Markets & Economy

Swiss Franc 1/26/12

2012-01-26T15:06:00.001-06:00

We have been preparing for a possible low in the Swiss Franc for a number of weeks, and the low is now at hand. Is the low part of a corrective rally that will ultimately be reversed, or is it the beginnings of a new uptrend? Those are questions will will probably be trying to answer for several weeks at the very least.

Weekly price bars are now above the downtrend line. It's possible to label the pattern on the way down from the highs as an Elliott Wave impulse. If so, the rally we get from here could be substantial, but would not be expected to make new highs prior to resuming the larger downtrend. It's not necessary to have the Elliott picture in mind to trade this, but it helps. It also helps if you are trying to decide which currency to hold currency related savings in.

Daily price bars are no longer making lower highs. As long as the current low holds, we could start seeing higher lows form. That's one thing we will be looking at -the next low that gets reversed.

A break of the current lows from here would send us into short positions as it could mean things are accelerating to the downside. As for now, we are still neutral on this market as we watch to see what price does from here.

Moving average envelopes show a mixed trend picture right now. Will the weekly catch up with the daily, or vice versa? We never really know until it happens, at which point we need to be ready to react appropriately.

Weekly RSI is also still in downtrend territory. Daily RSI is pushing against upper resistance. If I had to take a trade on this market, I would go long against the recent lows. But I don't have to!

Mixed picture out of the dynamic trailing stop indicator as well. Daily ADX is perking up a bit.

At the time of this post, 1 USD = 0.92042 CHF.

Current Stance:
Long Term: Flat

Intermediate Term: Flat

Definitions:
Flat = no position / not long or short the market.
Sell Short = positioning to attempt to profit on price declines
Buy / Long = positioning to attempt to profit on price advances
Hold = hold a long position
Hold Short = hold a short position

Dedication, Sacrifice, Hard Work

2012-01-26T06:15:00.000-06:00

Over the past two nights it was my pleasure to watch documentaries on some of the world's best motorcycle racers. It was a purposeful endeavor in an effort to learn and be encouraged by what it took these guys. Work is being laid down for an expansion of my trading operation right now. Encouragement from stories like these is just what the doctor ordered. It's unbelievable the amount of work, the time, the sacrifices, the 2nd and 3rd jobs, and support from family and friends it took to get these guys to their lucrative contracts and seemingly superhero like status.

I have ridden motorcycles off and on most of my life, racing them at one point. Participation and competition in other similar sports has also marked other significant periods of my life. It seems to me that what it takes to have success in trading is very similar to what it takes to have success in these sports. The documentaries further confirmed that. Encouraging.

My father was the first one to expose me to trading (he liked options, I like futures). He was also the first one to expose me to all these sports including -motorcycle racing, water-skiing (and barefoot water-skiing), and snow-skiing. Dad has since passed, but we talked about these things a lot and I made sure to thank him for the exposure. He was also always encouraging, telling me to go for things that others warned against. Watching the story of racer Troy Bayliss reminded me of all of this.

What's the moral? If you really want to do something, realize there is no easy path. It just looks easy until you know the whole story. So you want to trade? Roll up your sleeves and get ready to sacrifice, put in hard work, and commit lots of dedication for what you want. It's not easy. You should probably turn off the TV. I threw mine out something like six years ago. Oh, and there is probably no way to do it alone without some type of encouragement and support from family and friends. Thank the ones that encourage you. Stay away from the ones who tell you you can't do it. There are a million miserable nay-sayers for every one person who decides to get in the ring.

Gold futures 1/25/12

2012-01-25T15:17:00.000-06:00

Good thing we closed that short gold stance in late December. We have a little rally on our hands now.

Weekly gold prices are breaking above trend lines. A new uptrend? We don't know yet. I will be watching for either a break above prior highs, such as the mid-downtrend high in early November, or a correction to the current rally that gets reversed.

The mid November high is marked on the the daily bar chart above. A break above that would be constructive for the bulls. A break to new lows would have us following the bears and entering to the short side again. We don't really care which way it goes; we just trade it.

Mixed picture from the moving average envelopes. Isn't it interesting how basic price bar analysis often leads us to the same basic conclusions as fancy indicators. Hey, I understand wanting some confirmation; some hand holding. That's why these indicator charts are here.

RSI shows a mixed picture as well. Daily RSI just now starting to really poke into the uptrend area. Let's keep an eye on how pullbacks in price and RSI form from here.

The Dynamic Trailing Stop indicator is now in uptrend mode on both time frames.

Weekly ADX is still trending down. Daily ADX has turned up a bit. +DMI is gaining strength over -DMI on both time frames at the moment.

Current Stance
Long Term: Flat

Intermediate Term: Flat

Definitions:
Flat = no position / not long or short the market.
Sell Short = positioned to attempt to make money on price declines
Buy / Long = positioned to make money on price advances
Hold = hold a long position
Hold Short = Hold a short position

My medium to long-term automated system is also out of this market at the moment.

