Friday, April 25, 2008

Prechter Releases Free Resources on What to Do in a Recession

Our friends at Elliott Wave International have released another exciting resource that we think is well worth your time. We’ll, it’s actually a group of resources – more specifically – 3 FREE videos and 1 FREE report that all speak directly to what to during a recession.

The 3 videos include Elliott Wave International CEO Robert Prechter’s latest appearances on Bloomberg television from March 2008, November 2007 and October 2007. The videos present Prechter’s interesting and unique forecast as well as his outlook for U.S. Stocks, Precious Metals, Currencies and other markets.

Plus, Prechter discusses how Fed Reserve rate cuts merely follow the U.S. Treasury Bill interest rate. And he goes on to ask and answer a fascinating contrarian question: “Why in the world are people rooting for lower interest rates?”

The report included in this group of resources focuses mainly on Prechter’s Gold and Silver forecast, the same forecast his subscribers pay up to $59 every month for. But, right now, it’s yours FREE.

In these resources, you’ll learn why Prechter says the U.S. has been in a bear market since – YES – the year 2000.

I know, I know, a bear market since 2000 is a shocking claim, but when you consider the massive amount of credit inflation, and when you measure how much gold or how many commodities you can buy with your Dow or S&P 500 shares, you’ll learn that, according to Prechter, stocks have been CRASHING since 2000.

In fact, here’s a little secret for you: When you measure the S&P 500 in a basket of commodities rather than the U.S. dollar, you will see it has declined as far as 75%.

But, what does this mean for the “Real Dow” and “Real S&P 500,” as Prechter calls them? Here’s a hint: The nominal Dow has a long history of catching up to the “Real Dow.”

Prechter’s outlook is more than unconventional. And it’s more than contrarian. It’s a crystal clear and downright frightening explanation of where the markets are today, according to a man that’s studied them for more than three decades.

You will not find this outlook from any other source but Robert Prechter.

I encourage you to hear his warning, then decide for yourself what you should do – if anything – to prepare for Prechter’s prediction that the nominal Dow, the one you read about in newspapers, will one day catch up to the “Real Dow,” the one measured in gold.

In these FREE reports, you will hear, watch and read Prechter’s chart-filled advice on how to survive a recession, how to make money in a recession and how to create a safe investment strategy in recession.

Whether you agree with Prechter’s bearish forecast or not, this FREE group of resources is prudent advice for anyone concerned about preserving wealth in a recession.

To learn more about getting your hands and eyes on Prechter’s 3 FREE videos and 1 FREE report, click here.

FX Pip Capital Forex Training
FX Pip Capital provides Forex training by giving you the opportunity to trade along with a seasoned professional trader in real time.

Sunday, April 20, 2008

S&P 500 Index 4/20/2008

When looking at a chart of the S&P 500 Index with respect to the opening range targets, the market might have some more room to go before testing the lower boundary of the 2008 opening range. This level is roughly 1411.19. The chart below shows the S&P 500 Index with opening range and extensions. This chart also has the daily pivot(1385.08) and the rolling three day pivot(1374.42) in the middle pane. It is helpful to watch the difference between these two numbers in the coming days. As the difference between the two contracts, it will signal the steam in this rally is fading.

S&P 500 Index (click to enlarge)

The chart below is of the S&P 500 Index and the lower pane compares the percentage of stocks trading above their 40 period moving average(green line) and the percentage trading above their 200 period moving average(red line).

The green line (% > 40ma) is starting to get to an area that could be looked at as overbought. Unless the red line (%>200ma) starts to confirm the move of the green line, a re-trace of the current rally will be in order with time of consolidation.

S&P 500 % Above Moving Average (click to enlarge)

This third chart of the S&P 500 shows index versus the moving average for the advance-decline line. This moving average shows that fewer stocks are carrying the load in this rally. This does not mean in itself that the rally is weak, but it means it is important to watch for these leaders as we approach the 1411 level. Energy stocks along with Google have been the bright spots.

S&P 500 Index AdvDec Moving Average (click to enlarge)

This last chart shows the S&P 500 in relation to its longterm and medium term linear regression lines with standard deviation extensions. The market is at a juncture where the next few days are critical. Currently prices are at the upper edge of the medium term channel. This could prove to be an area to take profits until the market makes a higher move followed with a pull back to establish a new short term channel.

S&P 500 Index Linear Regressions (click to enlarge)

Monday, April 14, 2008

Linear Regression Slopes With Standard Deviation Levels

A simple way to visually determine the trend of the market is to view the slope of the linear regression of data from any index or security. It is also helpful to have linear regressions over multiple time frames to determine the short-term trend versus the medium and longer term trend.

