investors are currently anticipating.

Indeed, that "change of trend" did occur.

Now is the time to find out what EWI's analysts anticipate for the stock market in the weeks ahead.

Elliott Wave International has been guiding investors through bull and bear markets since 1979. From that long experience, we know that at certain market junctures, we can help the most by giving everyone our latest analysis free.

Now is one of those market junctures.

Elliott Wave International has just made the entire "Stocks" section of our flagship market letter, the monthly Elliott Wave Financial Forecast, available to all Club EWI members, free. Your membership in Club EWI is also free.

It's a rare opportunity to see what EWI's subscribers are reading.

Read the Financial Forecast excerpt now, free

This will help you understand how the markets got to this juncture -- and, more importantly what's likely next.

Also, please feel free to share this special excerpt with friends and family.

Again, here's that link:

Read the Financial Forecast excerpt now, free

What Recessions? It's a Wonderful Life

2019-12-28T11:29:00.001-05:00

What Recessions? It's a Wonderful Life

By Elliott Wave International

Fund managers see no risk of a U.S. recession. Have they over-indulged on the eggnog?

"I don't have your money. It's in Tom's house...and Fred's house." This is a quote from George Bailey, the fictional bank manager in the 1946 classic movie, It's a Wonderful Life. George was replying to customers of the bank who were demanding their money back. Unfortunately, the deposits had been invested, and the bank did not have enough money to pay everyone out. As I have said to my 14-year-old daughter every year over the past decade when we settle down to watch this feel-good Christmas movie, it's probably the simplest, and therefore best, lesson about understanding the complexities of the fixed-fractional banking system. (As you can imagine, this just exacerbates the fact that, in her now-teenage eyes, I am boring, embarrassing dad.)

George Bailey did not expect all his customers to demand their money back at once. It may be a fictional story, but it accurately reflects the complacent psychology of financial institutions as an economic cycle tops out. The latest example of such complacency comes from the most recent Bank of America Merrill Lynch Fund Manager Survey. Expectations that global growth will improve in the next year jumped to a net 29% of respondents in December, the biggest two-month gain on record, and a big turnaround from the middle of the year when there was intense fear of a global recession. The survey shows that fund managers now see the least risk of a recession since the middle of 2009. That was, of course, when the U.S. was already in recession, despite central banks' machinations to inject liquidity into the financial system. The Fed has again begun pumping billions of dollars into the system since September, but the difference is that the U.S. has not experienced a recession as it did in 2008-2009. Are people just blindly accepting that the Fed will be able to keep the stock market propped up? Perhaps.

Indeed, some investors believe that because the yield curve has turned positive again, then all is well and there's no need to worry. On the contrary, the chart below shows that when the yield curve inverts and then turns positive, it is precisely the time to worry that a recession may be dead ahead.

It's a Wonderful Life ends with George Bailey realizing that there are much more important things in life than business. By this time next year, currently cock-a-hoop (adj.: boastfully, if not defiantly, elated) investors might be feeling the same way.

It's a commonly held misconception that a positive yield curve swing is a good sign for the economy, but the evidence proves otherwise. Want to see EWI's President, Bob Prechter, tackle and disprove other commonly held beliefs that could hinder your investing? Good!

Get instant, free access to Prechter's speech to the International Federation of Technical Analysts. It shows you “What Really Moves the Markets.” Watch Now

Commodities Market Direction

2019-11-09T15:09:00.000-05:00

How Do YOU Know the Direction of a Market's Larger Trend?
Fundamental analysis versus Elliott wave analysis: the winner for predicting the 9-year long commodity bear market is clear.

By Elliott Wave International

95% of traders fail. It's a day-drinking, country-music kind of statistic. Think: "Friends in Sell-Low, Buy-High Places."
One article attempts to quantify the reasons, citing: "SCIENTIST DISCOVERED WHY MOST TRADERS LOSE MONEY -- 24 SURPRISING STATISTICS." See number 14:

"Investors tend to sell winning investments while holding on to their losing investments."

In other words, their timing is off key. And when it comes to seizing market opportunities, nothing is as important as timing. Our friends at Elliott Wave International said it best in the pages of their educational reference guide, Elliott Wave Principle -- Key to Market Behavior:

"To be a winner in the stock market, either as a trader or as an investor, one must know the direction of the primary trend and proceed to invest with it, not against it."

