Elliott Wave Technology

Left Behind, Chasing Armageddon

2012-02-19T13:01:00.001-05:00

The current market environment is rather strange right now.

Based on mainstream news and online media, widespread fear and uncertainty seem to be at all-time highs, yet the stock market is exhibiting extreme complacency, and appears well on its way toward retesting its all-time historic highs.

How can that be?

What is driving these markets higher? All I can think of is that the US equity market is currently dancing to the tune of bullish contrarian strategies in the face of a fundamentally dire backdrop to which EVERYONE (including the general public) is most keenly aware.
For the time being, this contrarian effect in concert with a whole lot of interventionist help from the most powerful central banks on the planet is sealing the bullish deal.
Argh you say, you don’t want to go near any of these markets with a ten-foot pole. It’s all rigged, and everything will crash again sooner or later.
We can’t really blame you for feeling that way. Such an outcome is certainly possible if not likely – but from where say might the Dow crash from – 14K, 18K, 20K, or even higher?

In addition, if the markets do turn down, wouldn’t you like to know when it is most prudent to short the new downtrends? Regardless of whether we get another bullish crack-up boom or a devastating market decline, do you really want to be left that far behind, again?
Seriously, setting aside the absurdity, hubris, and folly in taking stabs on calling entries and exits at absolute tops and bottoms, our empirically proven trading strategies are fully capable of recognizing when a major bottom or top has clearly reversed course and has begun trending in a new direction.
Granted, sometimes we have to pay the premium in getting head-faked and whipsawed regardless of which side of the market we are on, but overall, that is a small price to pay when one compares it to feeling completely left behind.
The inevitable head-fake/whipsaw premium is also a very reasonable price to pay for long-term success and staying power, and it assures that we will never take too big a hit or get train wrecked beyond repair.

Ch-Ch-Changes – Turn, and Face the Strain

Sure, times are changing, but change is constant. At times, change is imperceptible, and at times, it appears much more pronounced.
As we move into the balance of 2012, and reflect on what has taken place over the past three years, change and paradigm shifts of significance certainly feel much more intense than typical.

How many times throughout history has humankind been compelled to believe that a catastrophe or that the end of the world was imminent? If you answered, countless times, you would be correct.
However, this time, you may find yourself believing that this time it really is different, and what we are about to experience is the real McCoy – Armageddon by any other name.
Hell, with the Mayan calendar locked and loaded amid its well-publicized countdown to doomsday slated for December 21, 2012, given the current state of rising global unrest, wars, debt, imbalances, corruption and the like, everything is most assuredly going to collapse into a global state of anarchy.
Hmm, I guess just about anything is possible, however it really does matter what the mathematical odds are when such reasonable logic and fundamentals are pitted against a financial system that is much like the Universe, sharing in common with it a highly ordered but randomly violent complex system that was created from nothing.
Think back to 1995, which marked eight years following the largest single-day catastrophic wipeout amid the infamous world-ending Crash of ’87, when the Dow was trading near 5700.

What happened to all of the obedient disciples buying into the cult of Robert Prechter’s pronouncement of an impending bearish RAPTURE way back in 1995?

His compellingly brilliant and dogmatic proclamations that the world was at the “Crest of a Mega-Bearish Tidal Wave” in 1995 was supposed to have saved each of those souls who believed. What happened?
That is exactly right; they were all “Left Behind.” They watched in horror as the Dow threw over that famous rising wedge, pulled back a smidgeon, and then took off like a rocket and never looked back.

Trust me; I was one of those initially left behind, and it stung like a bitch.
Timing is Everything
Sorry, but the bear markets of 2002 and 2008 provide absolutely no redemption for such a profound dogmatic error.
Why not, simply because at the absolute print lows associated with both of these bear markets, prices remained more than 20% higher than they were at the time Mr. Prechter staunchly held to his Crest of the Tidal Wave end-of-the-world thesis. Timing matters.
Hey, don’t get me wrong – I respect Mr. Prechter and consider him a brilliant analyst and marketer.
It’s just that you cannot effectively trade, forecast, or invest effectively if you dogmatize or become married to a thesis even though it may be based upon a highly logical, compelling set of fundamental arguments in concert with a host of meaningful technical reasons as to why you must remain a staunch, committed and unwavering believer.

Lessons of the Past

I first began to pay attention to financial markets following the crash of ’87.
By 1991, I had a laser focus on the financial sphere studying and absorbing reams of Elliott Wave & Dow Theory, Gann, Pring, Murphy, CANSLIM, Buffett, etc. You name it, I devoured it cover-to-cover, inside out, frontwards and backwards.
After putting all of that knowledge to work, I still lost my initial trading stake of 10K in about 12-months time.
Though completely devastated, I never gave up, and by the time the Dow hit 7500, I retained what proved useful, abandoned all of my false gods and market religions, cast all dogma and bias aside, and began developing my own strategies, techniques, and unique way of charting and navigating the markets.
Since then, I have naturally recovered all of those initial losses and have decisively outperformed the S&P benchmark without any trouble at all.
I have since made it my mission to help as many individuals and entities avoid the common mistakes that I once made.
My goal is to share with integrity what I firmly believe to be extremely valuable insights and quantified strategies and methods that I have acquired throughout my 21-years of devotion toward mastering the extremely elusive craft of trading, market timing, charting, and forecasting.
Wisdom for the Future
Elliott Wave Technology has made many improvements and upgrades over the past eight years, and if you have yet to see our most recent product upgrades in action, you will soon be in for a treat.
For starters, we have a brand new website and delivery platform.
In addition to our first-in-class charting and forecasting services, we have added a full spectrum solution, the Chart-Cast Pilot, which based upon our proprietary and EMPIRICALLY PROVEN trading strategies, relays and tracks actual trades and performance metrics in three different timeframes.
In order to get a broad, in-depth sampling for precisely what each of our solutions offers, you can review several of our video archives at the Elliott Wave Technology YouTube channel . I trust you will find that our record of forecasting and navigating these markets remains second-to-none.
For a more current update, if not already attached, readers may email us to acquire complementary copies of our latest Feb-17 issues of the Near Term Outlook, and Chart-Cast Pilot publications.
We trust that this will earn your loyal confidence. We urge you to come back and join us as we continue nailing the shit out of these markets, while at the same time, making certain that we avoid all serious danger and undue risk.
I hope that you have enjoyed this communication and the accompanying files. I will gladly answer any questions you may have, and look forward to welcoming you back to the mission.
Until next time,
Trade Better / Invest Smarter

Central Banks Flooded The World In Liquidity Last Night

2012-02-16T23:43:00.001-05:00

There are those who have been waiting to buy undilutable precious metals in response to a headline announcement from the Fed that it is starting to buy up hundreds of billions of Treasury's or MBS.

By Tyler Durden – Thu Feb 16, 2012 2:00 AM ZeroHedge

This is understandable - after all that is precisely the trigger that the headline scanning robots which account for 90% of market action in the past year are programmed to do. And the worst thing that one can do is put on the right trade at the wrong time. Yet it may come as a surprise to some, that while the world was waiting, and waiting, and waiting, for Bernanke to hit the Print button, virtually every other central bank was quietly unleashing it own mini tsunami of liquidity. In fact, as Morgan Stanley puts it, "the Great Monetary Easing Part 2 is in full swing."
But wait, there's more: in an Austrian world, where fundamentals don't matter and only how much additional nominal fiat is created is relevant, it is sheer idiocy to assume that the printers will stop here... or anywhere for that matter. They simply can't, now that the marginal utility of every dollars is sub 1.00 relative to GDP creation.
This means that by the time the Global Weimar is in full swing, we will see much, much more easing. Sure enough, MS anticipates an unprecedented additional round of easing in the months ahead. So for those waiting to buy gold et al at the same time as DE Shaw's correlation quants do, the time will be long gone. Because slowly everyone is realizing that it is not the Fed that is the marginal creator of fake money. It is everyone.
Behold, the Great Monetary Easing part 2:

MS Summary:
The Great Monetary Easing Part 2 is in full swing – and begets inflation risks. Global monetary policy interconnectedness, the impact of central bank easing on commodity prices, and the possibility of an improved outlook for the real economy could mean a return of the Global Inflation Merry-Go-Round:
1) Super-expansionary monetary policy in the major developed economies, particularly the US, a) contributes to commodity inflation and b) is imported by EM central banks through (US dollar) soft and hard pegs.
2) Price pressures rise in EM due to domestic overheating and higher commodity prices. Inflation is then re-exported to DM through more expensive goods exports.
3) More expensive imports from EM and dearer commodities raise inflation in DM. In turn, DM central banks initiate the next round by maintaining – or increasing – monetary accommodation.
2013 might yet look like 2011 on the inflation front.
...and Detail:
The Great Monetary Easing (Part 2), is in full swing … In response to a slowing global economy and further downside risks emanating from the possibility of an escalating Eurozone debt crisis, central banks all over the world – and across the DM-EM divide – have been deploying their arsenal for a while now, and should continue to do so. The result is aggressive monetary easing on a global scale – what we have dubbed the Great Monetary Easing, part 2 (GME 2 - see Sunday Start: What Next in the Global Economy, January 22, 2012); this follows on from GME1 in 2009-10. The GME2 is now in full swing. Last week, the Bank of England announced a further GBP 50bn of gilts purchases, to take place over the next 3 months. On Tuesday, the Bank of Japan upped the target of its Asset Purchase Program by 50%, from JPY 20trn to JPY 30trn, with the increment concentrated exclusively on JGB purchases. We think Sweden’s Riksbank will pick up the baton from the Bank of Japan on Thursday and cut the repo rate by 25 basis points.
Half the world's central banks have reqliuified in the past few months!
Out of a total of 33 central banks under our coverage, 16 have eased policy in various ways since 4Q11; 7 out of 10 DM central banks and 9 out of 23 EM central banks. Many of these central banks will ease further, on our forecasts, while the central banks of Poland, Korea, Malaysia and Mexico, which have not cut so far, will also join in (and the National Bank of Hungary will likely reverse its 100 basis points of hikes over the course of the year).
What is surprising, is that the primary beneficiary of these hundreds of billions in excess liquidity from around the world, has so far been the US, where courtesy of the biggest equity market, the reflexive flaw that the stock market is the economy has led to what some have noted is decoupling, when in reality it is merely outperformance of the US stock market, where the bulk of global liquidity has concentrated. And now, like in 2011, that liquidity is starting to spill over again: gas just hit $3.52, and rising ever faster, which just happens to be the most direct, implicit tax on US consumer. And it is now detracting from growth.
Finally, another way of visualizing the global central banks' balance sheets.

Stocks Fall Amid Greece Concerns, Apple Pullback

2012-02-15T14:24:00.001-05:00

U.S. stocks fell amid concern Greece was moving closer to default as Apple (AAPL) Inc. pared gains and Deere & Co. sank after forecasting slower demand from farmers.

By Rita Nazareth – Wed Feb 15, 2012 1:53 PM Bloomberg

Apple rose 0.1 percent, trimming a 3.3 percent rally, amid reports that the company has pulled its iPad from Amazon.com Inc. in China. Deere & Co., the largest maker of agricultural equipment, fell 3.5 percent after lowering its forecast for U.S. farmer revenue. Comcast Corp. (CMCSA), the largest U.S. cable company, rallied 5.1 percent after authorizing a $6.5 billion buyback as profit jumped 26 percent.
The Standard & Poor’s 500 Index lost 0.3 percent to 1,346.96 at 1:50 p.m. New York time, reversing an earlier gain of as much as 0.4 percent. The Dow Jones Industrial Average fell 84.51 points, or 0.7 percent, to 12,793.77 today.
“It was the perfect storm waiting to happen,” Peter Sorrentino, a fund manager who helps oversee $14.5 billion at Huntington Asset Advisors in Cincinnati, said in a phone interview. “Too many people were positive on Apple. All it takes is a person to yell the emperor has no clothes and people head for the exits,” he said. “Plus, there’s not a real strong case that this market was poised dramatically higher. People just keep trying to delay the Greece situation.”
Global equities rallied as China pledged to invest in Europe’s bailout funds and sustain its holdings of euro assets. Stocks pared gains as Reuters reported that euro area finance officials are investigating delaying parts or all of the second bailout while still avoiding a disorderly default.