When adding standard deviation levels to these linear regressions, it shows a channel which can help determine when prices are extended with respect to the trend you are studying. These standard deviation levels are key to showing when a change in trend is happening. Once prices extend above or below 2 standard deviations, and prices sustain this move, the probability of a new trend forming is in your favor. This can be seen in the chart below of the Citigroup. The green circle shows when prices breached the 2 standard deviations below a very long term linear regression line. Prices then stabilized or consolidated there for a time, before showing that a true change in trend was occurring.

C - Citigroup (Click to enlarge)

Citigroup was not alone when this change in trend was starting. Below is a chart of the XLF Financial Sector SPDR. The XLF broke through the one standard deviation below and tried to hold the 2 standard deviations, but as time progressed the change in trend developed and the medium term linear regression shows a channel that has held the down trend since October of last year.

XLF - Financial Sector SPDR (Click to enlarge)

Below are charts of the S&P 500 Index and the Nasdaq 100 Index. Both charts show the linear regression lines and their standard deviation extensions. The longer term linear regression line is 377 periods. This is followed by the medium term linear regression line of 55 periods and the short term of 21 periods. It is important to notice that this applies to periods and not days. The charts above of XLF and Citigroup are actually a three day charts, combining the high, low, and close over three days to make a candle. This three day chart smooths data and eliminates one day wonders.

S&P 500 Index Daily (Click to enlarge)

S&P 500 Index 3day Chart (Click to enlarge)

Nasdaq 100 Index Daily (Click to enlarge)

Nasdaq 100 Index 3day Chart (Click to enlarge)

Combining different time frames of linear regressions can help visually establish where a particular index or security is in relation to its long, medium, and short term trends. This is done by looking at the slope of the linear regression and the individual index or security's location with regards to its standard deviations away from this linear regression. The standard deviations for the long term linear regression(377 period) used in the charts above are 1(white line), 1.5(yellow line, and 2(red line). These are both above and below the linear regression line. The medium(55 period) and short(21 period) term linear regressions only have the 2 standard deviation line applied. The slopes of these linear regressions combined with other various indicators can help spot some changes in trend to keep you ahead of the competition. The key is knowing when to have the math on your side and to fight the temptation of "hoping" prices will go back into the channel. Use stops and trust the math.

How can it be that mathematics, being after all a product of human thought which is independent of experience, is so admirably appropriate to the objects of reality? Is human reason, then, without experience, merely by taking thought, able to fathom the properties of real things.
--Albert Einstein

Elliott Wave Indepentent Trader Course - Free

Summary and Schedule of Free Lessons
Report #1: "What a Trader Really Needs to Be Successful.”
Available at 5 PM Eastern on Wednesday, April 9.
Report #2 (Includes a Video Lesson): The Versatility of The Wave Principle. Six Ways Wave Principle Helps Traders, Plus How It Fits Certain Trading Styles
Available at 5 PM Eastern on Thursday, April 10.
Report #3 (Includes a Video Lesson): Learn to Use Trendlines, Channeling Techniques and Support/Resistance Levels.
Available at 5 PM Eastern on Friday, April 11.
Report #4: Learn How to Integrate Historical Price Extremes, Failed New Highs and Lows and Other Technical Indicators into Your Elliott Wave Forecasts
Available at 5 PM Eastern on Monday, April 14.
Report #5 (Includes a Video Lesson): Learn to Use The Wave Principle to Confirm Your Wave Counts, Set Protective Stops AND… Become A Better Trader
Available at 5 PM Eastern on Tuesday, April 15.

Free Elliottwave Trading Course visit here!

Gold, the Dow, T-Notes: Which Does Best During Recessions?

By Susan C. Walker, Elliott Wave International

April 11, 2008

Each year, the NCAA college basketball tournament winnows its starting field of 64 teams to the Final Four teams who play for a chance to become the national champion. Congratulations to the University of Kansas and the University of Tennessee, this year's men's and women's basketball champions.

The structure of the NCAA tournament got me to thinking. Wouldn't it be great if we could set up brackets for our own investments the same way – start with 64 equities, bonds, mutual funds, commodity futures, metals, etc. Then let them duke it out against one another to see which ones emerge as the "Investment Final Four"?

Click here to download a free 5-page report from Elliott Wave International with even more information on which investment does best during recessions. The report, excerpted from Bob Prechter's Elliott Wave Theorist, includes in-depth historical analysis and six eye-opening tables.

