Robert Prechter Explains The Fed, Part I

Robert Prechter Explains The Fed, Part I 
The world's foremost Elliott wave expert goes "behind the scenes" on the Federal Reserve 
November 19, 2010

By Elliott Wave International

The ongoing financial crisis has made the central bank's decisions -- interest rates, quantitative easing (QE2), monetary stimulus, etc. -- a permanent fixture on six-o'clock news.

Yet many of us don't truly understand the role of the Federal Reserve.

For answers, let's turn to someone who has spent a considerable amount of time studying the Fed and its functions: EWI president Robert Prechter. Today we begin a 3-part series that we believe will help you understand the Fed as well as he does. (Excerpted from Prechter's Conquer the Crash and the free Club EWI report, "Understanding the Federal Reserve System.") Here is Part I. 

Money, Credit and the Federal Reserve Banking System
Conquer the Crash, Chapter 10
By Robert Prechter

An argument for deflation is not to be offered lightly because, given the nature of today’s money, certain aspects of money and credit creation cannot be forecast, only surmised. Before we can discuss these issues, we have to understand how money and credit come into being. This is a difficult chapter, but if you can assimilate what it says, you will have knowledge of the banking system that not one person in 10,000 has.
The Origin of Intangible Money
Originally, money was a tangible good freely chosen by society. For millennia, gold or silver provided this function, although sometimes other tangible goods (such as copper, brass and seashells) did. Originally, credit was the right to access that tangible money, whether by an ownership certificate or by borrowing.
Today, almost all money is intangible. It is not, nor does it even represent, a physical good. How it got that way is a long, complicated, disturbing story, which would take a full book to relate properly. It began about 300 years ago, when an English financier conceived the idea of a national central bank. Governments have often outlawed free-market determinations of what constitutes money and imposed their own versions upon society by law, but earlier schemes usually involved coinage. Under central banking, a government forces its citizens to accept its debt as the only form of legal tender. The Federal Reserve System assumed this monopoly role in the United States in 1913.
What Is a Dollar?
Originally, a dollar was defined as a certain amount of gold. Dollar bills and notes were promises to pay lawful money, which was gold. Anyone could present dollars to a bank and receive gold in exchange, and banks could get gold from the U.S. Treasury for dollar bills.
In 1933, President Roosevelt and Congress outlawed U.S. gold ownership and nullified and prohibited all domestic contracts denoted in gold, making Federal Reserve notes the legal tender of the land. In 1971, President Nixon halted gold payments from the U.S. Treasury to foreigners in exchange for dollars. Today, the Treasury will not give anyone anything tangible in exchange for a dollar. Even though Federal Reserve notes are defined as “obligations of the United States,” they are not obligations to do anything. Although a dollar is labeled a “note,” which means a debt contract, it is not a note for anything.
Congress claims that the dollar is “legally” 1/42.22 of an ounce of gold. Can you buy gold for $42.22 an ounce? No. This definition is bogus, and everyone knows it. If you bring a dollar to the U.S. Treasury, you will not collect any tangible good, much less 1/42.22 of an ounce of gold. You will be sent home.
Some authorities were quietly amazed that when the government progressively removed the tangible backing for the dollar, the currency continued to function. If you bring a dollar to the marketplace, you can still buy goods with it because the government says (by “fiat”) that it is money and because its long history of use has lulled people into accepting it as such. The volume of goods you can buy with it fluctuates according to the total volume of dollars -- in both cash and credit -- and their holders’ level of confidence that those values will remain intact.
Exactly what a dollar is and what backs it are difficult questions to answer because no official entity will provide a satisfying answer. It has no simultaneous actuality and definition. It may be defined as 1/42.22 of an ounce of gold, but it is not actually that. Whatever it actually is (if anything) may not be definable. To the extent that its physical backing, if any, may be officially definable in actuality, no one is talking. ... 

Do you want to really understand the Fed? Then keep reading this free eBook, "Understanding the Fed", as soon as you become a free member of Club EWI.

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Which Way is Gold Going ??

Gold: What Is The Economy Usually Doing When It Goes Up?
Research proves wrong the idea that gold reliably rises during recessions, says EWI President Robert Prechter.September 21, 2010

By Elliott Wave International

...If gold isn’t going up when the economy is contracting, when is it going up? Table 4 (see chart on p. 24 of this free Club EWI report -- Ed.) answers the question: All the huge gains in gold have come while the economy was expanding. This is true of the three most dramatic gold gains of the past century:

(1) Congress changed the official price of gold from $20.67 to $35 per ounce in 1934, during an economic expansion. The gain against the dollar was 69 percent.
(2) The entire bull market from 1970 to 1980 occurred during an economic expansion... [Of] the $815 per ounce that gold rose from 1970 to 1980, $725 worth of it came while the economy was expanding.
(3) The entire bull market from 2001 to the present occurred during an economic expansion... [Of] the $748 per ounce that gold has risen since February 2001, $726 worth of it has come while the economy was expanding.

Even lesser rises in gold, such as the two big rallies during the 1980s, came during economic expansions. So the biggest gains in gold, by far, have occurred while the economy was in expansion, not contraction.