Patent Dispute

Stocks reversed gains as Apple, the nation’s biggest company by market value, tumbled as much as 1.5 percent. Marbridge Consulting said the company asked Amazon China and other websites to stop selling the iPad amid a patent dispute.
Production at U.S. factories increased in January, reflecting gains in demand for U.S.-made automobiles and business equipment that may keep manufacturing at the forefront of the expansion. The Federal Reserve today releases minutes of its last meeting when policy makers decided to extend the central bank’s pledge to keep borrowing costs low until at least late 2014.
The S&P 500 yesterday closed about 1 percent away from its peak nine months ago of 1,363.61, which was the highest level since June 2008. The index has risen 7.1 percent this year as the U.S. economy showed signs of accelerating and European leaders moved closer to a solution on the region’s debt crisis.
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

U.S. Stocks Rise as China Says It Will Get More Involved in Europe Rescue

2012-02-15T10:11:00.001-05:00

U.S. stocks advanced, following yesterday’s decline in the benchmark Standard & Poor’s 500 Index, after China said it will get more involved in a solution for Europe’s sovereign debt crisis.

By Rita Nazareth – Wed Feb 15, 2012 9:31 AM Bloomberg

The S&P 500 added 0.2 percent to 1,353.23 at 9:31 a.m. New York time.
“The key feature is a much more hopeful prospect for the euro zone and a deal in the making for Greece,” said Mike Lenhoff, chief strategist at Brewin Dolphin Securities Ltd. in London. “That’s why the S&P 500 is a smidgen away from a high of nine months ago. And to some extent, it’s cheered on by the position China’s taken.”
Global equities rallied as China pledged to invest in Europe’s bailout funds and sustain its holdings of euro assets. Stock futures pared gains amid concern that officials in Europe and Greece were moving further apart as they try to negotiate a bailout to help the nation avoid default.
In the U.S., output at factories rose 0.7 percent in January after a revised 1.5 percent gain in December that was the largest in five years, figures from the Federal Reserve showed today in Washington. A 2.5 percent decline in utility output caused total industrial production to be little changed, less than forecast. Manufacturing in the New York region expanded in February at the fastest pace since June 2010, according to a separate report.
The S&P 500 yesterday closed about 1 percent away from its peak nine months ago of 1,363.61, which was the highest level since June 2008. The index has risen 7.4 percent this year as the U.S. economy showed signs of accelerating and European leaders moved closer to a solution on the region’s debt crisis.
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

Greek conservative takes bailout pledge to the wire

2012-02-15T09:59:00.001-05:00

(Reuters) - Greek conservative leader Antonis Samaras will send a letter of commitment to the terms of an EU/IMF bailout deal within the day, a party source said on Wednesday, with the country's bankruptcy rescue hanging in the balance.

By Dina Kyriakidou – ATHENS | Wed Feb 15, 2012 9:01 AM Reuters

Euro zone finance ministers had cancelled face-to-face talks on the 130-billion-euro ($170 billion) deal on Wednesday, saying they had yet to receive written pledges from Greek political party leaders to stick to punishing spending cuts, or clarification of all the savings.
"The letter will be dispatched within the day," a New Democracy party source told Reuters on condition of anonymity. Doubt has focused on Samaras, Greece's likely next prime minister and a strong critic of the austerity measures.
Ministers of the Eurogroup downgraded the Brussels meeting -- originally planned for 1700 GMT -- to a conference call.
Greece needs the funds by next month to avoid a messy bankruptcy.
The Eurogroup is next due to meet on Monday, but Greece has said it must initiate a debt swap deal with private sector bondholders by Friday if it is to meet a March 20 for 14.5 billion euros in debt repayments.
The Eurogroup had asked Greece to clarify how it would fill a 325-million-euro gap in budget cuts promised for 2012 and to persuade all party leaders to sign a commitment to implement austerity measures after an election expected in April.
"It's true we are asking the Greeks for some extremely painful sacrifices and I understand their anger, but Greece has made many errors in its past," French Foreign Minister Alain Juppe told France Info radio on Wednesday.
"It (the bailout) must be concluded because if Greece went bankrupt and left the euro zone, the chaos would be even worse for the Greek people and very bad news for the euro zone."
The cabinet of Prime Minister Lucas Papademos discussed the gap in the 3.3-billion-euro austerity program late into Tuesday evening. But there was no official clarification of where the savings would come from.
ACCELERATING CONTRACTION
Samaras has criticized the punishing new cuts in wages, pensions and jobs adopted by parliament early on Monday as rioters wrecked buildings across central Athens.
He voted for the bill, and expelled a quarter of his deputies who did not. But he says the cuts could plunge the country, already in its fifth year of recession, into an even bigger slump.
When parliament debated the austerity package on Sunday Samaras indicated that he would try to renegotiate the terms of the bailout, increasing doubt in the minds of European leaders.
"The timeline to 20 March is getting tighter, but Europe is still more likely than not to rescue Greece from disorderly default," Christian Schulz, senior economist at Berenberg bank, said in a note.
Some EU leaders have suggested Athens should leave the euro zone currency union.
The EU and IMF want Greece to account for every cent of budget cuts before they approve the rescue, which includes a bond swap, cutting the real value of private sector investors' bond holdings by some 70 percent.
But Greece's downward economic spiral has accelerated. Data on Tuesday showed that the economy shrank by seven percent in the fourth quarter of last year, even more than the five percent contraction of the third quarter.
Greece is well on its way to suffering one of the biggest slumps of modern history. Gross domestic product has contracted 16 percent from its peak and the austerity will make that worse.
Papademos has said that failure to back the bailout would consign Greece to economic catastrophe.
But with many Greeks suffering huge cuts in their living standards and young people burning and wrecking almost 100 Athens buildings in one night on Sunday, some people believe the catastrophe is already under way.
"On the current path - which is not sustainable in my view - we may very well see Greek GDP go down 25-30 percent, which would be historically unprecedented. It's a disastrous crisis for them," said Uri Dadush, at the Carnegie Endowment think tank in Washington.
That would put Greece in the same league as the United States, where the economy shrank 29 percent during the Great Depression.
($1 = 0.7616 euros)
(Additional reporting by Renee Maltezou in Athens, Alan Wheatley and Scott Barber in London, Aileen Wang in Beijing; Writing by matt Robinson)

Stocks, Commodities Rise After Greece Approves Austerity Plan for Bailout

2012-02-13T19:45:00.001-05:00

Global stocks rose, rebounding from the biggest loss of the year, and commodities climbed after Greek lawmakers approved austerity plans to secure rescue funds. Treasuries climbed, while the euro reversed early gains.

By Stephen Kirkland and Rita Nazareth - Feb 13, 2012 4:41 PM Bloomberg

The MSCI All-Country World Index (MXWD) added 0.8 percent at 4:30 p.m. in New York after slumping 1.2 percent on Feb. 10. The Standard & Poor’s 500 Index climbed 0.7 percent to 1,351.77. The euro was little changed at $1.3194, erasing a gain of as much as 0.7 percent. The S&P GSCI index increased 1 percent as 13 of 24 commodities advanced. Yields on 10-year Treasuries dropped one basis point to 1.98 percent.

The S&P 500 climbed to within 1 percent of a three-year high reached in April. Passage of the austerity bill puts the spotlight on a Feb. 15 meeting of euro-area finance ministers who must decide whether to approve the second bailout. Rioters protesting the measures battled police and set fire to buildings in downtown Athens. Italy met its target at an auction today, selling 12 billion euros ($16 billion) of bills as borrowing costs fell.
“We still think you should buy stocks,” Laszlo Birinyi, president of Birinyi Associates Inc. in Westport, Connecticut, said in a Bloomberg Television interview in London today. “It’s a continuation of the bull market and we’re encouraged by what we are seeing in Europe. I look at the markets, I find they are strong. There’s real buying going on. This is not short-covering or a temporary or transitory thing.”
Rally Resumed
The S&P 500 climbed for the fourth time in five days and rebounded from its first weekly loss of the year. The index, which is up 23 percent from last year’s low in October, trades for about 14 times its companies’ reported earnings and has been stuck below its five-decade average valuation of 16.4 since May 2010, the longest stretch since a 13-year span beginning in 1973, data compiled by Bloomberg show.
Financial, technology and industrial companies contributed the most to the advance in the S&P 500 as nine of 10 industry groups gained. Caterpillar Inc., United Technologies Corp. and Chevron Corp. rose more than 1 percent for the top gains in the Dow Jones Industrial Average, which increased 72.81 points to 12,874.04. Chesapeake Energy Corp. rose 2.4 percent after the natural-gas driller said it’s targeting as much as $12 billion in asset sales and joint ventures this year.
Apple Inc. (AAPL) advanced 1.9 percent to exceed $500 a share for the first time, as a two-week gain spurred by the iPhone maker’s first-quarter earnings report approached 20 percent.
‘Key Stocks’
“Apple is one of the key stocks in the whole market and it’s really driving things right now,” said Steve Kilcullen, head of flow derivatives sales for the Americas at Nomura Holdings Inc. in New York. “No one expected this move we’re seeing after they crushed earnings.”
More than 50 companies in the index are scheduled to report results in the coming week, data compiled by Bloomberg show, including Deere & Co. and Comcast Corp. Per-share profits have topped analyst estimates at 70 percent of the 331 companies that released results since Jan. 9, data compiled by Bloomberg show. Earnings-per-share have increased 3.9 percent for the group on 7 percent sales growth.
President Barack Obama sent Congress a $3.8 trillion budget plan today with stimulus spending and tax increases for the wealthiest Americans, spelling out election-year priorities that are certain to draw Republican opposition. Obama is proposing more money for jobs, highways and bridges, schools, student aid and manufacturing research as well as higher taxes for corporations, banks and oil, natural gas and coal companies.
The U.S. dollar weakened against 12 of 16 major peers and the Dollar Index, which tracks the U.S. currency against those of six trading partners, dropped 0.2 percent. The New Zealand dollar surged 0.9 percent against the greenback, while the Australian dollar advanced 0.6 percent.
European Stocks
The Stoxx Europe 600 Index rallied 0.7 percent as almost three stocks gained for every one that fell. Cable & Wireless Worldwide Plc (CW/)surged 45 percent after Vodafone Group Plc, the world’s largest mobile-phone company, said it’s in early stages of evaluating a potential offer for the company.
The extra yield investors demand to hold Italian 10-year bonds instead of benchmark German bunds fell three basis points to 367 basis points. Italy sold 365-day bills priced to yield 2.23 percent, down from 2.735 percent last month. Germany auctioned 3.01 billion euros of six-month debt.
The cost of insuring against default on European government bonds fell for the first time in four days. The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments declined 0.8 basis point to 328.
Oil Embargo
Oil in New York climbed 2.3 percent to a one-month high of $100.91 a barrel. Overseas Shipholding Group Inc., the largest U.S. crude-tanker owner, said on Feb. 10 that the pool in which its ships operate will no longer go to Iran after the European Union agreed to an oil embargo. Natural gas declined 1.9 percent for the biggest drop among 24 commodities in the S&P GSCI Index.
The MSCI Emerging Markets Index (MXEF) added 1 percent, following a 1.8 percent slide on Feb. 10, the biggest drop since November.
The Tel Aviv Stock Exchange’s benchmark TA-25 Index was down 0.1 percent after Israeli embassy personnel came under attack in India, leaving four people injured, and an attempt to blow up an Israeli car in Georgia was thwarted. Prime Minister Benjamin Netanyahu blamed both incidents on Iran.
Russia’s Micex Index (MICEX) jumped 2.3 percent as oil producers rose. Erste Group Bank AG helped lead the Czech PX Index (PX) 2 percent higher. Benchmark indexes Hungary, Poland, South Africa and Turkey gained at least 0.9 percent. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies listed in Hong Kong climbed 0.6 percent.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

Greek Bailout

2012-02-13T19:28:00.001-05:00

European finance chiefs get the second chance in a week to pull Greece back from the brink of collapse after lawmakers in Athens approved the austerity measures demanded for a financial lifeline.