Which brings us to the next part: How do you know the direction of the primary trend?
The contribution of mainstream market wisdom abounds -- the best gauge of a market's trend is news events surrounding that market. These news events, called fundamentals, can vary from weather patterns, political events, supply/demand data, trade wars, earnings reports, and on. The way it works is:

A. Positive news supports price and fuels a rising trend
B. Negative news deflates price and ignites a falling trend

This supposedly applies to all markets, especially commodities where supply is physical and finite. Reality, however, is a horse of a different color.
Take the broad commodity sector in 2010-2011. At the time, commodities were enjoying a strong rebound, with the CRB Index orbiting a three-year high. Mainstream financial experts used a barrage of bullish news events -- from soaring energy costs, growing economic uncertainty, mounting inflation fears, and an accommodative Fed -- to identify a healthy, rising trend. Here, these 2010-2011 news items provide a screenshot of the bullish consensus:

"Commodities on Fire! Investors want assets to protect themselves against rising inflation and possible shortages in the future, so the surge in commodities looks set to continue." (April 11, 2011 Financial Post)
"The world is in the middle of a commodity boom cycle" (June 8, 2011 Wall Street Journal)
"Traders are shrugging-off the frightening nightmare of 2008, but instead, are riding high on the magic carpet buoyed by 'Quantitative Easing.'" (January 6, 2011 Bullionvault)

Wrote one January 2011 CNN Money:

"Commodities of all types have been running like scalded monkeys. Hard and soft commodities, and shiny and not so shiny metals are on a tear...it appears that we are in the midst of a commodity super cycle."

The fundamental markers were positive. The CRB Index's trend was up. The road ahead was higher.
Except, it wasn't. The exact opposite scenario unfolded. Between 2011 and 2016, the CRB Index plummeted more than 50% in an unrelenting bear market that has seen prices slog sideways since. It goes without saying, fundamental analysis failed at its most important job -- enabling traders to know the direction of the primary trend and "proceed to invest with it, not against it."
Alternatively, there was Elliott Wave International's chief commodity analyst and co-author of Elliott Wave Principle -- Key to Market Behavior Jeffrey Kennedy. In his September 2011 Monthly Commodity Junctures, Jeffrey identified a textbook, five-wave move coming into a top on the price chart of the Continuous Commodity Index (CCI), referred to as the "old CRB."
Chapter 2 of Elliott Wave Principle -- Key to Market Behavior (EWP) shows the basis for Jeffrey's bearish forecast -- five-wave moves up are followed by three-wave corrections -- AND his ability to identify a likely downside target for that decline: From EWP:

"No market approach other than the Wave Principle gives a satisfactory answer to the question, 'How far down can a bear market be expected to go?' The primary guideline is that corrections, especially when they themselves are fourth waves, tend to register their maximum retracement within the span of travel of the previous fourth wave of one lesser degree, most commonly near the level of its terminus."

Armed with this guideline, Jeffrey's warned the next move for commodities would be a historic trend change that would slash prices in half. His September 2011 Monthly Commodity Junctures wrote:

A BEAR MARKET IN COMMODITIES: THE TRAIN IS COMING

The monthly price chart of the CCI clearly displays another five-wave advance (chart 2). This impulse wave, which began in 1999, ended this year.

This argues that a decline in the CCI should actually target the December 2008 low of 322.53, the terminus of the previous fourth wave.

From there, prices embarked on a 50%-plus crash to 351, near the 2008 low of 322.53 area Jeffrey identified five years earlier!

Accurately identifying a market's trend is pivotal to success. Period. The odds of doing so require the right tools. Right now, our friends at Elliott Wave International have added the ultimate resource guide Elliott Wave Principle -- Key to Market Behavior to their FREE, online Club EWI library. This best-selling "bible" of all things Elliott is a mainstay for market newbies and veterans alike.
In the end, failure is not a result of "bad timing;" but rather, applying bad tools to perform market-timing. Elliott waves give you an alternative.
Get your free copy now

2019-10-22T15:56:00.000-04:00

EWI's senior analyst Jeffrey Kennedy shares with you practical advice on what it takes to improve the quality of your trades.