EURO futures 1/24/12

2012-01-24T15:05:00.000-06:00

Our stops for the short EURO stance were hit, taking us out for profit. Stops are used to limit losses on initial trades, and to lock in profits on trades that have worked out for profit. I would not at all be surprised if price action again broke down to take us back into a short stance, but we respect stops.

The weekly bar chart is a major distribution pattern. This is my story and I'm sticking to it until proven wrong (not that uncommon in trading). A break of the neckline would be a major ugly sign for the hodgepodge currency. A break above the highs from last year would have us a little concerned that the distribution pattern idea might be faulty. Pattern highs were made in 2008 and the neckline had its first low mark in 2005. This is a big one.

We can see that daily bar prices have pushed above the internal trend channel.

A mixed picture. The weekly moving average envelope in downtrend mode; the daily now breaking into uptrend mode. RSI levels definitely don't have me wanting to buy this market. Time to sit out and watch from the sidelines until new clues present themselves.

Weekly stop still hovering above prices that seem to be closing in. Daily Stop hit. My stop was between these two, and it was also hit.

Weekly ADX registers the downtrend that has been underway. Will it resume? Daily ADX is being banged up a bit by the recent bounce.

The current design of my automated intermediate to long term system has also exited this market. This system is still under development and testing, but getting we are getting closer to starting to trade it -stay tuned, as I am sure certain aspects of that experience will be chronicled here. More markets than we currently talk about will be traded by that system, so I'll probably figure out how to do monthly reports on the system and what we have learned from successes and failures in running it.

Current Stance
Long Term: Hold Short (or simply hold a different currency)

Intermediate Term: Flat

Definitions:
Flat = no position / not long or short the market.
Sell / Short = positioning to attempt to profit on price declines
Buy / Long = positioning to attempt to profit on price advances
Hold = hold a long position
Hold Short = hold a short position

Code Modules / Building Blocks

2012-01-24T08:05:00.000-06:00

One of the lessons I have learned in the quest to program trading systems is to create code modules or building blocks of code that are often reused. Why re-invent the wheel every time? Instead, I just use notepad to create and save building blocs or code modules.

It is much easier to just go to a notepad file and copy than it is to recreate code each time one of these building blocs is needed for a new strategy. New building blocs are created as new logic problems are solved.

Silver Futures 1/23/12

2012-01-23T12:07:00.000-06:00

On January 3rd, we moved from a short stance to a neutral stance on silver futures. We continue to watch for the next clue.

Weekly silver prices have pushed above the downtrend line. Is a range forming, a corrective reaction in a larger downtrend, or a new uptrend?

We have no idea! Trading can be broken down and simplified, but, like most sports, its not easy to win. That's why we have learned to focus efforts primarily on simple tactical methods related to price trend.

Nothing exciting to me here yet. Downtrend broken. Not enough confidence in a new uptrend yet -need more price action to answer that question in the affirmative. If prices broke below recent lows, I would sell it short in attempt to follow trend again.

We still see a mixed picture on the moving average envelope charts. Weekly silver MA envelope is technically still in downtrend mode, while the daily MA envelope is in uptrend mode. Same mixed signal is present in the RSI indicator.

The Dynamic Trailing Stop has moved into uptrend mode (or stopped out remaining shorts). Daily DTS remains in uptrend mode.

ADX shows non-trending behavior on both time frames, but we can see +DMI and -DMI converging on the weekly chart, after having crossed on the daily.

An uptrend could form here. As a tactical trend following trader, I am waiting for more clues. The downtrend could resume just as easily. It is OK to not know -embrace it if you want to trade.

My automated intermediate to long-term system is also neutral on this market at the moment.

Current Stance
Long Term: Flat
(comments here are about trading liquid markets, and do not relate to any views we have regarding the holding of physical gold and silver).

Intermediate Term: Flat

Definitions:
Flat = no position / not long or short the market.
Sell Short = positioned to attempt to make money on price declines
Buy / Long = positioned to make money on price advances
Hold = hold a long position
Hold Short = Hold a short position

S&P 500 Stock Index 1/20/12

2012-01-21T14:17:00.000-06:00

We have been somewhat reluctantly trading the long side of the S&P 500. Our doubts and the S&P's ability to continue to edge higher show the need for tactical heuristics in trading. We keep a journal of some discretionary tactics on these pages, but are working on robust automated systems that may be shared in some form or fashion in the future.

Let's see what the S&P 500 charts say this week. Will it continue to edge higher and higher, or are we nearing a breakdown in trend?

Weekly bar prices continue to hold above an upwards trend line. A large defining price range contains the bigger picture of price action right now.

Intermediate term trend continues to work its way higher. Will it continue? I'm out of the longs if that most recent parallel trend channel is broken to the downside.

Our moving average envelopes in uptrend mode. Weekly RSI is neutral. Daily RSI is in uptrend mode on the daily chart.

Dynamic Trailing Stop indicator tracking uptrend on both time frames.