Why is such the case? Simple: During expansions, liquidity is available, and it has to go somewhere. Sometimes it goes into stocks, sometimes it goes into gold, and sometimes it goes into both. During times of extreme credit inflation, such as we have experienced over the past three decades, the moves in these markets during economic expansions are likewise extreme. When recession hits, liquidity dries up, and investors stop buying. During depressions, they sell assets with a vengeance.

Of course, we socionomists do not believe in the external causality of investment price movements. Recessions and expansions do not make investment prices move up and down. Fluctuations in social mood propel the economy, liquidity and movements in investment prices. So the only reason we bother with studies like this is to de-bunk various commonly held views of financial causality. Now we know: The idea that gold reliably rises during recessions and depressions is wrong; in fact, like most such passionately accepted lore, it’s backwards.

Finish reading this 16-chapter paper online now, free! Download Robert Prechter's FREE 40-Page Gold and Silver eBook.Here's what else you'll learn:

• Why Gold Is Still Money
• What Long Term Analysis of Gold Stocks Shows
• Study: Does Gold Always Go Up in Recessions and Depressions?
• True or False: Gold Is Better Than Stocks During Expansions
• What’s Next for Gold?
• Elliott Waves in the Silver Market
• MORE

Keep reading this free report now -- Download Robert Prechter's FREE 40-Page Gold and Silver eBook.

This article was syndicated by Elliott Wave International and was originally published under the headline Gold: What Is The Economy Usually Doing When It Goes Up?. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

the Hindenburg Omen . . is a Crash coming?

The Hindenburg Omen -- Omen-ous or Not?
Elliott Wave International Chief Market Analyst Steve Hochberg Sheds Light on a Feared Technical IndicatorAugust 24, 2010

By Elliott Wave International

On Aug. 12, volatile market action coincided with a technical signal called the Hindenburg Omen, whereby a relatively high number of new highs and lows in individual stocks occur at the same time.

This indicator instantly gained an enormous amount of media attention. So we sat down with Steve Hochberg, EWI's chief market analyst and close colleague of Robert Prechter, to ask him about the now-infamous Hindenburg Omen.

EWI: Steve, recently a market indicator called the Hindenburg Omen has been in the news, what is going on?

Steve Hochberg: Discussion of this indicator certainly has been everywhere. Someone emailed us and said they even saw it mentioned on the front page of the Drudge Report! Look, headline-grabbing names grab headlines. Essentially it measures the fractured nature of market action. Over the years, we've discussed numerous times in our publications how a fractured market is oftentimes an unhealthy market. The multiple non-confirmations registered at the recent August 9 stock high, which we talked about in the Short Term Update, are another manifestation of this bearish behavior. The message is consistent with how we view the Elliott wave structure.

EWI: Why are people interested in this particular indicator?

SH: That's a good question, and it speaks to a broader issue, viz., the "re-emergence" of technical analysis into the mainstream consciousness of market participants. In Prechter's Perspective, Robert Prechter discusses the timing of the popularity of technical analysis, of which Elliott waves, or pattern recognition, is the highest form:

"In long term bull markets, no one really needs market timing because the market is always going up. This was true during the 1950s and 1960s, a period of market strength. And it has been mostly true since 1982. From 1966 to 1982, though, the market was very cyclic, so investors couldn't sleep like babies with a buy-and-hold blanket like they do today."

The S&P 500 has a negative return over at least the past 12 years, so investors are naturally questioning the "broadly diversified, buy and hold" stance advocated by 90%+ of investment advisors. EWI subscribers are way ahead of the mass of investors because as the bear market progresses, the media should show increased focus on technical analysis, including patterns such as head-and-shoulders as well as trendlines, moving averages and, yes, even Elliott waves, just as they did during the last great bear market from 1966 to 1982. It will be an exciting time for those with even a cursory knowledge of the technicals.

EWI: So, what are you seeing now?

SH: Obviously we cannot give away our analysis, but the wave structure is clear, the myriad indicators we keep offer compelling confirmation and the market is accommodating our forecast. If readers have any interest in what this means for not only the stock market, but also all other markets, please give us a read to see if our work might be useful in helping to formulate your investment portfolio. We think it will be a worthwhile endeavor.

Read some of the latest nuggets directly from Elliott Wave International President Robert Prechter's desk -- FREE. Click here to download a free report packed with recent analysis and forecasts from Prechter's Elliott Wave Theorist.

a massive Head and Shoulders Pattern in the Market

Slicing the Neckline: A Classic Technical Pattern Agrees with the Elliott Wave Count

In the August issue of his Elliott Wave Theorist, market
forecaster Robert Prechter alerted readers that the U.S. stock
market was slicing the neckline of a classic head-and-shoulders
pattern in technical analysis, and that this may send the market
into critical condition.
Prechter said that when the Elliott wave count and a head-and-shoulders
pattern are saying the same thing about the stock market, it's
best to pay attention.

Read
some of the latest nuggets directly from Robert Prechter's desk -- FREE. Click
here to download a free report packed with recent quotes directly from Prechter's Elliott
Wave Theorist.