By Elliott Wave International

You've heard it all before:

If you want to trade using Elliott wave analysis, to succeed you first need to understand its rules and guidelines.
You need a clearly defined trading strategy (what? when? how? etc.) and the discipline to follow it.
Additionally, your long-term success depends on adequate capitalization, money management skills and emotional self-control.

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?

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This article was syndicated by Elliott Wave International and was originally published under the headline How to Build Consistent Trading Success. 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.

High-Confidence Stock Trading Opportunities

2019-09-09T12:55:00.002-04:00

How to Spot High-Confidence Trading Opportunities in a "Pinch"!
Why this single moving average chart pattern belongs in your technical toolbox today

By Elliott Wave International

When it comes to the world of technical market analysis, the biggest obstacle isn't a lack of quality, but rather, an abundance of choice. There are literally hundreds of technical tools out there, with digital libraries and chat boards devoted to the many variations of individual components.

If you used them all, your technical pages would look like the motherboard of the Starship Enterprise. And you'd need Spock himself to interpret the massive influx of data.

So, where on planet Earth do you start? How do you curate the right technical tools to support your trading style and maximize your ability to spot high-confidence setups in real-world markets?

Well, that's where our Trader's Classroom editor Jeffrey Kennedy comes in. In his August 9 video lesson titled "Pinch Me! How to Build Your Ideal, Custom Technical Indicator Page," Jeffrey shares one of his top three favorite technical chart patterns: the moving average "pinch.”

Right away, Jeffrey stresses the two main functions of any technical indicator page:

Identify the trend
Identify areas of oversold and overbought conditions

The moving average (MA) "pinch" accomplishes both, and here's how: First, the pinch occurs when all three MA lines -- green, red and grey -- come together and appear to form one single line. Then ... well, you'll just have to watch this free video to find out.

Jeffrey shows you several real-world examples of MA pinches, including this one in late 2018 price action of Big Board listee Chipotle Mexican Grill (ticker symbol CMG).

In the free video, Jeffrey highlights the area of compression where the pinch occurred and describes it as a "beautiful little bullish set-up," confirmed by the powerful advance that followed.

In fact, during the time of the pinch's formation in Chipotle, Jeffrey featured the market in his January 10, 2019 Trader's Classroom. There, Jeffrey homed in on the narrow and choppy price action in CMG, a six-month long sideways move that barely retraced 50% of the preceding rally, magnified here:

The same period of compression identified as a MA "pinch" was confirmed by all the characteristics of counter-trend price action -- the latter of which led Jeffrey to include Chipotle in his "I Like It!" market list for a strong move higher.

The next chart captures the volatile upside explosion that has seen a doubling in value of CMG prices to new record highs:

The first step to identifying a moving average "pinch" is to understand the mechanisms of the moving average indicator. In his August 9 Trader's Classroom video "Pinch Me!" Jeffrey lays the groundwork with a user-friendly lesson covering all the need-to-know basics.

Jeffrey also shows you how an MA pinch preceded three major buying opportunities in 2013, 2016 and 2019 in the tech-giant Apple.

Plus, you'll see how an MA pinch underway right now in the Healthcare Select Sector SPDR fund (XLV) suggests an "exciting" period of volatility may be ahead.

Free, watch Jeffrey Kennedy's Trader's Classroom “Pinch me!” video lesson now -- and see why the MA pinch is the first step to building a custom technical indicator page.

No, this isn't a dream; the power of the pinch is very real!

Using Moving Averages with Elliott Wave Analysis

2019-07-07T13:50:00.001-04:00

Moving Averages and the Wave Principle
Improve your Elliott wave pattern identification skills with this lesson from Jeffrey Kennedy

By Elliott Wave International

Moving averages are one of the most widely-used methods of technical analysis because they are simple to use, and they work. Among Elliott wave traders, you will likely find an especially high percentage of investors and traders who incorporate moving averages into their Wave analysis.

Here's why: you can use moving averages to identify Elliott waves.