ADX registers non-trending behavior on the weekly chart, but +DMI has crossed over -DMI recently. Daily ADX registers trending behavior.

VIX showing market complacency.

Put/Call not indication now to be a great time to buy this market.

Current Stance:
Long Term: Flat

Intermediate term: Long (Assertive traders only! And with a tight stop. I would not argue against a flat position right now!!)

My main intermediate to long term automated system, which is still in various stages of development and testing, is currently long this market. Side note: I've recently been looking at starting to trade the S&P Mid Cap index. System testing on the futures contract looks really good so far. It seems to work better in all time frames than the S&P 500 contract. I don't really know why, but that's how the data is coming out so far.

Definitions:
Flat = no position / not long or short the market.
Sell / Short = positioning to attempt to profit on price declines
Buy / Long = positioning to attempt to profit on price advances
Hold = hold a long position

Hold Short = hold a short position

Five Fatal Flaws of Trading

By Elliott Wave International

While there is no magic formula, EWI Senior Instructor Jeffrey Kennedy has identified five fundamental flaws that, in his opinion, stop most traders from being consistently successful. Read More.

EURO futures 1/19/12

2012-01-19T13:33:00.000-06:00

We are willing to allow some of our unrealized profits from the short EURO stance to be at risk, but we also have stops in place to lock in a significant portion of the gains. That's what is on my mind as the EURO bounces off recent lows. Let's take a look.

Might as well put the following statement on repeat for the weekly chart: looks like a large distribution pattern to me. A break of that neckline could be really ugly for the EURO.

The EURO's intermediate term trend remains down, but further expansion of the current bounce off the lows could cause us to harvest profits. The intermediate term short stance will change to flat with a significant break of the internal parallel downtrend channel.

EURO moving average envelopes are still showing a downtrend. RSI is also still in downtrend mode on both time frames. A slight divergence in daily RSI preceded the current bounce.

The weekly Dynamic Trailing Stop indicator is still tracking the downtrend, but the daily DTS has been penetrated to the upside. My automated medium to long-term trend following system (still in development) also produces a stop level very close to the weekly DTS level. Will it be hit? We don't know. That's what stops are for!

ADX registers strong trending behavior on the weekly EURO chart. Daily ADX has turned down in response to the retracement by price.

Current Stance
Long Term: Hold Short

Intermediate Term: Hold Short

Definitions:
Flat = no position / not long or short the market.
Sell / Short = positioning to attempt to profit on price declines
Buy / Long = positioning to attempt to profit on price advances
Hold = hold a long position
Hold Short = hold a short position

The Light Bulb Moment for the Eurozone
EWI's free EU debt report sheds some light on what's in store
Elliott Wave International

Gold Futures 1/18/12

2012-01-18T13:37:00.000-06:00

We recently closed out a successful short stance in gold, and are now waiting for price action cues as to what to do next.

Weekly gold futures prices have pushed above the down-trending parallel trend channel, but remain below a trend line drawn against a recent series of lower highs.

Daily prices remain above the down-trending parallel lines, but we still need to see more pattern or trend before deciding if this looks either like a new trend or a reaction within a larger trend still underway. It's OK to no know the answer all the time.

A mixed picture in between the two time frames and their moving average envelopes. RSI is in downtrend territory on the weekly chart, and in the neutral zone on the daily chart.

A mixed picture with the Dynamic Trailing Stop indicator as well. ADX registering non-trending behavior. We are fishing for trends. Nothing biting here right now.

Current Stance
Long Term: Flat

Intermediate Term: Flat

Definitions:
Flat = no position / not long or short the market.
Sell Short = positioned to attempt to make money on price declines
Buy / Long = positioned to make money on price advances
Hold = hold a long position
Hold Short = Hold a short position

New Year, New High Hopes for Stocks
By Elliott Wave International

You can probably relate: Every year, come January 1, I just can't help but feel that "every little thing is gonna be all right," as Bob Marley sang. This year, the mainstream financial community is sharing the same sentiment. Here's how EWI's Steve Hochberg summarized it... Read More.

The Importance of Exits

2012-01-18T06:00:00.000-06:00

When thinking about trading or investing, most people seem to focus on entries. "What should I invest in?". "I think now is a good time to buy XYZ....". Considering entry seems intuitive enough. But is this the most useful place for your attention in considering a trading plan?

My recent and ongoing work in writing automated systems has illustrated for me the importance of exits. Tests of many systems over a number of different markets and even different time frames have shown that more profits can be squeezed out of exits than entries. Exit heuristics are also more important than entries in the limiting of losses.

It seems that a good trading system could be handed to someone who has portfolio of trades / investments already in place through whatever method they originally used, and that the system would then be able to immediately tell them when to exit for a loss or profit, if any of the positions are over-sized, and when to move that exit point along with new directional moves in favor of the trade.

It's almost like entries are fools gold. Tactical traders are provided with profit opportunities partially because so many fundamentalists, technicians, and dollar cost averaging traders ("investors") focus on the entry. More attention should be placed on your exit strategy.

