"Oops, They Did It Again"

See "a classic capitulation to a rising trend"

By Elliott Wave International

History often repeats. So, one way to make an educated guess about the future is to look at the past.
With that in mind, let me share with you a valuable observation from our market analysts: Overseas investors tend to jump into U.S. stocks near tops, and sell heavily near bottoms. In other words, their market actions usually are a contrarian indicator.
In a moment, I'll show you why this knowledge is relevant today. But first, let's see how this information has served our subscribers in the past.
Our first stop is this chart from the September 2000 Elliott Wave Financial Forecast.

The publication noted:

Foreigners make their biggest commitments when major trends are about to reverse... This chart of the Dow and foreigners' net purchases of U.S. equities illustrates how beautifully the pattern has held through the U.S. bull market of the 1990s. The solid lines show the flood of foreign buyers within a month of each high, and the dotted lines show them rushing back out again on the months of the big lows.

The DJIA lost 50% of its value in the 2000-2002 bear market.
This next chart is from the August 2007 Financial Forecast, which said:

The first five months of [2007] produced what was easily the biggest gusher of net foreign buying in history. The record suggests that falling prices lie directly ahead for the U.S. market.

The DJIA went on to top just two months later, and entered the worst bear market since the Great Depression.
This chart from the April 2018 Financial Forecast recaps our commentary in 2000 and 2007 and then talks about today:

A new record high of nearly $1.5 trillion in net U.S. equity holdings by foreigners came as stocks topped in January. In a classic capitulation to a rising trend, foreigners' new record level of commitment didn't occur until December, when their amount of total stock buying finally exceeded the prior peak of August 2007. January's data, provided by the U.S. Treasury, are the latest available.

The April 2018 Financial Forecast is chock-full of charts, forecasts and insights you won't find anywhere else. See more via this sneak peek excerpt, which discusses the relationship between news and the U.S. stock indexes -- and what it means for investors.
Read it now, free!

This article was syndicated by Elliott Wave International and was originally published under the headline "Oops, They Did It Again". 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.

Is War "Hell" for the Stock Market?

Take a look at stock market behavior in times of war… and peace

By Elliott Wave International

Are wars bullish or bearish for stocks?
With the recent news of airstrikes on Syria and a threat of a global war, this question is extremely relevant. But does war really cause stock markets to rise and fall?
You might be surprised when you review these six charts.
William Tacumseh Sherman was a U.S. Army general during the Civil War who is known for the burning of Atlanta.
He also uttered the famous phrase, "War is hell."
Of course, this is very true.
But, is war also a big negative for the economy and stocks? Some market observers believe so. They argue that war diverts resources from productive enterprise, and mention the factories that are destroyed in war.
Others posit that war is good for stocks and the economy because the government forks over big money to companies to produce war materials.
So, who has the winning argument?
Elliott Wave International wanted to know the answer to that question ourselves. So, we looked at the path of stock prices during World War I, World War II, the Korean War and the Vietnam War to see if we could find any consistent correlations.
These four charts from Robert Prechter's 2017 book, The Socionomic Theory of Finance, show you what our research revealed (comments from the book are below):

Figure 12 shows a time of war when stock prices (normalized for inflation) rose, then fell; Figure 13 shows a time when they fell, then rose; Figure 14 shows a time when they rose throughout; and Figure 15 shows a time when they fell throughout the hottest half (1965-1975) of a twenty-year conflict. Who wins the war doesn't seem to matter. A group of allies won World War I as stock values reached fourteen-year lows; and nearly the same group of allies won World War II as stock values neared fourteen-year highs.

Obviously, we found no consistent correlation between the performance of the stock market and war.
But, how about during times of peace? Well, we checked that out too.
Here are two more charts from The Socionomic Theory of Finance, along with the commentary:

Figure 16 provides an example from the 1920s in which stock prices seemingly benefited from peaceful times. The Dow rose over 500% in just eight years as peace mostly reigned around the globe.

Figure 17, however, shows that in the three years immediately thereafter, peace likewise mostly reigned around the globe yet stock prices fell more than they had risen in the preceding eight years!