Bloomberg | 02/12/2012

Greece “will be saved in one way or another,” German Finance Minister Wolfgang told newspaper Welt am Sonntag yesterday, though the country must “do its homework.”

Euro-area finance ministers will convene in Brussels on Feb. 15 for an extraordinary meeting called after they declined to ratify the 130 billion-euro ($172 billion) package in a special session on Feb. 9. Frustrated after two years of missed budget targets, the European authorities demanded Greek officials put their verbal commitments into law.

The Greek parliament passed the legislation in the early morning hours today as rioters battled police and set fire to buildings in downtown Athens. Still, Schaeuble told German lawmakers on Feb. 10 that Greece was set to miss deficit goals, suggesting that the measures may fall short.

“I’m really wondering now whether so much damage has been done that this marriage no longer can be rescued,” Erik Nielsen, chief global economist at UniCredit SpA (UCG) in London, wrote in a note to clients. He predicted that the measures would be approved and that Greece will be able to make a 14.5 billion- euro bond payment on March 20.

Euro Gains

Global stocks and the euro rose after the vote in Athens. The euro gained 0.5 percent to $1.3262 at 10:21 a.m. in Berlin, edging back up toward a two-month high against the U.S. dollar that it lost on Feb. 10 after the finance ministers’ decision.

European finance ministers ended their meeting last week with Luxembourg’s Jean-Claude Juncker saying Greece must turn budget cuts into law, flesh out 325 million euros in reductions and have major party leaders sign up to the program so they don’t retreat after elections as soon as April.

Chancellor Angela Merkel plans to ask German lawmakers to vote on the next bailout on Feb. 27, pending the terms for securing aid being met by Greece. Other euro governments including the Netherlands and Finland have yet to schedule a date for parliamentary votes.

Schaeuble told legislators that current plans would leave Greece’s debt as high as 136 percent of GDP by 2020, according to two people in the meeting. That compares with the 120 percent foreseen in the second bailout, down from about 160 percent last year. Schaeuble was briefing on estimates from the so-called troika of international creditor assessing Greece’s program.

Awaiting Troika

Germany, as the largest contributor to euro-area bailouts, wants to see the latest report on Greece’s record of implementing measures compiled by the troika of the European Commission, European Central Bank and International Monetary Fund before a majority can be mustered in parliament, Economy Minister Philipp Roesler said today on ARD television.

The Greek vote “was a necessary condition but implementation of these measures is what counts,” Roesler said. “We’re waiting for the troika report on what progress Greece has made.”

More than two years after the debt crisis emerged in Greece, European leaders face international pressure to do more to tackle the source of contagion that threatens to drag down the global economy. Group of 20 nations have signaled they won’t reach a consensus on crisis aid for Europe via the International Monetary Fund at a Feb. 24-26 meeting of G-20 finance chiefs until Europe increases the size of its firewall.

‘Critical Juncture’

The sovereign debt crisis is at a “critical juncture,” Chinese Foreign Ministry spokesperson Liu Weimin said at a briefing in Beijing today, urging Europe to move beyond contingency measures. The European Union needs to “take active measures to respond to the European debt issue,” Liu said.

In Athens yesterday, Greek Finance Minister Evangelos Venizelos yesterday urged lawmakers to “choose the bad to avoid the worst” after Greek party leaders over the weekend backed the measures to secure the 130 billion-euro package and avoid a disorderly default.

Before the final debate started, Prime Minister Lucas Papademos appealed to Greeks to support new measures, including a 22 percent reduction in the minimum wage, smaller pensions and immediate job cuts for as many as 15,000 state workers.

“We are looking the Greek people straight in the eye with full knowledge of our historical responsibility,” he said in a televised address. “The social costs that come with these measures are contained in comparison to the economic and social catastrophe that will follow if we don’t adopt them.”

Debt-Swap Deadline

Part of the rescue included a bond swap intended to slice Greece’s debt load. The swap for new 30-year bonds with an average coupon of as low as 3.6 percent would cut 100 billion euros off more than 200 billion euros of privately held debt. Venizelos said the country needs to make a formal offer to private bondholders for a debt swap by Feb. 17.

The ECB also came under pressure to extend relief. President Mario Draghi last week left open the possibility of passing up profit on Greek debt held by the central bank, though he rejected selling it to the European bailout fund at a loss.

Greece has stumbled over the last two years in meeting reform targets in return for aid, citing a deepening recession now set to worsen. Unemployment climbed to 20.9 percent in November, as industrial production falls.

Joachim Fels, chief economist at Morgan Stanley, in a note to clients repeated his assessment that policy makers shouldn’t rule out the “really, really bad scenario” of Greece leaving the monetary union.

“I’m more than unhappy with the political cliffhanger taking place in Greece over the past few weeks,” German Foreign Minister Guido Westerwelle told this week’s edition of Der Spiegel magazine.

To contact the reporter on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

How Does a Corrupt Fed & Treasury Spell Success?

2012-02-10T22:45:00.001-05:00

In short, V-I-X, they spell success by keeping the VIX beneath 20. To accomplish this, they must use whatever means necessary to coerce market participants’ behavior toward chasing equities ever higher. The end game is such that inevitably, everything will once again implode precisely because of this wretched game of ignorant subject and omnipotent master.

Below, I explain this interventionist fix in detail from a reprint penned on the topic back in May of 2010. At the time, after a brief respite to the 17.59 level, which marked the height of the first leg of the bailout rally, the authorities lost temporary control as the VIX surged to 34.54 and the Dow corrected to its July 2010 lows.

From there, for the next 11-months they worked toward fixing the VIX all the way down to the 14.75 level, which marked the May highs of 2011. Thwarted by resurgence in questions surrounding existential solvency in the Euro-Zone, they lost control again, this time the VIX rocketed to an extreme level of fear in of October of 2011 at 42.96. Following a five-month decline, dragging the Dow down to a low that tested the level of the first bailout crest, we now find the Fed flirting with success once again.
As 2011 ended, with operation twist and the inference of QE3 and beyond, Vix readings steadily fell toward 20, which aided the seemingly improbable continuation of the rally off the July 2011 lows despite the clear lack of any Euro-Zone resolution.
The big-bang rally, which then launched trade in 2012, reflected this newfound control (coercing participant risk) amid an otherwise intractable financial condition permeating the globe.
Then, on January 19, ignoring all fundamentals of debt and solvency, the market instead continued decoupling, directing its focus on the hopes of another tech-boom supported by the likes of Apple and the promise of a pending Facebook IPO.
Since January 19, the VIX had remained beneath the 20 level until today. Accompanying Friday’s VIX closing at 20.79 was a sudden renewed concern over Greece and a triple digit decline in the Dow.
Relative to the corrupt Fed and Treasury, the current paradox or fly in the ointment is for them to maintain a perpetual levitation in bond prices (low interest rates) or else the Fed’s high-risk balance sheet becomes vulnerable to implosion, and US debt obligations accelerate to more unfathomable levels than they already are.
The balance now rests in juggling this twisted levitation in bond prices (low interest rates) for an extended period with egregiously maligned efforts to keep the VIX beneath 20 in order to spur a further bubble in equities, all while punishing the majority of their baffled subjects otherwise known as the 99%.
To follow the unfolding drama of the cleansing good vs. the interventionist evil, stays tuned, and keep your eyes on the VIX.

The Fix in (the VIX)

By Joe Russo, Elliott Wave Technology | reprint from May, 2012

To measure the ongoing success or failure of massive QE "working groups" interventions, all one needs to keep an eye on is the VIX. Readings below 20 suggest, "The FIX is in", whereas readings above 20 diminish the mission control effort to reflate monopoly-saving bubbles.
In effort to maintain control of supreme monopolies, policy makers and monetary authorities have successfully fostered an egregiously false paradigm of ever-rising paper asset values in setting policy and enacting legislation that in effect "FIXES the VIX" to extraordinarily low levels. This fuels rampant speculation, and excessive risk taking without regard for useful gains in productivity and the real economy over the medium or long-term.
Contrarians have historically viewed traditional VIX readings below 20 as excessively bearish, although as highlighted in the green timeframes in the chart below, readings beneath 20 have been quite the “norm” in recent decades.
Conversely, prolonged and/or extremely high readings toward 40 indicate a high degree of anxiety and fear. Contrarian options traders regard such high readings as bullish.
Those orchestrating the so-called "great moderation" have succeeded in keeping the VIX beneath the 20 level for a whopping 48% of the time over the past 24-year time horizon. Doing so was complete MADNESS. The result of such folly clearly goes long way in explaining frequent occurrences of the sheer insanity displayed throughout the financial markets in recent years.
Flawed monetary policy amongst other legislative measures has provided accommodation for inordinate levels of complacency for extended periods, and has proven to engender more frequently acute bubbles and busts. In our view, this lunacy has reached a point of no return whereby rampant speculative bubbles are the only means by which authorities can hope to sustain themselves as viable.
In our view, past periods of the so-called great moderation was nothing more than a gargantuan failure of epic proportion. Since leadership continues to double down - going ALL-IN with an endless supply of manufactured fiat credit, there is no resolution to the paradox beyond continuing to foster such policies in perpetuity. Sadly, this is where we find ourselves today.
With the exception of a very brief respite in 1990-1991, following the crash of '87, the VIX remained excessively bearish from a contrarian perspective (beneath the 20-level) for nearly eight years. That is a long time to maintain contrarian disciplines. Harshly discredited, mainstream cast aside contrarians along with their traditional measures of fear and complacency in favor of the new (sub-20) bubble paradigm.
This set of policy-induced conditions provided for a rather unhealthy and excessive 320% gain in the Dow industrials over an extremely short nine-year period. Of course, that gain eventually blew up and totally evaporated in the crash of 2000-2002.
During the dot.com bust in 2000-2002, monetary authorities went into emergency accommodation mode once again. From 2003 - 2007 they enacted more policies inciting excessive risk-taking, which kept the VIX beneath the 20-level for another four solid years.
From 2003-2007, the Dow advanced amid an "echo bubble" racking up another straight 44 months of continual daily VIX readings below 20. This encore policy-induced echo-bubble busted even harder than the first amid the crash of 2008.
It appears the only way equity markets can continue to advance, is with the full faith and backing of an implied US Government/Federal Reserve backstop of infinite accommodation and bailout provisions.
Over the last 25-years, there have been only two episodes of outright existential panic. Each surpassed typical levels of fear beyond the historically accepted 40-level. Both panic readings registered prints north of 60. The first occurred amid the crash of '87, and the second most recently amid the crash of '08. The flash-crash mini-black swan event, which had more to do with a lack of buyers and liquidity rather than computer glitches, did not even come close to reaching these existential panic zone readings.
We began to pen this article back on May 3 when the VIX chart was appearing "traditionally bearish" but "new-false-paradigm-normal" (bullish). That is to say that the VIX had returned to producing daily closes beneath the bubble zone of safety - registering consistent daily closes beneath the 20-level. Alas, a new bubble mania had apparently begun to manifest amid the persistent V-Shape bailout rally off the March 2009 low.
We rendered the 3-May chart below as this article began to take shape. Before we could finish the piece, the flash-crash of 6-May had come and gone.

6-May 2010:
This mini-Black Swan event rocked the daily close on the VIX well north of its safe bubble-zone beneath 20, but nowhere near level s of fear let alone outright panic. In fact, the closing VIX on 6-May had barely reached a level of balance or equilibrium (30) between fear and complacency.