Swiss Franc 1/17/12

2012-01-17T13:26:00.000-06:00

We have been expecting a possible low in the Swiss Franc, and, while the downtrend is not technically complete, prices continue to flatten out.

Weekly price bars have moved above the steep downtrend line.

A series of short to medium term higher lows and higher highs would be in place on the daily bar chart if Swiss Franc futures prices move above 1.0748. You can really see the price trend flattening out on the daily chart.

Both moving average envelopes are still in downtrend mode. RSI is also in downtrend range on both charts, but daily RSI has continued to diverge against lower prices. Velocity divergences against trend like this are often early warning signs.

The Dynamic Trailing Stop indicator is providing useful stop levels for anyone who might be short this market right now. Weekly DTS is a little wider than the daily DTS level -take your pick.

Non-trending behavior on the weekly ADX, via down-trending to flat ADX line. Daily ADX has started to weaken, with -DMI and +DMI lines converging.

At the time of this post, 1 USD = 0.94944 CHF.

Lately, I've shown example screen shots of trade signal results from some of the automated trading code that has been a little project over recent months. This week, I was able to clean up the code a little and filter out some of the bad signals. We will never filter out all the bad signals, and that is not what I am attempting to do. A robust system is the goal. Another change is that there is an initial stop that is sometimes tighter than the trailing stop depending on how the price bars form during the initial trade signal.

It's still a simple and robust code, which is what I want. You can see the screenshot of signals the new code would have produced in the Swiss Franc futures over the past year or so. Close comparison to last week's screenshot will reveal fewer trades in congestion areas for the updated code. Not too shabby!

You can see that the system is currently short the Swiss Franc (all my systems trade in both directions) with a stop loss level similar to other levels mentioned earlier in the post, and that the stop level is also in the profit zone. Blue dotted lines represent winning trades. Red dotted lines represent losing trades.

This piece of code does not have adaptive positions sizing included, so all signals only show 1 contract. I have written, tested, and plan to use a code module that does adjust trade position size as a percentage of risk to equity available as measured against a volatility generated stop/loss level. It just did not seem that having a bunch of numbers on the chart for different position sizes would serve a purpose in this illustration.

If you would have asked me in college if I had any interest in trading commodities or writing software code, I would have just laughed and asked if you wanted to go waterskiing. Forest Gump was right. You never know what you're gonna get!

Current Stance:
Long Term: Flat

Intermediate Term: Flat

Definitions:
Flat = no position / not long or short the market.
Sell Short = positioning to attempt to profit on price declines
Buy / Long = positioning to attempt to profit on price advances
Hold = hold a long position
Hold Short = hold a short position

How DEEP Will Cuts in Government Services Go?
Plus: The check is STILL in the mail.
Elliott Wave International

Silver Futures 1/16/12

2012-01-16T20:59:00.000-06:00

Silver prices are continue to reward our move to a neutral or flat stance from a previous sold short stance. We are now watching for the next sufficient trend cue -up or down.

Prices are starting to push above the weekly chart's downtrend.

Daily bars are out of the downtrend channel and have been edging higher. A break below recent lows would cause me to go short again. I'm not looking to go long yet. Let's see how this thing forms from here.

Moving average envelopes show a mixed trend picture. Silver prices are still trending downward according to the weekly chart. Daily bar chart action shows silver prices in an intermediate term uptrend.

RSI is in downtrend mode on both charts.

Dynamic Trailing Stop is in downtrend mode on the weekly chart and uptrend mode on the daily.

My most refined automated medium to long term system (still in development and testing phases) is flat the silver market.

Current Stance
Long Term: Flat
(comments here are about trading liquid markets, and do not relate to any views we have regarding the holding of physical gold and silver).

Intermediate Term: Flat

What Is Backing Your Deposits in the Bank?
By Elliott Wave International

Is the bank really the safest place to keep your money? Robert Prechter joins the Mind of Money host Douglass Lodmell to discuss what backs bank deposits and how you can keep your hard-earned money safe. Read More.

Five Fatal Flaws of Trading

2012-01-16T06:00:00.000-06:00

By Elliott Wave International

While there is no magic formula, EWI Senior Instructor Jeffrey Kennedy has identified five fundamental flaws that, in his opinion, stop most traders from being consistently successful. Read More.

S&P Stock Index 1/13/12

2012-01-14T06:00:00.000-06:00

The S&P 500 Stock Index continues to be a challenge. It's been tough to trade in the short term, and is requiring a lot of patience in the intermediate term. Most readers know my general outlook on this market has a bearish backdrop to it, but that I am willing to follow price trends up or down. We have had an intermediate term long (bullish) stance, but stops are being aggressively tightened on that. I smell trouble.

Price action is currently contained in a range between approximately 1370 and 1075. Behavior has been choppy since the low in October of last year, which marked the bottom end of the range.