Here's how the August issue of the Elliott Wave Financial
Forecast, the sister publication to Prechter's Theorist, described
the head and shoulders pattern unfolding in the stock market:
"The weekly Dow chart [below] shows the development
of an intermediate-term, head-and-shoulders pattern from the
January high at 10,729.90 to the present. The January high
marks the left shoulder, the April 26 high at 11,258 is the
head, and the right shoulder is now ending. The April [Theorist]
discussed the pertinent characteristics that Edwards and Magee
used to define this technical pattern ... all apply to the
current formation. Observe how weekly stock trading volume
has contracted during the development of the right shoulder,
a necessary trait of this pattern. The downward-sloping neckline
-- exactly as on the big ten year pattern -- displays market
weakness, which is consistent with our interpretation of the
wave structure."
This chart shows the head-and-shoulders pattern.

Here's what Robert Prechter himself said in a recent Elliott
Wave Theorist:
"Generally, when the neckline slopes downward, the right
shoulder does not rise to the level of the left shoulder ..."
Please look at the chart again -- then re-read Prechter's quote.

Read
some of the latest nuggets directly from Robert Prechter's desk -- FREE. Click
here to download a free report packed with recent quotes from Prechter's Elliott
Wave Theorist.

Technicals vs. Fundamentals

Technicals vs. Fundamentals: Which are Best When Trading Crude Oil and Natural Gas?

July 26, 2010

If "fundamentals" drive trend changes in financial markets, then shouldn't the same factors have consistent effects on prices?

For example: Positive economic data should ignite a rally, while negative news should initiate decline. In the real world, though, this is hardly the case.

On a regular basis, markets go up on bad news, down on good news, and both directions on the same news -- almost as if to say, "Talk to the hand cuz the chart ain't listening."

Unable to deny this fly in the fundamental ointment, the mainstream experts often attempt to reconcile the inconsistencies with phrases like "shrugged off," "defied" or "in spite of."

That begs the next question: How do you know when a market is going to cooperate with fundamental logic and when it won't? ANSWER: You don't.

Get FREE access to Elliott Wave International's most intensive forecasting service for the global Energy markets. Now through noon Eastern time July 28, you can get timely intraday charts, forecasts and analysis for Crude Oil and Natural Gas. You'll also get daily, weekly and monthly analysis and forecasts for all major Energy markets and Energy ETFs. Access FreeWeek now.

Take, for instance, the first three news items below regarding the July 22 performance in crude oil, versus the fourth headline, which occurred on July 23:

1. Crude prices surge nearly 4% in their sharpest one-day percentage gain since May. The rally was "aided by fears that Tropical Storm Bonnie will enter the Gulf of Mexico over the weekend and disrupt oil production." (Wall Street Journal)
2. "Oil Prices Soar As Gulf Storm Threat Looms" (Associated Press)
3. "The storm should keep oil prices bubbling if it continues to strengthen and remain on track." (Bloomberg)

vs.

4. "Oil Slips From Surge Despite Storm Threats" (Commodity Online)

Unlike fundamental analysis, technical analysis methods don't rely on the news to explain or predict market moves. They look at the markets' internals instead.

Get FREE access to Elliott Wave International's most intensive forecasting service for the global Energy markets. Now through noon Eastern time July 28, you can get timely intraday charts, forecasts and analysis for Crude Oil and Natural Gas. You'll also get daily, weekly and monthly analysis and forecasts for all major Energy markets and Energy ETFs. Access FreeWeek now.

'Day of Reckoning' Looms

Quadrillion Dollar Debt: 'Day of Reckoning' Looms
What Will Happen as $1,000,000,000,000,000 in Global Debt Winds Down?July 22, 2010

By Elliott Wave International

The biggest balloon in the world is deflating.

This balloon had been inflated with a quadrillion (10¹⁵) dollars, which is to say: This balloon was filled not with air but with debt from around the globe.

What will happen as this global debt winds down? In two words: Deflationary Depression -- the likes of which could be unprecedented in history.

Want to Know How to Prosper in a Deflationary Depression?
If you haven't yet given Robert Prechter's deflation argument your full attention, you should know now that yesterday was the best time to do so. Download Prechter's 60-Page Guide to Understanding Deflation here.

A thousand trillion in debt can't be wished away or swept under the rug. No one can "forgive" the debt. The consequences of unwinding this debt could be as massive as the dollar figure itself.

We've heard plenty about the debt problems of Greece, Spain, Portugal and Italy.

But how about the world's second largest economy? Consider this fact reported in the Japan Times (July 8):

"Japan's government debts are the highest the world has ever seen, at 219 percent of gross domestic product, according to the International Monetary Fund."

Then there's the world's sixth largest national economy. In January 2009,  Robert Prechter wrote this in theElliott Wave Theorist:

"British banks have amassed $4.4 trillion worth of foreign liabilities, twice Britain's annual GDP. ... England, moreover, 'has not defaulted since the Middle Ages.' The possibility that it may do so again is yet another indication that the bear market is of ... (larger) degree, exactly as Elliott wave analysts have predicted all along."