Traditionally high VIX readings (40+) usually occur after an extended or sharp decline while sentiment is still quite bearish. Historically, contrarians view high readings toward the 40 level as bullish. As such, it is reasonable to conclude that markets are in a balanced state of equilibrium at VIX readings close to the 30 level.
Conflicting signals between VIX readings and market levels can also yield sentiment clues for the short term. If the market declines sharply and VIX remains unchanged or decreases in value (towards complacency), it could indicate that the decline has further to go. Contrarians might take the view that there is still not enough bearishness or panic in the market to warrant a bottom. If the market advances sharply and VIX increases in value (towards panic), it could indicate that the advance has further to go. In such an instance, contrarians might take the view that there is not enough bullishness or complacency to warrant a top.
In the mind of mainstream financial media, fixed VIX readings beneath 20 (excessively bearish and overly complacent) are "the new (bubble-permitting) normal" that ignorant cheerleaders applaud. To pursue and lobby for such policies of accommodation that foster such readings is foolish, self-destructive, and ultimately suicidal.
In closing, the only way the perpetual denial-based extend and pretend policy wins is with sustained and extended periods of VIX readings beneath the 20-level. Sustained VIX readings above 20 shall exacerbate the already terminal problems occurring at mission control.

Until next time…

Trade Better / Invest Smarter

Elliott Wave, Technical Analysis, and Execution

2012-02-03T08:00:00.000-05:00

Forecasting Direction, Price, and Profit Targets

In every market and timeframe of interest, exceptional artistry in the proper interpretation of Elliott Waves in concert with an adept and impartial compliment of cold hard technical analysis provides an essential calm, clarity, and a sense of purpose that is essential in effectively laying out a roadmap, which can accurately forecast market direction, price, and specific profit targets.

Using two recent excerpts from the Near Term Outlook and one older excerpt from the Position Traders Perspective, we use the recent price action in Gold to provide an example of how we share such artistry.

Long-Term Forecasting

We have been tracking the price of Gold for decades. In October of 2010, we documented our body of work in a video entitled “IMPULSE-24kt Gold.” In it, we eluded to an outstanding upside price target we had in place for a price of $1495. One year later Gold subsequently met and surpassed that objective.
In early 2011, we presented the chart below to our Position Traders Perspective members. In it, we illustrated a minimum price and time target for our long-standing $1495 target for September of 2011. At the time, Gold had recently plummeted more than $90 an ounce from a high of $1431.90.
Beyond our minimum upside price target of $1495, we had also set a maximum time and target window for September 2011, which opened at $1463 and closed at $1935.46 on the high end.
On September 6, 2011, Gold reached its current historic print high at a price of $1922.60 – just $12.86 and less than 1% from our topside target for September.

Medium-Term Analysis

In just 14-sessions following its $1922.60 print-high in September of 2011, the Gold price collapsed, dropping $384 shedding nearly 20% of its value. By November, Gold had clawed its way back up toward the $1800 level, which we interpreted as a ‘b’ wave rally at minor degree, which strongly suggested there was still another shoe to drop on the downside.
In late November of 2011, our daily chart studies drew a line in the sand that outlined boundary to a sell-trigger harboring prospects for a $150 decline in the Gold price. On December 12 of last year, price breached beneath that boundary citing a price target for wave ‘c’ of (4) at a minimum downside price objective of $1550 per ounce.
Just 12-session later on December 29, from a price of $1700, Gold was slammed back down and tagged our $1550 target and then some, making its pivotal low at the $1522.60 level.

Short-Term Trading

Just 5-sessions after printing its pivotal $1522.60 low, we observed a rather telling bullish reaction. We immediately drew another line in the sand, this time a short-term buy-trigger, and presented it to our Near Term Outlook subscribers, which cited $113 dollars of upside upon a breakout above it.
Four days later on January 10, the line was crossed, electing long positions seeking an upside price target of $1742. Void of any trade drawdown by February 2, Gold hit our resting limit orders to exit and we collected $11,300 per contract as Gold sailed well beyond our $1742 target on the back of Bernanke’s recent inflationary reiterations.

Check Emotions at the door and Keep Your Eyes on the Charts

Sounds and looks easy enough, does it not. Well, as you probably already know, it is not as easy as it looks or sounds. You can stare at charts 24/7 and still have no solid clue as to what you are looking at or what it means.
With practice, you may improve over time but you may also find that your bias (where you emotionally want price to go) is heavily influencing what you are reading in the tealeaves through your newfound talents.
A consistent and reflexive discipline to detach and interpret price behavior impartially is essential - it’s what separates the men from the boys. It’s what we do here year in and year out. Come join us for a few sessions and see for yourself, the first three sessions are free. Your free three-day trial may take your trading game up a notch or two, and in the process, you might just conclude that it’s well worth your while to stick around and become a permanent member, you have nothing to lose.
Until next time,
Trade Better / Invest Smarter

Pilot Returns 1.28% in January

2012-02-02T02:41:00.001-05:00

For the month of January, the benchmark S&P 500 started 2012 with a big bang, up 4.48% for the month. This is a phenomenal one-month return considering that the average yearly return for the past ten years has been just 3.52%.

Compared to the benchmark, Pilot portfolios underperformed for the month. Our broad market Portfolio was up only 0.51%. Long-term and short-term positions in Gold were our best performers in this category, while short-term trading in S&P and Crude Oil futures were our worst performers for the month.

Our individual stock portfolio fared better with a gain of 2.05%. Holdings in Apple (AAPL) brought the greatest returns, while a monthly drawdown in open profits on short positions in Netflix (NFLX) was our worst performer.

We have highlighted our mark-to-market results for Netflix so that we might illuminate what such drawdowns might imply. Although our mark-to-market monthly drawdown in Netflix is a sizable one, our long-term short position in the issue remains open, and as of the close on February 2, sports a 21.62% 4-month gain since we put this short on from $156.69.
Maintaining a Marking to Market discipline is essential however; sometimes it renders performance as appearing much worse than it truly is. Yes, the monthly drawdown is a real loss however; taken from unrealized profits, the core position is still in the black by over 20%.

Take note that per the open positions displayed above, we have to a large extent mitigated the drawdown on core short positions held in Long-Term investment accounts and have taken full advantage of the bullish surge in Netflix via Mid-Level and Short-Term trading operations.

Click here for further insight as to our method of strategic diversification relative to positions in Netflix (NFLX).

Mark-to-Market Period Analysis
Mark-to-Market is another term for closing the books at certain time intervals for accurately reporting profit, loss, and performance. When we perform Mark-to-Market on a monthly basis, it means that though various positions may remain open, for periodical reporting purposes, we close the accounting books at the end of each month and thereby mark those positions to market.
Without a Mark-to-Market, it would be impossible to know where to allocate profit or losses within a given period.
For example, say that a trade that begins November 1 and closes January 31 makes 30%. The Mark-to-Market allocates the proper percentages to each month as opposed to the entire amount at the end of the three-month holding period.
History and development
The practice of mark-to-market as an accounting device first developed among traders on futures exchanges in the 20th century. It was not until the 1980’s that the practice spread to big banks and corporations far from the traditional exchange trading pits, and beginning in the 1990’s, mark-to-market accounting began to give rise to scandals.
To understand the original practice, consider that a futures trader, when taking a position, deposits money with the exchange, called a "margin.” This intends to protect the exchange against loss. At the end of every trading day, the contract is marked to its present market value.
If the trader is on the winning side of a deal, his contract has increased in value that day, and the exchange pays this profit into his account. On the other hand, if the market price of his contract has declined, the exchange charges his account that holds the deposited margin.
If the balance of these accounts falls below the deposit required to maintain the position, the trader must immediately pay additional margin into the account to maintain his position (a "margin call"). As an example, the Chicago Mercantile Exchange, taking the process one-step further, marks positions to market twice a day, at 10:00 am and 2:00 pm.

Until next time,

Trade Better / Invest Smarter

Glass Ceiling Markets Revealed

2012-01-27T14:46:00.002-05:00

Following up on our most recent post “Glass Ceiling Bullish or Bearish,” today, we unveil the two markets illustrated in that feature.

Below, we display the two phantom price charts presented for side-by-side comparison. We had mentioned that both were popular indices, and hinted that we had rendered one of the charts with monthly closes and the other using a chart of daily closes.

We consider one of these a potential analog to present conditions.

Analog   an’a’log (noun) U.S CHEMISTRY   A chemical with a similar structure to another but differing slightly in composition.

Though fascinating to discover, ponder, and observe, all analogs inevitably blow-up. Despite this truth, analog comparisons can be useful in observing how past price patterns resolved.
One can also compare what conditional similarities and foundational differences exist relative to the analog chart of the past and the doppelganger price pattern of the present.

Analog an’a’log (noun)

U.S CHEMISTRY

A chemical with a similar structure to another but differing slightly in composition.

Above, the chart on the left renders monthly closes of the Dow Jones Industrial Average. The Dow’s first encounter with its “glass ceiling” occurred in 1966, while its sixth such encounter took place at the tail end of 1982.
The chart below illustrates how the Dow resolved this pattern, not once looking back in the five years after it had finally shattered its glass ceiling on the sixth try in November of 1982.

Above, the small chart on the right renders daily closes of our modern-day doppelganger, the NASDAQ 100. The NASDAQ 100’s first encounter with its “glass ceiling” occurred on February 16, 2011, while its fifth and recent encounter took place on January 18, 2012.
The chart below illustrates the NASDAQ 100 currently amid its fifth attempt within the last twelve months at breaking out above, and shattering its overhead glass ceiling.
If the NASDAQ-100 is to produce an outcome with any semblance to the analog depicted in the 1966 – 1982 Dow, the prospective wave count, amplitude, and degrees of trend noted below, will jettison the NDX toward the 3300 level in no time flat.

Perhaps, insofar as its 83.4% two-year wipeout in 2002, which clearly broke its degree of trend correlations with the Dow, the NASDAQ may be about to embark upon another disconnect of sorts, one that may seek to realign its broken trend correlation with the Dow and S&P.
After all, another mini tech-boom that rockets the NDX away from the pack toward 3000, will merely amount to a common 61.8% retracement of its previous two-year wipeout in 2002, which we consider as the base terminal of Cycle Degree “A”.
Here are a few interesting facts about the NASDAQ disconnect during its unrelenting bubble-spike into 1999, its total destruction in 2002, and its stunning full recovery last year from the 2008 bear market lows.

In the bear market of 2002, the NASDAQ was completely wiped out (-83.4%) while the Dow lost only 38% of its value.
In 2007, the Dow reached a new historic all-time-high while the NASDAQ struggled with a paltry 38.2% retracement of its complete annihilation in 2002.
In 2008-09, the NDX held above its 2002 lows, while both the Dow and S&P breached well below their respective 2002 lows.
In 2011, the NDX retraced 100% of its 2008-09 declines, and trades higher today than at its peak in 2007. The same cannot be said for the Dow or the S&P 500.

Comparing Analogous Fundamental Conditions
So what was foundationally similar in the period spanning 1966 – 1983 for the Dow relative to the (twenty-times-condensed) doppelganger illustrated in the NASDAQ 100 in 2011?
For one thing, in the late 70’s and early 80’s, the world was enmeshed in a situation that is somewhat analogous to the conditions it faces today.

Tension in the Middle East
High Energy Prices
High Gold Prices
Runaway Inflation
Rising Interest Rates

Looking at the list above, it appears that we are only missing two crucial ingredients, runaway inflation, and rising interest rates.

Institutions like the Fed, ECB, World Bank, or the IMF, who are in positions of influence over these things; fancy themselves as having the necessary control over all aspects of what they are doing to address the world’s current problems; are they correct in their assumptions or are they wrong.

One can argue that global and financial challenges occurring between 1966 and 1982 were just as dire if not more so than they are at present.