Market behavior was once explained to me in a way I will never forget. Price action was compared to water flowing. You can tell the larger trend from temporary diversions caused by obstacles in the stream because prices are choppy and do not flow well when reacting to the obstacles. Think of rapids, or a big rock that causes a stream of water to curve slightly. Now, this may not be a perfect analogy, but I think it is a darn good one for a technical trader to keep in mind. It's certainly something that has stuck with me. Prices are pretty choppy to the upside right now.

Lot's of lines on a technical trader's chart typically me things in that particular market have kept him busy. What a mess! Patience is running a little thin. Stops for intermediate term longs are moving up to today's lows. A break below 1277.58 (cash market) takes us from an intermediate term long position back to flat. Although my patience is being tested, this tightening is very much due to an actual short term price pattern that formed over the past few sessions.

Action like this reinforces the desire to finish development and testing on those automated systems I've been writing code for. At least with them, we know to expect lots of whipsaws, and don't need to worry with it so much. The grass is always greener, right!

Moving average envelopes are in uptrend mode on both charts. A reason to hold onto longs if our tight stop is not taken out. RSI is above first level of uptrend support on the weekly chart, and slightly above second level of uptrend support on daily chart.

DTS indicator is providing good stop / loss levels for anyone who is long right now. Daily DTS stop is right where I mentioned my own discretionary stop is. Nothing is stopping this trend from running forward, I just don't have a good feeling about it. Sometimes you have to listen to your gut and at least tighten up the exits.

ADX registers non-trending behavior on the weekly chart, but shows trending behavior with the latest upside on the daily chart.

My Elliott Wave interpretation remains bearish. This interpretation will be wrong if prices move above 1370.58 (cash index). Confirmation for this interpretation, at least further indication for it, would come with a break below 1074.77 (cash index).

VIX is looking pretty complacent these days.

Put/Call ratio has declined. When people are not worried, it is the best time for a decline.

Bottom line: I am definitely willing to trade and follow the price trend upwards if that is where it goes, but I smell trouble.

Current Stance:
Long Term: Flat

Intermediate term: Long (with a tight stop, and I would not argue against a flat position right now!!)

Short term:
My propriety short term system is allowing trades to the long side right now. Changes in directional orientation as well as entries and exits occur more frequently than the weekly S&P posts to this blog.

Definitions:
Flat = no position / not long or short the market.
Sell / Short = positioning to attempt to profit on price declines
Buy / Long = positioning to attempt to profit on price advances
Hold = hold a long position

Hold Short = hold a short position

Five Fatal Flaws of Trading
By Elliott Wave International

While there is no magic formula, EWI Senior Instructor Jeffrey Kennedy has identified five fundamental flaws that, in his opinion, stop most traders from being consistently successful. Read More.

Art Carden Responds to "The Story of Broke"

2012-01-13T11:45:00.000-06:00

EURO Futures 1/12/12

2012-01-12T19:03:00.002-06:00

Our stance on the EURO remains to hold onto sold short positions. Some consolidation appears to be occurring in the short term. We have no idea if the short term pause will turn into a new intermediate term uptrend of significance or not. We plan to keep a bearish stance until price action suggests that trend is over.

EURO pattern still looking like one of long term distribution to me.

Intermediate term price trend in EURO futures remains down. We have parallel trend lines in place as part of our defense against any significant changes in this trend.

Moving average envelopes are still in downtrend mode.

RSI is in downtrend range on both time frames, and no positive divergence, save for a very small one on the daily chart, formed prior to the current consolidation.

While a rally would not be surprising after such declines in prices, we don't currently see reasons to use extra tight stops right now. It's best to let trends run until they tell you its over. We can lock in a profit with a loose protective stop, allowing opportunity for the trend to turn into an exponential profit.

The Dynamic Trailing Stop indicator provides two possible levels for stops. Weekly DTS is a bit more loose than daily DTS. The automated system I have been working on currently has a stop between these to levels.

ADX confirms trending behavior for both time frames.

Current Stance
Long Term: Hold Short

Intermediate Term: Hold Short

Definitions:
Flat = no position / not long or short the market.
Sell / Short = positioning to attempt to profit on price declines
Buy / Long = positioning to attempt to profit on price advances
Hold = hold a long position
Hold Short = hold a short position

The European Debt Crisis and Your Investments
A look back on 18 months of analysis and reports on the European Credit Crisis
By Elliott Wave International

EWI's analysts have been anticipating and tracking the credit contagion across the European nations for the past two years. Elliott Wave International subscribers were first alerted to the still-developing European debt crisis back in December 2009. Read More.

Gold Futures 1/11/12

2012-01-11T13:43:00.000-06:00

It looks like our change in stance from hold short to flat was good timing. We have no way of knowing if the larger downtrend is complete yet, but the intermediate term trend has turned back up by several measures.

Weekly gold futures prices still remain below trend-line, and within down-trending parallel lines based off current pattern high and low. Prices are currently testing the upper parallel line.

Daily gold futures have pushed above down-trending parallel trend lines.

Moving average envelopes are still in downtrend mode on the longer term weekly chart, but have moved into uptrend mode on the intermediate term daily chart.