Remember, Japan and Great Britain are major world economies. Imagine what the debt totals would look like in a line-item analysis of other nations, regions, states, provinces and municipalities around the world, including the U.S.

De-leveraging will likely lead to a deflationary crash -- a "day of reckoning."

How can you prepare for a deflationary crash?

To start with, keep your money safe. As Bob Prechter mentions in the June 2010 Elliott Wave Theorist:

"Investors should be primarily in greenback cash and Treasury bills."

He also describes holdings which should be strictly avoided.

Want to Know How to Prosper in a Deflationary Depression?If you haven't yet given Robert Prechter's deflation argument your full attention, you should know now that yesterday was the best time to do so. Download Prechter's 60-Page Guide to Understanding Deflation here.

Slope of Hope

Understanding Robert Prechter's 'Slope of Hope'

July 19, 2010

By Elliott Wave International

Almost everybody who follows financial markets has heard about climbing the "wall of worry": the time when prices head up bullishly, but no one quite believes in the rally, so there's more worry about a fall than a rise.

What's the opposite condition in the market?

Bob Prechter named it the "slope of hope," meaning that as prices head down, no one wants to believe the market really has turned bearish, so there's more hope for a rise than fear of a fall.

Want to Know How to Prosper in a Deflationary Depression?If you haven't yet given Robert Prechter's deflation argument your full attention, you should know now that yesterday was the best time to do so. Download Prechter's 60-Page Guide to Understanding Deflation here.

The market has been rising recently, following a bearish decline from late April through the end of June, which makes now the perfect time to learn more about the slope of hope.

* * * * *

Excerpted from The Elliott Wave Theorist by Robert Prechter, published June 18, 2010

According to polls, economists are virtually unanimous in the view that the “Great Recession” is over and a recovery is in progress, even though “full employment will take time,” etc. Yet mortgage writing has just plunged to a new low for the cycle (see Figure 1), and housing starts and permits just had their biggest percentage monthly drop since January 1991, which was at the end of a Primary-degree recession. But the latest “recession” supposedly ended a year ago. How can housing activity make new lows this far into a recovery? The answer is in the subtitle to Conquer the Crash, which includes the word depression. The subtleties in economic performance continue to suggest that it “was” not a “recession.” It is a depression, moving forward, in punctuated fashion, slowly but inexorably.

Despite this outlook, keep in mind what The Elliott Wave Theorist said last month: “Even though the market is about to begin its greatest decline ever,the era of hope is not quite finished.” For as long as another year and a half, there will be rallies, fixes, hopes and reasons to believe in recovery. Our name for this phase of a bear market is the Slope of Hope. This portion of the decline lasts until the center of the wave, where investors stop estimating upside potential and start being concerned with downside potential. Economists in the aggregate will probably not recognize that a depression is in force until 2012 or perhaps beyond. That’s the year the 7.5-year cycle is due to roll over (see April 2010 issue). Stock prices should be much lower by then, but optimism will still dominate, and it will show up in the form of big rallies and repeated calls of a bottom.

Want to Know How to Prosper in a Deflationary Depression?If you haven't yet given Robert Prechter's deflation argument your full attention, you should know now that yesterday was the best time to do so. Download Prechter's 60-Page Guide to Understanding Deflation here.

the Long Decline Ahead: 20 Questions with Robert Prechter

20 Questions with Robert Prechter: Long Decline Ahead

July 2, 2010

By Elliott Wave International

The following article is an excerpt from Elliott Wave International’s free report, 20 Questions With Deflationist Robert Prechter. It has been adapted from Prechter’s June 19 appearance on Jim Puplava’s Financial Sense Newshour.

Jim Puplava: I want to come back to government spending, but first I want to move onto the stock market. In your last two Elliott Wave Theorist issues, you laid out a scenario that would put the Dow and S&P, which in your opinion may have peaked on April 26, as the top from here. You feel that this top is the biggest top formation of all time, a multi-century top and we could head straight down in a six-year collapse that would end in 2016 that could see a substantial portion of the S&P and the Dow wiped out in a similar way that we saw between 1929 and 1933. Let's talk about that and the reasoning behind it.

Editor’s Note: The article you are reading is just one small excerpt from Elliott Wave International’s FREE report, 20 Questions With Deflationist Robert Prechter. The full 20-page report includes even more of Prechter’s insightful analysis on fiat currency, gold, the Fed, the Great Depression, financial bubbles, and government intervention. You’ll learn how to protect your money -- and even profit -- in today's environment. Read ALL of Prechter's candid answers for FREE now. Access the free 20-page report here.