Senior Analyst Jeffrey Kennedy knows how to take complex trading methods and teach them in a way you can immediately understand and apply -- his step-by-step tutorials are beneficial to traders at any level of experience. Jeffrey is also well-known for combining ancillary technical tools to strengthen his Elliott wave analysis.

The following lesson provides a powerful example of how moving averages can strengthen your ability to identify Elliott Patterns. It is excerpted from Jeffrey's free 10-page eBook, How You Can Find High-Probability Trading Opportunities Using Moving Averages. (Click here to get your copy of this free eBook now.)

If you're new to the Wave Principle, I recommend using a moving average to get you started, and the reason why is that a moving average overlaid on a price chart will help train your eye to see developing Elliott wave patterns.
For an example of a schematic Elliott wave, look at the figure below:

If you've read The Elliott Wave Principle by Robert Prechter and A.J. Frost, you know that wave patterns are illustrated as line diagrams.
When you look at a real price chart rather than a schematic, the basic chart is typically an open-high-low-close price chart. Each price bar represents a single period and is illustrated by a vertical line with a small mark to the left and a small mark to the right as seen in the next figure:

The little lower line on the left-hand side of the vertical bar is the open; the little upper line on the right-hand side of the vertical line is the close; the top of the line is the day's high or that trading period's extreme; and the bottom of the line is that trading period's low.
Here's the thing: Whenever you're making the transition from looking at a textbook diagram to actually counting Elliott waves on a real price chart, it can be confusing to the eye. If you use a moving average, it will help you to see the wave pattern more easily.
Let me prove my case more thoroughly with this chart of Corn:

The blue line is an 8-period simple moving average of the close, which clearly shows that a five-wave decline has unfolded from the upper left-hand side of this price chart. With the aid of a moving average, the subdivisions within this selloff are more easily discernible than with the untrained naked eye.
Also, notice that the slope of the move up in wave 4 is shallow. This detail is important because one of the key characteristics of countertrend price action is that it moves slowly, thus its slope will be inherently more shallow than what one can expect to encounter when a motive wave is in force.

Learn How to Trade the Highest Probability Opportunities: Moving Averages
No matter what your level of experience in the markets, you'll be amazed at how quickly you can benefit when you include moving averages in your Elliott wave analysis. Now you can learn how to apply them to your trading and investing in this free 10-page eBook. Learn step-by-step how moving averages can help you find high-probability trading opportunities.
Begin to improve your trading and investing with Moving Averages today! Download Your Free eBook Now >>

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How to Spot High-Confidence Trading Opportunities in a "Pinch"! Why this single moving average chart pattern belongs in your technical toolbox today

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Gold: Setting Near-Term Price Targets
This was our "initial upside target" -- which has now been exceeded. What's next?

GameStop (GME): 88% Shellacking Yet No Lesson Learned
"Every major peak gets cinematic treatment"

Investing: What You Can Learn from Mom and Pop
"The highest commitment to stocks since the record levels of early 2000"

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"If the 2007 analogue holds, the current rally [will] persist ..."

Corporate Bonds: "The Next Shoe to Drop"
"The neckline has been broken over the last few days"

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SVB failed in March. Oil was destined to fall as early as February – here’s why;

Why the Recession Consensus Might Be Too Optimistic
"Major stock market declines lead directly to..."

Why You Should Expect a Pickup in Stock-Market Volatility
"Traders are convinced the market volatility will remain subdued"

Stocks: What to Make of the "Overhanging Optimism"
This "is consistent with the early stage of a long bear market"

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Stock market prices usually decline after this occurs

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Here are two illustrations of the fractal form of financial markets

Gold and Silver: Pay Attention to This Noteworthy Record High
Here's what usually occurs in related financial markets when "big changes in social mood are afoot"

How Do YOU Know the Direction of a Market's Larger Trend?
Fundamental analysis versus Elliott wave analysis: the winner for predicting the 9-year long commodity bear market is clear.

Want more?
How about 14 more trading lessons like these -- 100% free?

How to Spot High-Confidence Trading Opportunities in a "Pinch"!
Why this single moving average chart pattern belongs in your technical toolbox today

Moving Averages and the Wave Principle
Improve your Elliott wave pattern identification skills with this lesson from Jeffrey Kennedy