RSI remains in downtrend territory on both charts. A positive divergence on the daily chart preceded the recent rally.

The Dynamic Trailing Stop exit indicator is holding onto downtrend mode on the weekly chart. Daily DTS is tracking the current intermediate term rally to the upside.

ADX registers non-trending behavior on both time frames.

Current Stance
Long Term: Flat

Intermediate Term: Flat

Definitions:
Flat = no position / not long or short the market.
Sell Short = positioned to attempt to make money on price declines
Buy / Long = positioned to make money on price advances
Hold = hold a long position
Hold Short = Hold a short position

"Market Manipulation" Is Not Why Most Traders Lose

A look at EWI president Robert Prechter's requirements for successful trading
By Elliott Wave International

How often have you heard analysts refer to a down day on Wall Street as "traders taking profits"? Sounds great, but the sobering fact is that most traders -- in futures, commodities, or forex -- lose money. Yet some traders do win; some even set records. In 1984, Elliott Wave International's president Robert Prechter won the U.S. Trading Championship, setting a new all-time profit record of 444.4% in a monitored real-money options account. Here is a link to the free report where he lays out his requirements for successful trading. Read More.

Debts, Deficits, and Spending Cuts

2012-01-11T06:00:00.000-06:00

Swiss Franc 1/10/12

2012-01-10T12:10:00.000-06:00

Diverging velocity and possibly completed Elliott Wave patterns continue to point to a possible intermediate term low in the Swiss Franc.

This week's price bar is currently above the trend-line drawn across recent lower highs. Because it is a fairly steep trend-line, price making its way above the line does not seem all that significant on its own. But there are other factors that have my attention right now.

Prices have made slight new lows since the last post, so the trend is still down. If I were short this market right now (unfortunately not), stops would be moved down to 1.0748. We just keep stepping this down with what appears to be a deteriorating trend.

Swiss Franc moving average envelopes are still in downtrend mode on both the weekly and the daily charts. The real story here is the daily RSI.

While both weekly and daily RSI indicators are in downtrend range, the daily RSI continues to form a positive velocity divergence with price. This indicates a possible intermediate term low in the making.

The Dynamic Trailing Stop indicators is still in downtrend mode on both charts. Notice that the stop suggested earlier is right in between the two exit levels proposed by DTS. Any of these levels would be fine for someone who is holding shorts right now.

Weekly ADX shows non-trending behavior. Daily ADX is again registering trend with the new lows.

As some readers might know, I have been playing around with programming automated systems in my free-time. Although this has been a self directed learning effort, I have no prior experience in writing computer programs. I am relying on books and a lot of experimentation. Human input would be great! If any of you out there work on this type of thing, I would love your input and feedback. Trust me, I have questions!

Many of the systems simply have not worked well (expected), while others have actually worked well enough for me to continue various testing and development phases with them. Simple systems seem to work the best. Ultimately, I may trade a different account with these systems. Here is what trades (no position size adjustments; only entry and exit signals) with one of my medium to long-term trend-following systems would have looked like in the Swiss Franc futures contract over the past year:

Blue (or is it teal? I kind of suck with colors.) dotted lines connect entry and exit to winning trades. Red dotted lines connect entry and exit to losing trades. The blue are easier to see because the system does not stick around in a losing position for a long time, but will let the winning position run until signaled that the trend is ending.

I like how this system operates! It does get whipsawed in sideways markets, but it is really good at catching the major trends and profiting from major upside and major downside movements. Most importantly, it seems fairly robust across many markets. My current goal is to to keep working with it to see if I can filter out more of the noise or not. Note that the system stop is right in the same area that simple price bars as well as the DTS indicator suggested earlier in the post! I am taking this one step at a time, and moving slowly into this automated trading systems world, but it is very exciting nonetheless!

At the time of this post 1 USD = 0.94923 CHF.

Current Stance:
Long Term: Flat

Intermediate Term: Flat

Definitions:
Flat = no position / not long or short the market.
Sell Short = positioning to attempt to profit on price declines
Buy / Long = positioning to attempt to profit on price advances
Hold = hold a long position
Hold Short = hold a short position

The European Debt Crisis and Your Investments
A look back on 18 months of analysis and reports on the European Credit Crisis
By Elliott Wave International

How DEEP Will Cuts in Government Services Go?

2012-01-10T06:00:00.000-06:00

Plus: The check is STILL in the mail.
By Elliott Wave International

The pace of the deteriorating economic trend appears to be accelerating. Our analysis suggests that it's part of a larger deflationary trend that has a long way to go. Learn how to prepare and protect yourself... Read More.

Silver Futures 1/09/12

2012-01-09T18:26:00.000-06:00

Silver is still in a downtrend, but our stance is currently flat after defending short position profits from an intermediate term rally, which we are still watching for our next clue.

Silver prices remain below a downtrend line drawn against recent lower highs. If prices break back below current pattern lows, we will be treating it as a trend breakout, causing us to move from a flat back into a sell short stance. We follow the trend.