RP: Yes, you're exactly right. I did a lot of work on technical forms, cycle forms and Elliott wave forms in April and May and put them in a double issue. Let’s talk about the cycles first.
The 7¼-year cycle has been quite regular since the first bottom in 1980. The next bottom was at the crash in October 1987. The next one was November 1994, which is when the economy went through four years with lots of layoffs; it was a recessionary period throughout until that cycle bottomed. The next one was between September 2001, which was the 9/11 attack, and the October 2002 bottom. And the latest one was at the low in March 2009. All those periods are 7¼ years apart, so we are in the uptrend portion of the 7¼-year cycle.
However, notice for example that in 1987, the market went up until August of that year and then bottomed in October, just a couple of months later. So the decline occurred very, very late in the cycle. This time it occurred a little bit earlier in the cycle, topping in '07 and bottoming in '09. In the current cycle, prices should peak the earliest of all of them. It's what we in the cycle prediction business call “left-hand translation.” The market’s already gone up for about a year, and I think that's just about enough. I think we're going to spend most of the cycle going down. But the important thing to note is that the next bottom is due in 2016. That means I think we're going to have a repeat of what happened between 1930—which was the top of the rally following the 1929 crash—and the July 1932 low. Instead of taking two years, it's going to take about six years.
It's going to be a very long decline. It's going to be interrupted by many, many rallies, just as the decline from 1930 to 1932 was. And every time it bottoms and rallies, people are going to say “OK, that's enough; it's over.” But it won't be over. It's just going to be a long, long process. I think you and I will probably be talking a few times during this period. One of the interesting aspects of this process is that optimism should actually remain dominant through the first three years of the cycle. That will carry us into 2012. Even though prices will be edging lower, most people are going to think it's a buy, and you shouldn't get out of your stocks, and recovery is just around the corner, probably for the next three years. And then, for the final half of the cycle, the final three years, that's when you'll get the capitulation phase when everyone finally gives up.

Editor’s Note: The article you are reading is just one small excerpt from Elliott Wave International’s FREE report, 20 Questions With Deflationist Robert Prechter. The full 20-page report includes even more of Prechter’s insightful analysis on fiat currency, gold, the Fed, the Great Depression, financial bubbles, and government intervention. You’ll learn how to protect your money -- and even profit -- in today's environment. Read ALL of Prechter's candid answers for FREE now. Access the free 20-page report here.

This article, 20 Questions with Robert Prechter: Long Decline Ahead,was syndicated by Elliott Wave International. EWI is the world's largest market forecasting firm. Its staff of full-time analysts lead by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

The Biggest Baddest Call Of Them All

EWI called the uptrend in stocks "out" back in April 2010 

By Nico Isaac Fri, 04 Jun 2010 16:00:00 ET	Email	BOOKMARK AND SHARE IT!

Even non-sports fans have heard by now about the recent debacle known as "Baseballgate" -- with two outs in the ninth inning, the first base umpire called "SAFE" when the runner was clearly "OUT." The missed call cost Detroit Tiger pitcher Armando Galarraga a perfect game.

And as the blogosphere flooded with memories of other historic slip-ups that cost "so and so" star "this and that" honor, demands for the Commissioner of Baseball to reverse the bad call grow louder by the hour.

And it was indeed a very bad call. But the Biggest, Baddest Call of all was not made on a sports field. It was made in the field of finance -- specifically on the stock market. To wit: The mainstream "umpires" of finance stood near first base, and in April made this emphatic call for the uptrend in stocks:

"SAFE!!"

In case you missed the event, here's an instant replay:

• "Stocks Remain In A Powerful Bull Market." (April 10 Bloomberg)
• "Stocks Haven't Lost Their Appeal As The Market Goes Up, Up, And Away." (April 21 US News & World Report)
• "You can use any number of words to describe this bull market. Frothy is not one of them. This market is reasonably priced." (April 21 AP)
• "US Stocks Post Longest Winning Streak Since 2004. The recovery should be sustainable and that will drive the market." (April 24 Bloomberg)
• "All the economic reports are pointing up... despite lingering worries over debt problems in Greece. Right now, there is virtually no evidence of a top." (April 30 USA Today)

Yet from its April 26 peak, the DJIA turned down in a jaw-dropping 1000-plus point selloff. The market suffered its worst May since 1940.

(The Market's Next Big Play: The June 2010 Financial Forecast Service reveals whether the US stock market will hit prices out of the park -- or strike out -- in the days, weeks, and months to come. Get the full play-by-play today.)

The markets have no Commissioner to reverse the bad call of the financial mainstream. But at least one team of analysts remained ahead of the most game-changing moves in the world's leading stock market, including a forecast that called the rally "OUT" in April 2010. Consider the following insight from EWI president Robert Prechter:

On April 16, Prechter published his April Elliott Wave Theorist titled ""Deadly Bearish Picture." Notice the dates!

"We can project a top...between April 15 and May 7, 2010. It is rare to have technical indicators all lined up on one side of the ledger. They were lined up this way -- on the bullish side -- in late February-early March of 2009. Today, they are just as aligned, but on the bearish side."

April 26 marks the high for the DJIA, followed by the devastating drop on May 7 -- exactly within the date range Prechter's forecast called for.

Find out what the next big play for stocks is today. Click on the link and follow the fast and easy steps to begin.

TAGS: DOW, DOW JONES INDUSTRIAL AVERAGE, US STOCKS, BULL, BASEBALL, BAD CALL

One Week Left: Download Prechter's free 10-page market analysis

There’s only one week left to download Robert Prechter’s free 10-page market letter. Our friends at Elliott Wave International are featuring the free download through June 7.