Yet somehow, perhaps with the assistance of Nixon moving the world completely off any remnant of the Gold Standard, we managed to unleash a powerful and sustained inflation, which provided the miracle-elixir that enabled economies to breakthrough their seemingly insurmountable challenges.

Closing Thoughts

Will events unfold differently this time? Though the past and present may rhyme to some extent, in our view, one must consider two profound foundational differences.

The first is that the hyper-inflationary effects unleashed by Nixon in 1971 removing the last remaining anchor to Gold, (which provided some level of efficient free-market moderating effects on global trade) has expended its entire payload.

The second, is that the flawed and distorted application of a centrally planned Keynesian approach to managing global economies void of tangible anchors or restraints, has created unfathomable levels of debt from which there is no escape and no turning back.

The most likely reason that we are lacking runaway inflation and rising interest rates is due to global banking cartels going “all-in” and fighting the free-market with their perpetually flawed interventionist policies in attempt to once again avert, delay, or subdue the markets natural deflationary forces of unwinding and cleansing itself of excessive malinvestment.

Lastly, we leave you with another puzzle to play with. Given all that is known about flawed monetary policy and its effect on nominal values, from an Elliott Wave perspective, how would you label the S&P-500’s 2000, 2002, 2007, and 2009 market terminals relative to their respective degrees of trend.

Until next time,

Trade Better / Invest Smarter

Audit the Fed

2012-01-26T17:53:00.001-05:00

Dear Fellow American,

I ran for the U.S. Senate to end the federal government’s out-of-control spending and solve our debt crisis.

But that can't be done until we tackle the source of the problem: the unaccountable Federal Reserve.

As long as Ben Bernanke keeps printing money, the government will keep spending it.

You and I need to end that right now.

And just like during my campaign, the establishment is stacked against us. But look at what has already been accomplished with you in our corner!

Please take a few moments to read the message below from Campaign for Liberty Vice President Matt Hawes and support C4L in this vital effort to rein in the Federal Reserve.

For Liberty,

Senator Rand Paul

Dear Patriot,

Trillions of dollars have been stolen from U.S. taxpayers.

You and I, right now, are seeing the worst plundering of a country's wealth in the history of civilization, led by an out-of-control Federal Reserve.

But you and I together CAN put a stop to it all.

With your help (including completing the petition to your representative and senators) today, Campaign for Liberty is ready to take the battle straight to the heart of the problem - the Federal Reserve itself.

Last year, we came close to enacting a full Audit of the Fed.

This year, with more Fed opponents put in office and the economy still reeling, we have our best chance ever.

But you must act today.

Just think about the scope of the problem.

The massive, outrageous amount of dollars recently committed to the economic bailouts totals:

More than the socialist New Deal...

More than the entire Iraq debacle...

More than the 1980's savings and loan mess... More than the Korean War...
COMBINED.

Where will it all end?

It's time you and I put a stop to an out-of-control Federal Reserve.
And Ron Paul has a bill before Congress to do just that.

That's why it's vital you fill out your personal "Audit the Fed" petition in support of Congressman Paul's bill.

This bill, introduced in the House by Congressman Ron Paul and in the Senate by Senator Rand Paul, will finally pull the lid off the FED and expose its outrageous power grabs.

Now is the time to make sure your representative and senators feel the heat to support the Audit the Fed bill!

If you and I don't act today, I'm afraid this crisis will end with the economic ruin of every man, woman, and child in the United States.

Today, over 16 TRILLION in taxpayer dollars in bailouts and loans have been agreed to by Congress, the Bush and Obama Treasury Departments, and the out-of-control Fed.

So is it really any wonder more and more folks are starting to realize the Washington, D.C. establishment is hurtling us toward complete economic disaster?

Whether it's watching a phony "stimulus" package get rammed into law or seeing Congress pass a $700 BILLION bank "bailout," the American people are agitated and increasingly angry.

You saw the result of that anger in the Tea Parties last year and then in the November elections.

Statist, pro-Fed politicians were tossed out of office left and right!

That means it's a perfect time to unleash the pressure of MILLIONS of outraged Americans on the out-of-control Fed today!

So please agree to complete your petition urging your Representative and Senators to cosponsor and seek roll call votes on Audit the Fed - the first step toward ENDING THE FEDERAL RESERVE once and for all!

As I know you're aware, the Federal Reserve is shrouded in secrecy.
Its meetings are off-limits to the public.

Its inner-workings are off-limits to the public.

Fed leaders know coming clean with Congress and the American people on how they create money out of thin air would result in an anti-Fed firestorm.

So can you imagine the impact of a full-scale audit?

You and I will finally be able to show the American people that the Federal Reserve System leads to:

*** Constant economic crises - the housing crisis and the resulting chaos is just one example of an economic bubble created by centrally-planned interest rates and money manipulation;
*** The destruction of the middle class - as fuel, food, housing, medical care and education costs soar, everyone who is NOT on the government dole is forced to make do with less as the value of their money slowly decreases;
*** Currency destruction - history shows us that riots, violence, and full-scale police states can result when people finally realize fiat money isn't worth the paper it's printed on and REFUSE to accept it.
And unless you and I do end the madness in Washington, D.C., we may be closer than we'd like to think to learning that history lesson firsthand, right here on the streets of our towns and cities.
That's why your commitment to helping pass the Audit the Fed Bill - and helping Campaign for Liberty fight this battle - is so vital.

Just a few years ago, there was no chance of passing any legislation like Ron Paul's Audit the Fed Bill.

So I guess there has been one "CHANGE."

You see, with the piling up of trillions of dollars in out of control "bailouts" of Wall Street and international bankers, even many politicians in Washington, D.C. want to show you they're "being responsible."

What better way for Congress to do this than by auditing the Federal Reserve to account for the trillions stolen from U.S. taxpayers?

More and more Congressmen are already feeling the pressure and are signing up to support this bill.

I've even received word Audit the Fed could move in the coming weeks in the U.S. House.
When that happens, you and I must be ready to fight.

There will be many battles you and I must wage over the coming months to take back our country.

But this one is set to rage in Congress in just a few short weeks.

And, it's both a bill we CAN pass and one that is vital to exposing the massive corruption and downright evil at the Federal Reserve.

You see, after regulating, taxing, spending, borrowing, and printing us into what looks like the worst recession in decades, establishment politicians and power brokers are assuring us they're working hard to "fix" our economic woes.

What is their solution?

You guessed it.

More of the same!

I'm convinced that if you and others will insist on Congress passing Audit the Fed, the votes will be there.

Then the question is whether Barack Obama will sign it.

But here's the thing: even if the Audit the Fed bill is vetoed by Obama, just forcing him to do it is a win/win situation.

Can you imagine how it will look in the 2012 election when you and I tell the American people President Obama refused to even LOOK for the trillions of dollars stolen from the taxpayers?

Now, we just need to show Congress the American people demand action on Audit the Fed.

Here's how we plan to do that.

First, we're already busy contacting up to seven million activists nationwide through mail, phones, and email to generate petitions to the U.S. Congress demanding action on "Audit the Fed".

But that's just the beginning.

We'll work the talk radio stations and grant local media interviews to further turn up the pressure on Congress.

And a few days before the vote, if we have the resources, we'd also like to run hard-hitting targeted radio, TV, and newspaper ads.

This entire program is designed to send this one, CLEAR message to Congress - Any politician who votes against the Federal Reserve Audit should look for another job.

But such a massive effort won't be easy - or cheap.

So, in addition to your signed petitions, I also hope you'll agree to chip in a contribution of $10 to Campaign for Liberty.

If we don't take action, the America we see in just a few years could look far worse than even the one we see today.

Can I count on you to join the fight to AUDIT THE FED by filling out the Petition and chipping in a quick $10 contribution right now?

In Liberty,
Liberty" src="http://www.chooseliberty.org/images/Matt_Hawes_blue_signature2.jpg">
Matt Hawes
Vice President

P.S. Please complete your petition DEMANDING your Representative and Senators cosponsor and seek roll call votes on the Audit the Fed Bill TODAY!
With federal spending at record levels, and TRILLIONS of new dollars flying off the printing presses, it's never been more important the Federal Reserve's abuses are exposed to the American people once and for all.
So along with your signed petition, please chip in a contribution of $10, $25 or even $50, to Campaign for Liberty TODAY!

Glass Ceiling Bullish or Bearish?

2012-01-24T02:19:00.010-05:00

We have all heard of the proverbial “glass ceiling” in the business world where one attains a certain level of achievement and is unable to advance any further.

Well, the same thing happens to share values from time-to-time. They reach a certain price level, and no matter how hard they try, they are simply unable to shatter the glass ceiling overhead.

Price charts clearly reflect such episodes and offer some analog-based clues as to what may manifest following these prolonged battles at overhead resistance.

We provide two such examples below. One is an analog from the distant past, and the other is playing out in real time. Both are major equity indices. Can you recognize either of these popular equity indices?

Does either of these look familiar? What indices are they? Which is the old, and which is the new?

The first index on top sports 6-tests at the glass ceiling of resistance, while the second index shows five attempts at breaking through the resistance barrier.
If you think you have identified either of these beauties, which is the chart of the distant past and what was its outcome? Which is the chart currently unfolding in real time? What are the general time-periods of both the old and the new?
Well, that’s all for now. Don’t worry, we won’t’ leave you hanging for long. In the next few days, we will provide a follow up piece with all of the answers along with some forward-looking analysis as well.
Do reply with a post or send us an email with your best guesses.
What do you say we make things a bit more interesting?
How about:

The first thirteen non-subscribers (all of our current subscribers already know the answers) who get the two markets correct will get a complimentary issue of our Near Term Outlook.

The first eight (non-subscribers) who get the two markets and analog outcome correct will get a complimentary issue of EWT’s Charting Bundle.

Finally, the first five (non-subscribers) to also provide the general time-periods for each of the charts, will get a complimentary issue of the Chart-Cast Pilot.
We will give you one last hint. One of the indices is a chart of daily closing prices, while we have rendered the other using a chart of monthly closes.
Now post/mail in your answers and we will report all winners with the follow-up feature and analysis by the weekend.
Until then,
Trade Better/Invest Smarter
Joe Russo
Publisher and Chief Market Analyst
Elliott Wave Technology

Lifetime Pilot Performance: 1081.06%

2012-01-23T00:33:00.001-05:00

Here we provide the big-picture, long-term performance stats for the Chart-Cast Pilot portfolios. Our spreadsheet breaks down returns by market, account-type, and trading/investment strategy.

Long-term investment account statistics go back as far as 1973, while Mid-Level and Short-Term trading stats reflect performance from 2007 to date.

This historical account provides testament to the efficacy, benefits, and rewards, that accompany adherence to proven trading and…

…investment strategies, which have delivered robust returns over various market cycles.

Incorporating three distinct accounts for each market/stock traded provides for a level of strategic diversification that is virtually immune to periods of high correlation such as we have experienced over the past several years.

We have broken down each broad market and individual stock held within our portfolios by engagement at three distinct timeframes, and we have listed each under the “Account Type” column.
The year in parenthesis following LT (long-term) Investment Accounts denotes the year in which our strategy engaged that market or stock.

For long-term engagement in the broad market equity indices, under the “#Contracts/Shares” column, we represent an initial 10K exposure to these indices as the indices themselves are not actual tradables.
For long-term engagement in Gold, Crude Oil, and the Long Bond, we recorded performance basis a single continuous futures contract.
Mid-Level and Short-Term trading accounts contain the symbol for the actual tradable under the #Contracts/Shares column.
The “Profit-Factor” column is a TradeStation generated measure of profitability. The Profit-Factor reflects the amount made relative to the amount lost. By definition, a value greater than one means that the total number of trades recorded contain a positive net profit. The higher the profit factor the greater the level of profitability.
Generally, long-term investment accounts will trade much less frequently. Mid-Level trading accounts focus engagement on the intermediate term timeframe and as a result, they typically generate a greater number of trades vs. longer-term core investment positions. Short-term trading accounts focus engagement on the short and near term. These accounts generate the greatest number of trades.
The “%Profitable” column displays the percentage of trades that were profitable amongst those recorded for each strategy. Note that high win rates are not typical for robust strategies that perform well over various market cycles. Robust profits are quite common amid strategies that sport win rates of 30% and less.