Intermediate term trend in silver prices are neutral according to our parallel trend-lines.

Silver's weekly moving average envelope still shows a long-term downtrend in place. Depending on the individual trader's interpretation, the daily moving average envelope would be considered neutral or downtrend.

The recent rally formed off of a positive RSI divergence as seen on the daily chart. RSI remains in downtrend range on both time frames however.

The Dynamic Trailing Stop indicator remains in downtrend mode on the weekly chart, but like our own stance, has moved out of downtrend mode on the daily chart.

ADX is a lagging indicator (what indicator is not?). I started including ADX in these charts partially because I have heard of trend followers using it, and I wanted to monitor on a regular basis. I might write programs for automated tests that use it as a filter in the future. It's not the top thing on the long list of programming tasks to script out though. For now, we are just monitoring it here and calling it like we see it. Weekly ADX is registering trending behavior. Daily ADX is trending down over the past few sessions, which is an indication of non-trending behavior on the intermediate term.

Current Stance

Long Term: Flat
(comments here are about trading liquid markets, and do not relate to any views we have regarding the holding of physical gold and silver).

Intermediate Term: Flat

Preparing Your Finances for 2012
Looking ahead to a new year and planning for the future
By Elliott Wave International

Now is a good time to look back over the past year and assess your finances. Do you have the information needed to make wise decisions in the next year? Prepare and take action now so that you'll be ready for what's ahead. Read More.

S&P 500 Stock Index 1/06/12

2012-01-07T07:00:00.000-06:00

The S&P 500 has been a tough market to trade lately. After braking above some areas of intermediate term resistance, there has not really been any follow through. Only chop and churn! It's messy, but none of us know when messy will turn into profitable trend. Right now, the intermediate term trend, as choppy as it might be, is up.

This week's low is above the downward sloping trend-line drawn across recent lower highs. As long as prices continue to stay above that level, then prices are in uptrend. Does that mean you would close new longs if prices broke below the low of this past week? Yup, I would! It's a tight stop, but it means something. As this stop/loss are relates to the trend-line it broke, it might indicate a false breakout of sorts. Cut losses short! To make it a little easier, I have also drawn an up-trend-line across recent lows.

Churn city! What's it going to do next? I don't know. The intermediate term trend is up for now. We follow with really tight stops at the moment. Our most recently drawn intermediate term parallel trend-lines marking the current uptrend match up pretty well with the stop area we mentioned on the weekly chart.

Moving average envelopes are in uptrend mode on both time frames. RSI is above first level of trend support on both charts.

Dynamic Trailing Stop exit indicator is in uptrend mode on both time frames. Looks like it has a pretty tight stop similar to the one I mentioned earlier.

ADX shows non-trending behavior on the weekly chart. Daily ADX has turned up a bit with the intermediate term trend.

I don't think I've posted this chart in a while. It's my long term Elliott Wave count as it stands now. It is extremely bearish. So, why am I willing to take trades to the long side (buy) trades? Because I am a trader. I am tactically trading price action. I can get in and out very vast. There is absolutely no way I would have long-term investments in the stock market for holding right now. Am I nuts? Only history will solve that.

We don't have a time machine. We have to deal with the information we have. We are all speculators! Everyone who is alive is speculating with resources. We are all traders. I am telling you what I think -my speculation- right now about this market. The fact that I want to talk about this is probably a sign I am a little nuts. So, son't listen to me, unless it makes sense with what you can think of for yourself.

Bottom line: I will trade it, but I will not at all put my faith in it and hold it blindly for the "long-term". You do what you think is best and we will compare notes on the other side. I am willing to own my mistakes. Are you? Every trader should be.

Current Stance:

Long Term: Flat

Intermediate term: Long (with a tight stop, and I would not argue against a flat position right now!)

Hold Short = hold a short position

Why Choose the Wave Principle?
Robert Prechter reveals why he embraced the Wave Principle.
Elliott Wave International

EURO Futures 1/05/12

2012-01-05T14:22:00.000-06:00

We continue to be rewarded by our short position in the EURO.

The EURO's long term price pattern has looked like one of distribution for so long now, I don't even remember when we started saying it. Distribution simply means a period of more buying / accumulation transitioning into a period of net selling. This is not rocket science. That's just what a chart pattern like the one above communicates.

Now, there is currently no confirmation of this hypothesis yet, but prices are acting more an more in accordance with the idea in recent sessions. Ultimately, we just follow the price trend, but it's hard to ignore such a pattern when you know the potential implications (there are no certainties).

Confirmation would be a break of the neckline, around the 1.18 handle. If prices instead choose to break back above the 1.48 area (1.49398 in the EURUSD spot cross rate) , then we will need to start reconsidering. In fact, we are going to be a little concerned with the bearish outlook (which is simply based on price trend, nothing else) if prices break back above 1.42466 (basis EURUSD spot cross rate).

The trend is down, but trends don't move in a straight line. I will be using the parallel lines to help monitor any trend retracements that develop in the intermediate term.