The free issue, titled “A Deadly Bearish Big Picture,” contains recent research and market analysis that goes beyond the news headlines to give you urgent, independent market forecasts. Prechter’s market outlook has changed dramatically since February of 2009 when he informed hisElliott Wave Theorist subscribers to turn bullish.

The markets have turned more and more volatile by the day, with huge market swings spanning hundreds of points! It’s time to prepare yourself. 

Get your FREE copy of Prechter's latest research through June 7 -- Download the Theorist now.

Stunning Long-Term Elliott Wave Picture

Prechter Describes The "Stunning Long-Term Elliott Wave Picture"

May 12, 2010

By Robert Folsom, Elliott Wave International

Please join me to consider a time in the stock market that lasted just under three years: 32 months, to be precise.
During this period a series of powerful rallies stand out clearly on a price chart. The shortest of these rallies was four weeks, the longest more than five months.
I can even list seven of these rally episodes, with the number of calendar days and percentage gains.

1.  152 days     +52%
2.  28 days       +11%
3.  77 days       +19%
4.  69 days       +27%
5.  31 days       +30%
6.  35 days       +39%
7.  28 days       +27%

Get Robert Prechter's Latest Analysis -- Click Here to Download His 10-Page Market Letter FREE
For a limited-time, you can download Robert Prechter's April 2010 Elliott Wave Theorist, the first in a two-part series entitled "Deadly Bearish Big Picture," for FREE! Click here to learn more and download your free Theorist.

This information obviously seems to paint a bullish picture: The stock market was in double-digit rally mode during 43% of the total calendar days in question.
But in fact, those rallies were the days when the bear was catching his breath. The market was the Dow Jones Industrials; the overall period was from November 1929 to July 1932. It devastated investors. The Dow lost 80% of its value. Yes, that includes the rallies listed above.
I said that these rallies stand out on a price chart, and indeed they do -- it's just that the declines stand out even more. There's virtually no "sideways" action. Prices moved rapidly in one direction or the other.
You can see the chart for yourself in the first issue (April issue, page 4) of the two-part series Bob Prechter has published in The Elliott Wave Theorist. Part One was in April, "A Deadly Bearish Big Picture." The final sentence of that issue said Part Two "will update the stunning long-term Elliott wave picture."
Bob just published Part Two. It completes the "Big Picture" he has now delivered to subscribers.
The past doesn't "define" the present or the future, but it sure does provide context. No analyst alive today understands this better than Bob Prechter.
Believe me when I say that the charts and analysis in this two-issue series are unique. The word "stunning" only begins to describe what you'll read.

Get Robert Prechter's Latest Analysis -- Click Here to Download His 10-Page Market Letter FREE
For a limited-time, you can download Robert Prechter's April 2010 Elliott Wave Theorist, the first in a two-part series entitled "Deadly Bearish Big Picture," for FREE! Click here to learn more and download your free Theorist.

the Many Signs Of Deflation

Bob Prechter Points Out The Many Signs Of Deflation
Yes, You Heard Us Right
April 29, 2010

By Elliott Wave International

Everywhere you look, the mainstream financial experts are pinning on their "WIN 2" buttons in a show of solidarity against what they see as the number one threat to the U.S. economy: Whip Inflation Now.
There's just one problem: They're primed to fight the wrong enemy. Fact is, despite ten rate cuts by the Federal Reserve Board to record low levels plus $13 trillion (and counting) in government bailout money over the past three years -- the Demand For and Availability Of credit is plunging. Without a borrower or lender, the massive supply of debt LOSES value, bringing down every exposed investment like one long, toppling row of dominoes.
This is the condition known as Deflation.
Bob Prechter uncovered more than a dozen "value depreciating" developments underway in the U.S. economy as the two main engines of credit expansion sputter: Banks and Consumers. Here's a preview of his findings contained the free report, The Most Important Investment Report You'll Read in 2010:

• A riveting chart of Treasury Holdings as a Percentage of US Chartered Bank Assets since 1952 shows how "safe" bank deposits really are. In short: today's banks are about 95% invested in mortgages via the purchase of federal agency securities. Unlike Treasuries, IOU's with homes as collateral have "tremendous potential" to fall in dollar value.
• Loan Availability to Small Businesses has fallen to the lowest level since the interest rate crises of 1980. In Bob Prechter's own words: "The means of debt repayment [via business growth] are evaporating, which implies further deflationary pressure within the banking system."
• An all-inclusive close-up of the Number Of Banks Tightening Their Lending Standards since 1997 has this message to impart: Since peaking in October 2008, lending restrictions have soared, thereby significantly reducing the overall credit supply.
• Both residential and commercial mortgages are plummeting as home/business owners walk away from their leases at an increasing rate.
• The major sources of bank revenue -- consumer credit and state taxes -- are plunging as more people opt to pay DOWN their debt. Also, a compelling chart of leveraged buyouts since 1995 shows a third catalyst for the credit binge -- private equity -- on the decline.

All that is just the beginning. For more information on the deflationary shift underway in the financial landscape, download Bob Prechter's free report, The Most Important Investment Report You'll Read in 2010. It contains 13 pages of commentary, riveting charts, and unparalleled insight into these urgent market matters.