2011 Pilot Performance: 20.73%

2012-01-22T11:16:00.000-05:00

No doubt 2011 was a challenging year for traders and investors. The Dow Jones industrials finished the year sporting a 5.5% gain. The NASDAQ Composite Index closed down about 1.8%. And, amazingly, the Standard & Poor's 500 Index ended almost exactly flat.

To be precise, the change was four one-hundredths of a point: 1,257.60 compared with 1,257.64 in 2010. The percentage change was 0.0032% and is nearly the index's smallest change -- positively or negatively -- ever.

That the changes for the major averages would be so small may be hard to believe in a year that saw the major averages rise more than 8% by April 29 and then fall 17% or more from those levels by early October. Below is a list of broad asset returns for 2011.

Combined, the 20 asset classes benchmarked above returned a total loss of (–2.72%) for 2011. In contrast, our broad market portfolio (shown below) had a positive 2011 return of 3.12%, while our individual stock portfolio returned 38.34% for a combined average total return of 20.73%.

PORTFOLIO RETURNS: CHART-CAST PILOT

The Pilots Take On Netflix Before it Crashed

2011-12-08T23:07:00.034-05:00

Back on September 15 of 2011, we provided Chart-Cast Pilot members with a special report on Strategic Diversification. We used our three levels of engagement in Netflix to provide that presentation.

Though hindsight always provides 20/20 vision, there was no such hindsight assistance in navigating the precipitous collapse that was to occur in Netflix back on September 15, 2011.

The chart below reflects the wreckage three months later.

Chart-Cast Pilot

2011-12-07T22:55:00.026-05:00

Today, in short-term trading accounts, we lifted long positions with a $2270 profit per contract and reversed short nearby Oil futures at 100.55.

Outside the purview of our trading strategy, we have also noted a short-term downside price target at $98 even vs. the 102.44 pivot high.

Nearby trendline support is noted in blue, while the rising reddish trendline defends the $98 target, which would return roughly 2.4 points or $2,400 per single contract traded. The balance of today's Pilot is available in PDF format here.

The Near Term Outlook

2011-12-06T21:52:00.014-05:00

No doubt the jury remains out relative to short, medium, and long-term headline risk associated with the Global Debt Crises.

The bill is now overdue and the collectors are banging at their door for payment. They are putting in a call to their Uncle Sam to see if he might be able to buy them more time.

A weakening US dollar will suggest they are indeed buying time, while a strengthening US dollar i.e flight to safety, suggests things are not turning out quite as expected.

If the medium-term uptrend is to eventually deliver a move north of 80, and if trendline support fails over the short-term, another modest leg down toward a truncated minute degree -c- wave may terminate the minor degree *b* near the next trendline of support, and launch a powerful leg up in minor *c* as noted. The balance of today's Near Term Outlook is available in PDF format here.

2012-2021: Global Spring, the Time Is Nigh

2011-11-11T09:34:00.023-05:00

Following the absolute failure and systemic insolvency that shocked global economies in 2008-2009, people of The United States , and the World at large, missed an extraordinary opportunity to champion a revolutionary shift toward liberating global citizenry from the corrupt tyrannical grip of the evil twins who have implicit mastery and command over a sacred trinity of deceit, illusion, and destruction.

Breeding Ground of Corruption

The evil twins to which we refer are the egregiously flawed Democratic/Communist/Socialist Governments of the G-20, in collusion with the Global Banking Cartels to which they grant coordinated fiat license to commit continuous legal fraud against the masses.

Governments around the world do this by partnering implicitly with, and granting their global banking cartels the extraordinary privilege of creating money and credit ex nihilo, or stated more clearly, by counterfeiting, which is fraudulent and illegal by the most historically common and natural rules of law known to man.

This irresistible temptation to cheat easily through the fraudulent creation of illusionary wealth from nothing has an insidious effect. Such misappropriation distorts the behavior, planning, investment, and production cycles of all agents and actors involved in every aspect of the economic and political process.

It is clear, that the United States are no longer plural, but rather a singular United State of America, part socialist, part fascist, and on the surface, free , as advertised. We trust that based upon its heavy-handed involvement in national and global economies, that all impartial observers must logically conclude that America conducts itself more like a centralized power of economically planned socialism, which, as Hayek argued, is a system doomed to fail by design. Hayek also argued that socialism is a common pathway that if left unchecked, has in the past, turned democratic nations into totalitarian regimes.

The opaque coup of the infant United States was vexing, incomprehensible, and brilliant from its founding. Masked under the flag of freedom, beyond its righteous surface, it has risen as everything but the free democratic republic it espouses itself to be. If not mended with swift caution, America will inevitably fall along with the balance of socialist/communist societies.

From its very beginnings, led principally by Hamilton, varied agents within the newly formed republic persistently lobbied and ultimately succeeded in positioning the young government in such a way as to allow it to attain a supreme privilege of omnipotent power that stood far above of the rule of law.

Brilliantly worded by the most crafty of elite and well-read scholars, clearly, the constitution contained loopholes and future amendments from which agents in support of an all powerful centralized government could eventually unpack, and thus gain the imposing capacity to empower themselves with extraordinary powers and permanent totalitarian control of the states and its citizens. Under the cloak of freedom, that is exactly what they did, and they did it well.

As evidenced by history, which leads us to the present, the masterful cloaking device is beginning to fade, and America is no longer able to connect-the-dots to reconcile its actions as the free democratic republic it claims itself to be.

If held to the equal rule of law, independently, the business of government and banking are indispensible utilities within free societies. Placed together in collusion however, they become the most sinister and destructive forces on the face of the Earth.

Such collusion, and the seemingly benign but subversive entitlement it imparts to the actors and agents nearest its core, is the insidious undetectable cancer that continues to metastasize across the globe with increasing speed.

Unless we achieve full and complete success in parting these evil twins of persistent decay, and legislate that they adhere like the rest of us, to the common natural laws established throughout history, it will be our grim destiny to further enrich and empower them, and forever remain their servants at our own expense and dignity.

By now, it is self-evident that a two party American system of government within a society that falsely perceives itself free, is unable to administer effective democratic governance precisely because it attempts to do so within the confines of a socialist-totalitarian yet democratic regime.

Essentially, we are assigning our elected officials with an impossible task. This clearly explains why the division of ideology grows exponentially in tandem with the growth of the socialist/totalitarian state, which thus far, has successfully disguised itself as free democratic republic.

Is it any wonder why Americans are becoming exceedingly more indignant toward government, and in growing numbers, are demanding to know why our American system of government does not at all appear to reflect any semblance of what the constitution has outlined, the very grounds upon which Americans base their pride and patriotism.

Missing the momentous opportunity in 2009, we sheepishly stood by quietly in fear as the evil twins savagely plundered its citizenry of wealth and treasure, taking it one-step closer to the inevitable brink of complete and utter demise.

Let us not repeat such errors at the turn of the next crisis, which shall upon its certain arrival, will again elevate great fears amongst the masses. At the next crises, our masters will try to shake us once more, and again coerce us to acquiesce to the wisdom of those responsible for its cause, and bow to them as their servants, in carrying all of the generational burdens, costs, and liabilities associated with their recurrent failures.

For the love of your life, parents, children and grandchildren, under any circumstance, do not allow such pillage and plunder to happen ever again.

Instead, upon the next arrival of crisis, we shall be justified and obligated to exercise the lawful right to remove all agents comprising the corrupt elements of the failing republic, and command its restoration to comply explicitly, in accordance and the spirit that is galvanized in the original frameworks residing within the documents of our founding.

We must do so peacefully, with expedient caution, and in accordance with the fundamental concepts and intent of the founding documents, which is what the majority of Americans perceive to be the unshakable foundation upon which American values and ideals solidly rest, the ideals of law, freedom, and liberty, for which they have always been prepared to die.

TAMING THE EVIL TWINS

Though it may be impossible to rid a system of corruption entirely, we must nonetheless endeavor to do so leaving no stone unturned. Naturally, such a large process of transition will take time, and we must remain vigilant until an even rule of law once again prevails blindly across the land, and eventually across the entire globe.

Beyond the opinions and beliefs stated above, we are not qualified to pen such a manifesto. Instead, courtesy of Mr.Jesús Huerta de Soto, we shall supply and share the tenets of a critical starting point from which to consider.

A Manifesto for Revolution, Justice, Restoration, and a New Beginning :

The first and foremost priority is to stop the bleeding by stripping the evil twins of their insidious and unlawful powers. Once we stop the bleeding and return to a blind and impartial rule of law, we can then surmount the balance of corruption, which as byproducts of the failed system, shall lay in wait for removal or fundamental restoration.

De Soto s manifesto contains the essential initial framework for a rational transition that will strip the twins of the current privileged system of the government-banking cartel monopoly, to one where the rule of law is uniformly reestablished, eventually separating banking and government completely in order to avoid the greatest temptation known to humankind, creating money (ex nihilo) from nothing.

Money, Bank Credit, and Economic Cycles:

De Soto s brilliant Manifesto is a comprehensive treatment of the root causes of economic crisis and a failsafe blueprint for how to improve matters through a return to sound legal principle:

Can the market fully manage the money and banking sector? In this major book, Jesús Huerta de Soto argues that the market can manage the money and banking sector, that it can again, without inflation, without business cycles, and without the economic instability that has characterized the age of government control.

A complete comprehensive treatise on economic theory, the book is sweeping, revolutionary, and devastating not only the most extended elucidation of Austrian business cycle theory to ever appear in print but also a decisive vindication of the Misesian-Rothbardian perspective on money, banking, and the law.

Its five main contributions:

A wholesale reconstruction of the legal framework for money and banking, from the ancient world to modern times

An application of law-and-economics logic to banking that links microeconomic analysis to macroeconomic phenomena

A comprehensive critique of fractional-reserve banking from the point of view of history, theory, and policy

An application of the Austrian critique of socialism to central banking

The most comprehensive look at banking enterprise from the point of view of market-based entrepreneurship

De Soto also provides a defense of the Austrian perspective on business cycles against every other theory, defends the 100% reserve perspective from the point of view of Roman and British law, takes on the most important objections to full reserve theory, and presents a full policy program for radical reform.

Are you a true revolutionary committed to fighting for freedom, liberty, and sustainable solutions for effective change?

Are you dead serious about educating yourself on the history, politics, economics, laws, doctrines, and theories behind these critical matters?

If you are, then you owe it to yourself and your country to carefully study and absorb De Soto s superbly crafted treatise cover-to-cover.

Trade Better/Invest Smarter
Joe Russo
Publisher and Chief Market Strategist
Elliott Wave Technology

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Elliott Wave Technology provides a suite of Winning Solutions designed to assist those who wish to trade better and invest smarter based upon the practice and deployment of proven trading strategies in concert with expert and unbiased chart analysis.

The Road To Success

2011-11-04T01:28:00.010-04:00

Proactive trading and investing is one of the very few endeavors in life where one must learn to expect regular and frequent failures as a routine matter of course toward achieving ongoing success.

As such, it stands to reason that prior to engaging, one must come to terms with, and embrace these expected failures as though they are an annoying but essential lifelong partner whom without one could not otherwise succeed.

Though winnings far outpace losses, riddled with failure is the Road to Success. It is a tough pill to swallow, but it is what it is, and there is simply no getting around it. More likely than not, this is precisely why 90% of all who try their hand at the business of trading abandon it at the first signs of challenge and adversity.

