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.