Since most of us have neither the time nor the money to act as our own version of the NCAA (which might stand for the "National Coordinator of Asset Allocation"), it's worth knowing that Bob Prechter of Elliott Wave International has already set his mind to the task. He has specifically explored which investments do best in times of recession and which do best during economic expansions. But instead of starting with a field of 64 investments, he researched the three most popular investments – gold, the Dow, and Treasury bonds. We can call them the Treasured Three, rather than the Final Four.

Gold and Recessions

Since economists and even Ben Bernanke, chairman of the Federal Reserve, now admit that it looks like the U.S. economy has entered a recession, many people may wonder whether they need to change the mix of their investments. In particular, as some prices keep going up – notably for food and gas – the threat of inflation makes people more interested in gold as an investment, since it's usually seen as a bulwark against monetary inflation.

It is this conventional wisdom that piqued Prechter's curiosity. He wanted to find out whether it would hold up to a reality test. As he writes in The Elliott Wave Theorist, "I have often read, 'Gold always goes up in recessions and depressions.' Is it true? Should you own gold because you think the economy is tanking? Whenever we hear some claim like this, we always do the same thing: We look at the data."

So he and another Elliott wave analyst ran the numbers, reviewing the behavior of these three key investments during recessions following World War II, from February 1945 through November 2001. This is what they learned:

Gold was not the best investment during recessions in terms of total return.

The winner of this tournament was actually Treasury Notes, which had a total return of 9.96%. In contrast, gold had a total return of 8.80%, and the Dow came in at 6.89%. But that's not all – once they figured in the transaction costs for each investment (at a 2008 level), gold fell from second to third place as a worthwhile investment during recessions. The total returns with transaction costs came out this way:

1. T-Notes 9.82%
2. Dow 6.85%
3. Gold 4.80%

This result turns conventional wisdom on its head. It's also worth being aware of as you invest in 2008. Here's how Prechter sums up the results:

The Best Investment During Recessions

The most important question, however, is not whether the Dow beat gold or vice versa but whether making either investment would have been better than taking no risk at all. Table 3 [see free report provided by Elliott Wave International] shows that ten-year Treasury notes beat both gold and the Dow during recessions since 1945, and they did so far more reliably. T-notes provided a capital gain in 10 of the 11 recessions, and of course they provided interest income during all of them. And the transaction costs are low….

So if you want to make money reliably and safely during recessions and depression, you should own bonds whose issuers will remain fully reliable debtors throughout the contraction. Of course, as Conquer the Crash [Editor's note: Bob Prechter's best-selling business book] makes abundantly clear, finding such bonds in this depression, which will be the deepest in 300 years, will not be easy. Conquer the Crash forecast that in this depression most bonds will go down and many will go to zero. This process has already begun. This time around, you have to follow the suggestions in that book to make your debt investment work. [The Elliott Wave Theorist, March 2008]

Susan C. Walker writes for Elliott Wave International, a market forecasting and technical analysis company. She has been an associate editor with Inc. magazine, a newspaper writer and editor, an investor relations executive and a speechwriter for the Federal Reserve Bank of Atlanta. Her columns also appear regularly on

Wednesday, April 2, 2008

April Fool Rally?

Is it a little ironic that the S&P 500 Index has a 3.5% rally on April Fool's Day? It has been tough market the last few months, but the first day of the second quarter has gotten off to a great start. This doesn't mean that all of yesterday's problems are gone, but it does mean that for now some of the risk might be priced into the market. This could change quickly when new storm clouds arise, or when some of the old storm clouds come back bigger and stronger.

Below are two charts of the S&P 500 Index. One chart shows the S&P 500 with it's extensions based on the opening range. This chart also shows the updated pivot numbers to watch as strength of this rally day is measured in days to come. The second chart shows the S&P 500 with an indicator showing the percentage of stocks trading above their 40 period moving averages. This is a key chart to watch because it shows that the recent low in prices was not confirmed by a new low in stocks trading below their 40 period moving averages. This divergence is marked with red lines.

S&P 500 Index- Opening Range Extensions (click to enlarge)

S&P 500 Index - % Stocks Above 40 Period Moving Average(click to enlarge)
A similar chart to the percentage of stocks trading above their 40 period moving average chart is one depicting the advance decline moving average chart. This shows a similar divergence, but also shows that the market might be a little ahead of itself with this one day massive rally.

S&P 500 Index Adv-Dec (click to enlarge)

The U.S. Dollar Index chart is important to watch as this large rally day is digested. This index is forming a triangle pattern. The dollar has stalled in it's downward move. This could be because of some anticipated actions by the European Union to coincide with the actions the U.S.Federal Reserve took in previous weeks. If Europe decides to add liquidity and or cut interest rates, there could be some profit taking by investors who have been long the Euro.

U.S. Dollar Index(click to enlarge)

EUR/USD Daily Chart