The Thrill of Victory

There is no greater thrill than successfully assuming the risks and responsibilities of directing your own trading and investment capital. Over the long haul however, climbing this particular ladder of success requires a great deal of planning and perseverance.

The Right Stuff

Apart from a huge burst of luck straight out of the gate, (which can frankly do more harm than good) what does it take to make it as a trader? The following is a list of essential prerequisites to consider prior to risking your discretionary speculative capital:

Do you have a livable risk-free income stream?
Do you have adequate insurance coverage?
Do you have little or no debt?
Do you own 10-20% in physical Gold/Silver as a percentage of your entire net worth?
Do you have cash reserves of at least 6-months of living expenses on hand?
Do you have at least $10,000-$20,000 in speculative investment capital that you can afford to lose?
Do you have a proven edge or strategy that will guide your trading and investment decisions?
Do you have the will and discipline to succeed in the face of regular and frequent losses?
Do you know how to manage your speculative capital to avoid the risk of ruin?

If you can answer yes to most of the above, you can then begin to give serious consideration in joining the elite-few who comprise the 10% of market participants that continually prevail while the majority fails.

Calculating One' s Risk of Ruin

The best risk of ruin calculator we have found thus far is located here. Since we have developed a proven trading edge with historical performance stats that go back a minimum of 3-years, it is possible for us to quantify the probability of ruin for an applied strategy within a given market and timeframe with a reliable degree of accuracy.

Nothing Risked, Nothing Gained

For example, after 719 trades (periods) over the last 5-years, including $9000 in slippage and $3400 in commissions, our short-term E-mini trading strategy produced an average monthly return of $400, which amounts to more than $30,000 in total net profits throughout the entire period.

What is the risk of ruin for this strategy? If one begins with trading capital of $20,000, within any given month there is a 24.31% chance of ruin associated with trading this particular strategy. In this case, risk of ruin is reached upon a 75% loss of initial capital or (-$15,000), which would render one s account dormant due to not having enough margin money remaining to put on another trade. Below is the equity curve associated with this particular short-term E-mini trading strategy.

The Magic of Success

Naturally, as one s stake would have grown from $20,000 to over $50,000 over the period, so long as one s trade size remained the same, one s risk of ruin drops to a paltry 0.08%. One can find more excellent money management and position sizing tips here.

Shark Infested Waters

In order to survive amid the unknown waterways of trading and investing, it is essential that one plot and follow a proven strategic course to grant oneself the highest probabilities of long-term success. Acquiring reliable navigation tools to tilt the odds in one s favor is paramount.

The Thrill of Victory and the Agony of Defeat

We span the markets to bring you a constant variety of trades, the thrills of victory, (and yes) the agony of defeat. The ultimate human drama is assuming a calculated risk for unknown rewards. This is OUR Wide World of Strategic Trading and Investment Success!

Beneath the nostalgic Wide World of Sports introduction from which the previous paragraph was constructed, one may peruse our short-term trading performance for the month of October.

For October, the portfolio review of our short-term trading strategies unequivocally embodies the thrill of victory.

The monthly performance profile intends to exemplify a random statistical sample of profit opportunities that one might expect to gain through acquiring access to the PILOT within a given month of daily operations.

Trade Better/Invest Smarter

Joe Russo Publisher and Chief Market Strategist

Elliott Wave Technology

Elliott Wave Technology provides a suite of Winning Solutions designed to assist those who wish to trade better and invest smarter based upon the practice and deployment of proven trading strategies in concert with expert and unbiased chart analysis.

Technical Tipping Point Near at Hand

2011-10-24T01:10:00.006-04:00

In September, following five months of impulsive decline from its May high, the Dow has reversed abruptly, rallying incessantly after a fleeting 20% roller coaster drop from its secondary QE-2 bailout crest. The Dow is currently on path toward violently reclaiming more than 60% of these recent losses within the extremely short span of 14-sessions.

The price action along with all of its key participants and influencers should be keenly aware that equity markets are nearing a potential tipping point similar to that following the like rally in 2008, which occurred just prior to the implosion and widespread recognition of outright systemic insolvency, which has yet to be resolved.

The Elliott wave rendition and implied bearish outcome below assumes that the recent history of 2008-2009 is drawing toward an imminent tipping point of repeating itself in the not too distant future. Do be advised that there are various alternate paths associated with the unwinding of longer-term bearish forecasts.

At present there appears to be two realities from which the financial sphere struggles to define daily values. The status-quo rendition of imposed reality courtesy of the monopolistic interventions and kick-the-can short-term band-aid fixes for long-term problems vs. the underlying truths of various mathematical impossibilities caused by blatant fascist interference in markets and the monopolistic micromanagement thereof, which deceitfully aligns itself under the protective guise of free market capitalism.

The first rendition of reality is associated with so-called Cramer-laden fundamentals of company earnings, corporate balance sheets, etc. If you trust and believe the official numbers reported by statist sovereign governments and the bailout-modified accounting standards of various corporations, then trade that version of reality, which would be long-term bullish with a stop loss for good measure beneath the September lows.

The latter and intentionally suppressed rendition of reality is associated with massive unsustainable debts, deficits, and the flawed paradigm of global trade, which is based upon the artificial currency arbitrage of one nations skilled labor and make-believe money vs. another' s. Such corrupt and imbalanced trade is by no means free, and benefits only those relative few who are in a position to profit from global fiat currency arbitrage. As we draw closer and closer to the end of this corrupt charade of supposedly free global trade, we are suddenly beginning to see the outline of its endgame effects taking shape. In this latter version of reality, nothing is more revealing or uglier than the underlying truth.

If you embrace the latter, then short the indices with buy-stops to cover above the May highs.

Trade Better/Invest Smarter
Joe Russo
Publisher and Chief Market Strategist
Elliott Wave Technology

Elliott Wave Technology provides a suite of Winning Solutions designed to assist those who wish to trade better and invest smarter based upon the practice and deployment of proven trading strategies in concert with expert and unbiased chart analysis.

WHIPSAW: The Song Remains the Same

2011-10-01T09:04:00.027-04:00

What Does Whipsaw Mean?
Simply stated, a whipsaw market condition is present when a security's price heads in one direction then reverses sharply and abruptly in the opposite direction.

Derived from the push and pull action used by lumberjacks to cut wood with a type of saw with the same name, the term has become synonymous with large fast-moving head-fake-type swings in the financial markets.

Whipsaw is an ever-present challenge in the trading and investment arena. According to one of Jack Schwagers original Market Wizards Ed Seykota, the only way to avoid whipsaw losses is stop trading and investing. Disengagement may work for a time however; I do not believe that Seykota intended for people to interpret his quote as a serious solution.

Seykota, best known for his extremely successful trend-based strategies, concedes that each is subject to whipsaw drawdowns and losses. In addition to being one of the best-in-class trading systems developers, Seykota has musical talents and a rather keen sense of humor as well.

The video below is of Ed Seykota and his blue grass band performing The Whip-Saw Song. Embedded within the artistic levity are numerous pearls of wisdom. Do enjoy.

If you want to get insight and exposure to successful trend trading strategies like those used by Ed Seykota, subscribe to the PILOT today.

RELATED NEWS
2008 Financial Crisis Causes and Consequences

John Allison, Retired Chairman and CEO, BB&T Corporation recently spoke to the Harvard Law School Tea Party about the causes and consequences of the 2008 financial crisis.

The hour and a half C-Span coverage of the event is well worth the time. Allison' s talk clarifies succinctly all that is going on in the global financial sphere and its impact on regional economies around the world.

Apart from the bounty of illuminating financial and political aspects of Allison' s talk, the one thing that also struck a chord were his thoughts and philosophy regarding individuals sense of purpose and self-esteem relative to their chosen career paths.

Deriving passion from ones chosen field of expertise aligned with a mission to assist others and make the world a better place is the underlying theme of Allison s philosophy.

After soaking in all of the shared wisdom, I asked myself three things:

Am I passionate about my work?
Am I assisting others?
Am I attempting to make the world a better place?

Though there is always room for improvement on every front, to my delight, I was able to answer yes to each of these three essential questions.

Nothing Risked-Nothing Gained

There is no way to avoid regular bouts of occasional and sometimes extended periods of whipsaw.

In a choppy market riddled with whipsaw, the only strategy that may deliver alpha is a successful counter-trend strategy however; they too are subject to their own brand of whipsaw.

Trade Better/Invest Smarter
Joe Russo aka ~ the PILOT
Publisher and Chief Tactical Strategist
Elliott Wave Technology

Elliott Wave Technology provides a suite of Winning Solutions designed to assist those who wish to trade better and invest smarter based upon the practice and deployment of proven trading strategies in concert with expert and unbiased chart analysis.

23.27% Return for September 2011

2011-09-30T00:53:00.015-04:00

S&P futures opened the month of September at 1211.75 and closed the month at 1125.75, losing 86-pts and shedding (-7.09%) of its value.

In contrast, the following proprietary counter-trend trading strategy delivered 282-pts or +23.27% in S&P profits, which is an alpha of 30.36 meaning that it beat the stalled benchmark by more than 30%.

September has been a horrendous month for all types of investment and trading disciplines regardless of timeframe. In fact, one can argue that the entire year of 2011 has provided a great deal of challenge for nearly all investment classes.

Why is this happening? It is happening because there remains a compelling list of unresolved structural flaws still weighing down upon the global financial sphere.

If you want to gain insight and exposure to disciplined trading strategies like this one, subscribe to the PILOT today.

Bucking the Volatile Whipsaw Trends in September

About the only place to have hidden in September was amid a strategy that deployed a counter-trend tactical approach to the manic vicissitudes of the S&P 500. The chart below reflects the $14,140 in monthly profit achieved counter-trading a single contract against the bipolar price action in the S&P futures throughout the month of September.

Documented below is the list of trades associated with the outstanding results this short-term counter-trend trading strategy achieved in the month of September:

In the month of September, the strategy executed 18 trades. Of the 18, nine were winners and nine were losers equating to a 50% win ratio. For the month, the nine winners brought in $14,680 in profits and the nine losers gave back total of (-$1,937.50) in losses. The average winning trade produced a profit of $1631, while the average losing trade produced a loss of only (-$215).

Inputs, Results, and Historical Statistics

The applied short-term counter-trend strategy has been in place and executing trades since January 3, 2007. We used US $40,000 to capitalize this short-term trading account. Also included are commissions at $2.35 per side, slippage of $6.25 per trade, and an assumed risk-free alternative return of 2%.

Since 2007, the graph and the mark-to-market analysis table below illustrate this strategies average monthly profit/loss for each seasonal month of the year.

The last mark-to-market period highlighted in the table below is not an average listing but rather the ACTUAL results achieved in the month of September.

Conclusion:

If you want to gain insight and exposure to disciplined trading strategies like this one, subscribe to the PILOT today.

dis~ci~pline/

Noun:

Training to act in accordance with rules; drill:militarydiscipline.
Activity, exercise, or a regimen that develops or improves a skill; training:
Punishment inflicted by way of correction and training
The rigor or training effect of experience and adversity
A set or system of rules and regulations
Activity, exercise, or a regimen that develops or improves a skill; training:
A branch of instruction or learning: the disciplines of history and economics

Trade Better/Invest Smarter
Joe Russo aka ~ the PILOT
Publisher and Chief Tactical Strategist
Elliott Wave Technology

Elliott Wave Technology provides a suite of Winning Solutions designed to assist those who wish to trade better and invest smarter based upon the practice and deployment of proven trading strategies in concert with expert and unbiased chart analysis.

CHECKMATE

2011-09-23T23:54:00.020-04:00

Looking for the Holy Grail? Well, here it is...

Breaking Up with Netflix
Our long-term bullish investment exposure to Netflix ended on Monday September 19, 2011.

Though price drew down some 48% from peak value, we exited our 2 ½-year long-term investment with a return in excess of 450% at an exit price of $159.69 per share.