Our moving average envelopes are in downtrend mode over both time frames in the EURO.

RSI is in downtrend mode on weekly and daily charts. There is still a possible positive RSI divergence forming on the daily chart -something to watch. We mentioned that last week, and only a small rally formed. New lows are now on the board, but there is still a possible divergence forming.

The Dynamic Trailing Stop indicator is providing good stop levels for shorts right now. The weekly DTS gives prices a little more room to breath.

ADX registers trending behavior on both charts.

The chart above shows the entries and exits suggested by my current favorite of the automated systems I have been writing code for. This is still in development and testing phases, but we can see that it's stop for current shorts is very close to where the weekly DTS is suggesting a defensive exit be placed. This system tests fairly well in the EURO market over a ten year time frame, BTW.

Current Stance

Long Term: Hold Short

Intermediate Term: Hold Short

Definitions:
Flat = no position / not long or short the market.
Sell / Short = positioning to attempt to profit on price declines
Buy / Long = positioning to attempt to profit on price advances
Hold = hold a long position
Hold Short = hold a short position

The Light Bulb Moment for the Eurozone
EWI's free EU debt report sheds some light on what's in store
By Elliott Wave International

How many European bankers does it take to change a light bulb? That's a joke in search of an answer, but EWI's European analyst Brian Whitmer explained five months ago that the "light bulb moment" was coming -- that's the time when most people would clearly recognize the severity of the European debt crisis. He offered this spot-on analysis back in July 2011, before the larger world came to know recently how bad things really are in the eurozone. Read More.

Gold Futures 1/4/12

2012-01-04T15:08:00.001-06:00

A post on the 29th of December noted that we were tightening stops for our gold short positions. Those stops have been hit by the market, taking us into a flat position. If prices break down to new lows again, we will follow the trend by selling gold short again.

Gold prices still remain below a trend-line drawn across lower highs on the weekly bar chart. The new pattern low also provided an opportunity to draw parallel trend-lines based off trend high and low, with second line placed against most recent corrective termination point. Weekly prices are still within the bounds of this set of parallel lines. The trend is still down according to the weekly chart.

My decision to tighten stops was primarily based off of action on the daily bar chart. As price broke to new lows, we wanted to see follow through, not a reaction low. Also, a possible Elliott Wave pattern down was complete. If correct, it was assumed to either be a C-wave of a correction, or a lower degree first wave in a new downtrend. In either case, I figured a rally might form.

We still gave prices room to continue trending, but they did not choose that path. A rally has developed. Now we have to be on guard. I could have completely been premature in an effort to protect profits. If prices break to new lows, we will be following them by selling new positions short. If not, then we will watch how the rally develops to see what price action guides us to do next.

Moving average envelopes are clearly still in downtrend mode. RSI is in downtrend range, but is rallying off a positive divergence seen on the daily bar chart.

Weekly Dynamic Trailing Stop indicator is in downtrend mode. Daily DTS is now in uptrend mode.

Out of all the automated systems I have recently been writing code for and experimenting with, my current favorite trend-following system is still short gold, but the stop is very close to being hit.

Current Stance

Long Term: Flat

Intermediate Term: Flat

Definitions:
Flat = no position / not long or short the market.
Sell Short = positioned to attempt to make money on price declines
Buy / Long = positioned to make money on price advances
Hold = hold a long position
Hold Short = Hold a short position

How to Identify and Use Support and Resistance Levels
By Elliott Wave International

Since 1999, Elliott Wave International senior analyst and trading instructor Jeffrey Kennedy has produced dozens of Trader's Classroom lessons exclusively for his subscribers. While commodity markets are known as some of the toughest trading environments around, these actionable lessons from a skilled veteran can help you trade commodities, or any market for that matter, with more confidence. Read More.

Swiss Franc 1/03/12

2012-01-03T13:59:00.000-06:00

The Swiss Franc continues to show potential bottoming activity.

Do we know prices have turned up yet? No! But..... Prices are now above the trend-line drawn across recent lower highs. If this week's low ends above that line, I would consider it somewhat significant.

A move above 1.0905 would be further indication of a trend change. Why? It would mean we would be seeing higher lows rather than lower highs for a change. I hope you ask why. People who get frustrated when others ask why are small minded.

Moving average envelopes are still in downtrend mode. It's fairly common for our entries to be based on slower trend indications than our exits.

RSI is in downtrend range on both charts, but with significant positive velocity divergence.

The Dynamic Trailing Stop indicator is in downtrend mode on both time frames right now, but in very close proximity to current prices. ADX registers non-trending behavior on both time frames.

At the time of this post, 1 USD = 0.93217 CHF.

Current Stance:
Long Term: Flat

Intermediate Term: Flat

Definitions:
Flat = no position / not long or short the market.
Sell Short = positioning to attempt to profit on price declines
Buy / Long = positioning to attempt to profit on price advances
Hold = hold a long position
Hold Short = hold a short position

What Is Backing Your Deposits in the Bank? By Elliott Wave International