Elliott Wave International (EWI) is the world's largest market forecasting firm. EWI's 20-plus analysts provide around-the-clock forecasts of every major market in the world via the internet and proprietary web systems like Reuters and Bloomberg. EWI's educational services include conferences, workshops, webinars, video tapes, special reports, books and one of the internet's richest free content programs, Club EWI.

Lessons in Technical Indicators

Lessons in Technical Indicators: Part 3
How to use technical indicators to complement your wave analysis

By Nathaniel Williams Tue, 23 Mar 2010 11:30:00 ET	Email |  Print  |  RSS |  My Updates	Bookmark and share It!

Want to Learn More? Read Part 1 and Part 2 of this series.

The MSCI Asia Apex Index combines 50 of the largest stocks in Hong Kong, Taiwan and Korea. The index also provided Elliott Wave International's Asian-Pacific Short Term Update editor Chris Carolan an opportunity to teach his subscribers how to use three of his favorite technical indicators to anticipate and capitalize on trend changes.

 

Enjoy this free lesson that comes from Chris Carolan's on-demand, online trading course "3 Technical Indicators to Help You Ride the Elliott Wave Trend." 

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You can order "3 Technical Indicators to Help You Ride the Elliott Wave Trend" for $49, or you can subscribe risk-free to The Asian-Pacific Short Term Update, The European Short Term Update, or Global Market Perspective for the same price and get the trading course FREE!

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Chris's primary tool for spotting trend reversals is the Wave Principle. Through wave analysis, he saw an impulsive "wave five of five." In other words, prices appeared to be at both a short-term and long-term high. One of the Wave Principle's rules is that a correction -- or a trend reversal -- occurs after the completion of a five-wave impulse, so Chris's wave count suggested that the index's next move would be down.

 

Chris then used his favorite three technical indicators to verify his forecast, as he demonstrates in the trading course.

 

First, the Relative Strength Index (RSI) noted a divergence, symbolized by the red dot, at the top of wave five. A divergence occurs when prices make consecutive highs or lows while losing momentum, and it means that a given market might be overbought or oversold. After divergences, trend reversals often ensue.

 

Second, the Digital Signal Filter (Jurik RSX), an enhanced RSI, also suggested that the index was overbought. The blue line on the chart hadn't yet started to retreat, but it was clearly reaching a topping point. This was another signal that the trend was nearing its end.

 

Third, the interaction between the index and the Keltner Channel provided a clear indication that a reversal was imminent. When prices breach the channel wall and appear to be reacting contrary to the channel's trend, you can expect a corrective price reversal. 

As you can see from the chart above, Chris's wave analysis was correct. The index had reached the top of a five-wave impulse, and prices responded by initiating a steep downward correction. What's more, all three of Chris's indicators supported his forecast. Using the Wave Principle and technical indicators isn't like looking into a crystal ball, but you can see how helpful they can be to help you spot the end of a trend -- or the beginning of a new one.

 

This is just one of Chris's many lessons about using technical indicators to complement your wave analysis. You can learn more today in his on-demand, online trading course "3 Technical Indicators to Help You Ride the Elliott Wave Trend." In this 42-minute video, Chris shows you how to get the most out of each of these indicators, using detailed charts, real-world examples and practical insights.

 

You can purchase "3 Technical Indicators to Help You Ride the Elliott Wave Trend" for just $49 here -- but please don't! Get it FREE when you start your risk-free subscription for the same price to one of the following services:

• The Asian-Pacific Short Term Update
• The European Short Term Update.
• Global Market Perspective

(Already a subscriber to Global Market Perspective, European Short Term Update or Asian-Pacific Short Term Update? View the trading course here.)

States Are Broke and Approaching Insolvency

Take Time from March Madness for 2010's Most Important Investment Report
March 19, 2010

by Editorial Staff

You got your brackets filled out before the NCAA Men's Basketball Tournament's opening game on Thursday afternoon. Good -- now sit back and enjoy the games. But if you're looking for a good read during the numerous and lengthy time outs, we've got just the thing. It's the most important investment report you will read in 2010. Forget the theoretical and hypothetical sorts of analysis that occupy so much space online. Bob Prechter gives 22 real-life examples of how deflation is beginning to spread in the U.S. economy -- along with 13 charts that make the examples even clearer.

You want to know whether to prepare for inflation or deflation? This report will answer your questions. Read this excerpt to see what we mean. Oh, and try to forget that a No. 2 seed (Villanova) almost got upset in the first round and that Georgetown, a No. 3 seed, got beat by Ohio University, a 14 seed.

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States Are Broke and Approaching Insolvency
While state “regulators” clamp down on profligate banks, the same states’ legislatures continue to blow money. For years, state governments have been spending every dime they could squeeze out of taxpayers plus all they could borrow. (The lone exception is Nebraska, which prohibits state indebtedness over $100k. Whatever Nebraska’s official position on any other issue, by this action alone it is the most enlightened state government in the union.)