On August 1, 2011, when Netflix fell just 13% from its all-time highs, we began hedging 30% our long side exposure by moving short the shares at $266 in Short-Term trading accounts. We continue to let profits run on these short positions.

We took further measures to hedge long exposure back on August 2 when we moved short an additional 30% of our long-term investment exposure at $261.74 in Mid-Level speculative accounts. We continue to let profits run in these accounts. We are now net short the shares across-the-board.

Direct Strategic Diversification: DSD

<What Is It, and Why You MUST Acquire It to SURVIVE & PROSPER

If you wish to avoid tragedy, you must adopt the strategy.

Simply stated, strategic diversification is a means by which to engineer a direct and measured level of protection by instituting multiple time-frame long/short investment/trading tactics. This simple and direct approach is far superior and replaces the convention where one attempts to adhere to a long-only approach in the quest to find non-correlated issues or sectors to diversify the deployment of capital in effort to hedge, enhance, or mitigate risk.

This type of direct diversification is far superior to conventional means, and is essential to adopt in order to effectively hedge, enhance, and mitigate risk in all market conditions.

How is this strategy working out for our portfolio?
PHENOMENALLY WELL! The vast majority of our net positions and equity curves are RISING, STABLE, ADEQUATELY HEDGED, and performing brilliantly - delivering alpha well in excess of the benchmark S&P. The strategy has performed in this manner amidst all of the financial turmoil experienced over the past decade. In other words, we are consistently KICKING ASS on an absolute basis and shall continue to do so. How is your strategy working out?

This form of strategic diversification is a direct hedge and enhancement tactic that augments long-term investment exposures by deploying Mid-Level and Short-Term strategies, which tactically trade with and around larger core positions.

As an aside, many of the largest brokerage firms and top-tier investment banks will convey in their prospectus disclosures that although their funds strategic approaches are historically sound, that there is simply no way to avoid the downside risks associated with events like those which occurred in the 2008-2009 financial crisis. Those with a minimum of one million dollars or more pay a minimum annual fee of $10,000 or 1% of their account size (plus a % of profits) for the privilege to participate in select hedge funds of such sort. To that, we say BUNK!

How Does One Accomplish This?
The simplest way to accomplish this is by deploying three separate brokerage accounts. One earmarked for Long-Term investments, one for Mid-Level speculation, and the third for Short-Term trading.

These general methods of strategic diversification are exactly what we spell out for subscribers on a daily basis.

In the Netflix example, approximately 60K in investment capital was required to work such a strategy. One would have needed to pony-up 35K to acquire the initial long-term stake, and an additional 25K split between the two other accounts to engage the issue using Mid-Level and Short-Term trading tactics.

Here is how one may have followed along. On December 27, 2008, we executed a long-term investment shift in Netflix by moving long 1,234 shares at $28.46 at a cost of $35,119. Below is a graphic journal summarizing the results we have achieved using the proprietary (DSD) Direct-Strategic-Diversification tactics throughout the course of our ongoing engagement with Netflix.

The Results
Averted Tragedy using the DSD Strategy
Although our engagement history goes back much further than 2007, for the purpose of this example, the three tables and equity graphs below provide recent snapshot histories of how the multiple timeframe DSD strategy has performed through September 23, 2011.

Do bear in mind that each of the three proprietary accounts employs robust strategy-specific tactical shifts unique to their specific objectives.

The tables document each accounts entry and exit by date with a signal bias, price, number of shares, and a profit/loss ledger for each trade. In addition, to the right of each table is an associated equity graph representing the detailed path of profitability produced from each account.

Following the crash in Netflix, note the massive 48% drawdown from peak equity illustrated in the graph to the right of the Long-Term investment history listed in the first of our three tables.

Despite the fact that our long-term investment returned in excess of 450%, without the hedges in place courtesy of our Mid-Level and Short-Term trading accounts, it would have been extraordinarily tragic nonetheless to stand by and witness peak equity cut in half before taking profits.

As such, breaking up with Netflix was NOT that hard to do. In fact, we never really broke up. We remain engaged (from the short side) and Netflix continues to give us plenty of good lovin' just like she always has. What a catch!

The DSD strategy delivers similarly impressive results throughout the broad markets, individual stocks, Bonds, ETF 's, Futures, Commodities, and FX Markets. For subscribers, we combine many of these markets in our daily recap of the proprietary DSD portfolio.

As further testament to the DSD strategy, below is a side-by-side comparison of the S&P 500 from 1960 - 2011 on the left, and the equity curve produced by our Long-Term investment exposure to the benchmark on the right.

Bear in mind that the side-by-side comparison charts below are simply an apples-to-apples comparison of the one-to-one stability, alpha, and absolute returns achieved in the strategic Long-Term trading account vs. buying and holding the S&P throughout the 50-year period. It does not include the equally robust hedge, enhancement, and risk mitigation benefits derived from our Mid-Level and Short-Term trading accounts.

Conclusion:
Avoid Tragedy - Adopt the Strategy
One of our ultimate goals is to develop and bring to market a small family of DSD hedge funds or ETF' s that strictly adhere to the coordinated disciplines that embody the Direct Strategic Diversification methodology.

As simple as it is, even when spelled out in black and white, many people simply do not have the patience, courage and discipline to adhere to, properly execute, or consistently manage the strategy protocol.

In contrast, a strategically dedicated ETF or Fund would execute perfectly, and thus create an ideal solution for millions of ordinary investors who lack the essential patience and discipline to tap into this Holy Grail of investing.

One of the directives would be to make sure that these products would be within the reach of the common investor. Since the strategies execute automatically, fees should be relatively low. Another objective would be to keep the minimum account size requirements within reach of the ordinary investor instead of restricting access to accounts of a million dollars or more.

If you think that you (or someone that you know) might have an interest in participating in the development of such products and/or have a unique skill-set or hands-on experience at any level of related operational development, please feel free to contact us to share your thoughts.

Until then, the DSD portfolio shall remain available via the Chart-Cast Pilot by subscription only.

Trade Better/Invest Smarter

Joe Russo aka ~ the PILOT
Publisher and Chief Tactical Strategist
Elliott Wave Technology

Elliott Wave Technology provides a suite of Winning Solutions designed to assist those who wish to trade better and invest smarter based upon the practice and deployment of proven trading strategies in concert with expert and unbiased chart analysis.

Measuring Alpha

2011-09-16T12:50:00.014-04:00

The DAILY BULL

Alpha, What Is It?

W

e have all heard the term alpha as it relates to finance. The term has come to the forefront recently courtesy CNBC s well-advertised Delivering Alpha Conference, and of course, by way of the popular financial website Seeking Alpha.

What does alpha mean relative to finance? In short, alpha is a technical risk ratio used in modern portfolio theory.

Simply stated, alpha represents what a portfolio manager or investment strategy adds to or subtracts from returns relative to the baseline performance achieved by a benchmark index such as the S&P 500.

A positive alpha of 1.0 means the fund or strategy has outperformed its benchmark index by 1%. Correspondingly, a similar negative alpha would indicate an underperformance of -1%.
Today as promised, I am going to share with you a snapshot measure of my long-term investment strategy delivering an alpha of 720 during one of the most uncertain economic environments in the past 50-years.

In the previous DAILY BULL, I discussed the common human condition of reacting to the present vs. deriving wisdom from the past. Well, it should come as no surprise that the majority of Traders and Investors suffer the exact same malady of reacting emotionally and reflexively to the current market conditions vs. employing a precise and preconceived plan of action.

I also compared the current uncertain economic and investment environment to that of a similar and arguably much more severe 16-year period, which ran from 1966 1982. Moreover, I had explained that to navigate effectively during such times, that one must re-adjust expectations accordingly and develop the tenacity and the will to prevail.

Granted, what I describe in the previous paragraph is far easier to articulate than to actually accomplish.

How Does One Accomplish This?

Obviously, one must have a preconceived and trusted strategic plan of action (or strategy) in place that will alert them to respond accordingly to ALL market conditions BEFORE THEY OCCUR.

HELLO readers, these precise strategies of adept preparedness are exactly what I have developed, historically back-tested, and currently employ in real-time.

Take a close look at the measuring alpha chart provided and observe my strategies long-term engagement tactics throughout the course of the last bout of uncertainty from 1966-1982.In the 16-years spanning 1966-1982, the S&P 500 traded within a wide 126% range from 62.68 on the low end, to 141.96 on the upper. The measuring alpha chart begins on February 11, 1966 at a price of 94.06, and concludes some 16-years later at a price of 101.44 during the week of August 13, 1982.

The Results (Machines Don' t Lie Folks)

From start to finish, and despite the 126% range, after 16-years of turbulent bull and bear markets the benchmark S&P index advanced a paltry 7.84% - in 16-years!That translates to a severely sub-standard annual rate of return of roughly 0.5%, which is an exceptionally easy benchmark to beat from an alpha perspective.

Over the same time frame, my strategic approach delivered 65.74% in Total Returns and captured 63% of the entire trading range for the period.Bear in mind that this performance measure does NOT include the 35.25% return resulting from the previous bull market; instead, it begins with the 9.35% loss on short positions taken in March of 1968 and ends with the 21.2% profit taken on long positions in September of 1981.Of the 8 position shifts taken over the 16-year period, only 2 resulted in losses, and the remaining 6 were profitable shifts in long-term investment bias.

These statistics translate to a 75% win rate on long-term directional shifts, which produced a profit-measured win-to-loss ratio of nearly 3-to-1.As an aside, the historical annual rate of return for stocks is around 8%. During this prolonged 16-year period of extreme stress, wild swings of abrupt bull and bear markets, my strategy delivered an annual rate of return of 4.10%, more than half the historical average vs. the sub-standard 0.5% derived from the benchmark itself.

Summary

Not only does my strategy ride the certainty of powerful bull markets with ease, but it also traverses the gray skies of prolonged uncertainty with the grace of a gazelle. Mission Accomplished - Next.

This and other strategies, which I have designed for different timeframes, markets, and objectives, are currently at work in today s markets and continue to perform remarkably well.

Trust me, as the equity curve attests; though it looks easy and painless after-the-fact, maintaining the discipline to heed the signals and endure the open trade drawdowns is far more difficult than sticking ones head in the sand and just hoping for the best.

Three Poor Long-Term Options

The following are three common mistakes made by investors and traders alike:
They freeze like a deer in the headlights, do nothing, hope for the best, and take comfort that they are not alone. Hope in concert with the paralysis of denial is a strategy doomed toward complete and utter failure.

They sell everything near a market high, go to cash, disengage, and rest assured that they are preserving capital knowing that their money will stagnate until they put it back to work. Feeling brilliant, after a big drop in prices, the markets come back, so they think it is safe to get back in. Shortly after they do, the market begins to tank again - now they are back at square one. They continue repeating this process until they give up all together realizing they have done no better than if they had left well enough alone. The old adage is true; you CANNOT time the market, not that way anyhow.

Last and the very worst is that...
They hang on until they can no longer stand the pain, and then they sell everything near a market panic low. OUCH!

If you find that you are making any of these common mistakes, wish to Part Company with the masses, and distinguish yourself and your investment accounts as alpha-enabled, then join us as we continue to navigate successfully amid this challenging period in market history.

Next: Breaking Up With Netflix

In closing, there is a whole lot of news surrounding the pounding that Netflix is taking of late. As you may know, Netflix is part of my portfolio. In a future article, I will share with readers the complete history of my engagement with Netflix, which will illustrate how my tactic of strategic diversification rules the day - even amid market environments with 90% plus correlation to the S&P.

Until then,

Trade Better/Invest Smarter
Joe Russo aka ~ the PILOT
Publisher and Chief Tactical Strategist
Elliott Wave Technology

Elliott Wave Technology provides a suite of Winning Solutions designed to assist those who wish to trade better and invest smarter based upon the practice and deployment of proven trading strategies in concert with expert and unbiased chart analysis.