But now even states’ borrowing ability has run into a brick wall, because the basis of their ability to pay interest—namely, tax receipts—is evaporating. The goose—the poor, overdriven taxpayer—is dying, and the production of golden eggs, which allowed state governments to binge for the past 40 years, is falling. The only reason that states did not either default on their loans or drastically cut their spending over the past year is that the federal government sucked a trillion dollars out of the loan market and handed it to countless undeserving entities, including state governments.

“It’s hard to imagine what happens when stimulus money runs out,” says a budget expert. (USA, 10/29/09) But it is not at all hard to imagine what will happen. Conquer the Crash imagined state insolvency seven years ago. The breezy transfer of money from innocent savers to state spenders is going to end, and when it does, states will cut spending and “services” drastically. They will also default on their debts, which will be deflationary.

Elliott Wave International's latest free report puts 2010 into perspective like no other. The Most Important Investment Report You'll Read in 2010 is a must-read for all independent-minded investors. The 13-page report is available for free download now. Learn more here.

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Elliott Wave International (EWI) is the world’s largest market forecasting firm. EWI’s 20-plus analysts provide around-the-clock forecasts of every major market in the world via the internet and proprietary web systems like Reuters and Bloomberg. EWI’s educational services include conferences, workshops, webinars, video tapes, special reports, books and one of the internet’s richest free content programs, Club EWI.

Free to Learn Elliott Wave Analysis

Learn Elliott Wave Analysis -- Free
Often, basics is all you need to know.
March 5, 2010

By Editorial Staff

Understand the basics of the subject matter, break it down to its smallest parts -- and you've laid a good foundation for proper application of... well, anything, really. That's what we had in mind when we put together our free 10-lesson online Basic Elliott Wave Tutorial, based largely on Robert Prechter's classic "Elliott Wave Principle -- Key to Market Behavior." Here's an excerpt:

Successful market timing depends upon learning the patterns of crowd behavior. By anticipating the crowd, you can avoid becoming a part of it. ...the Wave Principle is not primarily a forecasting tool; it is a detailed description of how markets behave. In markets, progress ultimately takes the form of five waves of a specific structure.
The personality of each wave in the Elliott sequence is an integral part of the reflection of the mass psychology it embodies. The progression of mass emotions from pessimism to optimism and back again tends to follow a similar path each time around, producing similar circumstances at corresponding points in the wave structure.
These properties not only forewarn the analyst about what to expect in the next sequence but at times can help determine one's present location in the progression of waves, when for other reasons the count is unclear or open to differing interpretations.
As waves are in the process of unfolding, there are times when several different wave counts are perfectly admissible under all known Elliott rules. It is at these junctures that knowledge of wave personality can be invaluable. If the analyst recognizes the character of a single wave, he can often correctly interpret the complexities of the larger pattern.
The following discussions relate to an underlying bull market... These observations apply in reverse when the actionary waves are downward and the reactionary waves are upward.

1) First waves -- ...about half of first waves are part of the "basing" process and thus tend to be heavily corrected by wave two. In contrast to the bear market rallies within the previous decline, however, this first wave rise is technically more constructive, often displaying a subtle increase in volume and breadth. Plenty of short selling is in evidence as the majority has finally become convinced that the overall trend is down. Investors have finally gotten "one more rally to sell on," and they take advantage of it. The other half of first waves rise from either large bases formed by the previous correction, as in 1949, from downside failures, as in 1962, or from extreme compression, as in both 1962 and 1974. From such beginnings, first waves are dynamic and only moderately retraced. ...

Read the rest of this 10-lesson Basic Elliott Wave Tutorial online now, free! Here's what you'll learn:

• What the basic Elliott wave progression looks like
• Difference between impulsive and corrective waves
• How to estimate the length of waves
• How Fibonacci numbers fit into wave analysis
• Practical application tips for the method
• More

Keep reading this free tutorial today.

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Elliott Wave International (EWI) is the world’s largest market forecasting firm. EWI’s 20-plus analysts provide around-the-clock forecasts of every major market in the world via the internet and proprietary web systems like Reuters and Bloomberg. EWI’s educational services include conferences, workshops, webinars, video tapes, special reports, books and one of the internet’s richest free content programs, Club EWI.

Financial Forecast Service

The Financial Forecast Service delivers the most insightful market analysis you can buy - period
			The Financial Forecast Service Includes: The Short Term Update (Mon, Wed, Fri) You'll get forecasts for the markets' turns each Monday, Wednesday, and Friday, after the markets close. Extensive Elliott wave charts and commentary include stocks, bonds, metals, and the U.S. dollar. Also includes occasional special opportunities for stocks that look poised for major moves. $39/month. The Elliott Wave Financial Forecast (Monthly) Tracks intermediate-term patterns in the U.S. markets and forecasts upcoming price movements. You get monthly wave analysis of stocks, bonds, metals, the U.S. dollar and economic and social trends. $19/month. Named #1 Bond Timer and Featured Advisor by Timer Digest. Read article. The Elliott Wave Theorist (Monthly) At least once per month, you’ll also get Bob Prechter’s cutting edge view into when, where, and why the waves are unfolding in the broader market. Each Theorist provides unparalleled insight into the sociological and psychological signals in the marketplace. $20/month.