So, despite the universal assumption to the contrary, the evidence shows that there's no consistent relationship between stock prices and peace -- or war.
However, we do encourage you to analyze the market's Elliott wave structure.
Other research we've conducted shows that market prices trend and reverse in recognizable patterns.
Is Your Portfolio Built on False Assumptions?
Download this Free 33-Page Report to Find Out.
Did you know that the vast majority of portfolios are built on false assumptions? These false assumptions -- or Market Myths -- have been passed down across generations. They are so baked into investor psyche that no one ever thinks to challenge them... but we do. Do earnings really drive stock prices? Can the FDIC actually protect you? Is portfolio diversification a smart move? Download Market Myths Exposed now and find out whether your portfolio is built on flawed foundations. We guarantee you'll be shocked to find the truth.
Sign up now and get FREE access to The Market Myths Exposed eBook

This article was syndicated by Elliott Wave International and was originally published under the headline Is War "Hell" for the Stock Market?. 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.

5 "Core" Elliott Wave Patterns, Avago (NASDAQ: AVGO)

By Elliott Wave International

The stock of Avago Technologies rebounded strongly off the recent lows. What's next? The challenge is on you to provide the answer. Give it a shot!

Click the chart below to download a printable PDF version:

Now that you've labeled your AVGO chart, watch the rest of this video on elliottwave.com and compare your chart with your Trader's Classroom instructor Jeffrey Kennedy's labels.
You'll also see where AVGO should go next -- watch now, free!

This article was syndicated by Elliott Wave International and was originally published under the headline . 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.

5 "Core" Elliott Wave Patterns, Hershey (NYSE: HSY)

By Elliott Wave International

The choppy rise in the stock of Hershey -- and the sharp recent breakdown -- speak volumes to an observant Elliott wave investor. See if you can spot the tell-tale signs...

Click the chart below to download a printable PDF version:

Now that you've labeled your HSY chart, watch the rest of this video on elliottwave.com and compare your chart with your Trader's Classroom instructor Jeffrey Kennedy's labels.
You'll also see where HSY should go next -- watch now, free!

This article was syndicated by Elliott Wave International and was originally published under the headline . 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.

5 "Core" Elliott Wave Patterns, Ferrari (NYSE: RACE)

By Elliott Wave International

The stock of Ferrari has been rising strongly since 2016. Can you spot the Elliott wave pattern? It has profound implications for the trend in RACE from here...

Click the chart below to download a printable PDF version:

Now that you have labeled your RACE chart, watch the rest of this video on elliottwave.com and compare your chart with your Trader's Classroom instructor Jeffrey Kennedy's labels.
You'll also see where RACE should go next -- watch now, free!

This article was syndicated by Elliott Wave International and was originally published under the headline 5 "Core" Elliott Wave Patterns, Challenge #1: Ferrari (NYSE: RACE). 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.

Fibonacci Reveals the Stock Market's Next Big Move

Scientists speculate that Elliott waves are the stock market's "critical structure"

By Elliott Wave International

The stock market's recent triple-digit swings might have many investors wondering if the path of prices is completely random.
But, as random as prices may appear, EWI's analysts can assure you that a recognizable Elliott wave pattern is unfolding. In other words, we've been here before, and we have a good idea of how it's going to turn out.
No, the stock market is not random. In fact, Elliott waves are the clearest when volatility is the wildest! You see, volatility is driven by investors' emotions, and Elliott wave price patterns in market charts are nothing more than a reflection of this investor psychology.
What's more: investor psychology unfolds in those recognizable and repetitive patterns that I just mentioned, whether on an intraday basis, day-to-day or across longer time frames.
Even independent scientists say so.
Consider this 1996 quotation from "Stock Market Crashes, Precursors and Replicas" in France's Journal of Physics:

We speculate that the 'Elliott waves' . . . could be a signature of an underlying critical structure of the stock market.

EWI founder Robert Prechter put it this way:

Scientific discoveries have established that pattern formation is a fundamental characteristic of complex systems, which include financial markets. Some such systems undergo "punctuated growth," [or] building fractally into similar patterns of increasing size.

Nature is full of fractals.
Consider branching fractals such as blood vessels or trees: A small tree branch looks like an approximate replica of a big branch, and the big branch looks similar in form to the entire tree.
Now consider that most of nature's fractals are governed by the Fibonacci sequence. It begins with 0 and 1, and each subsequent number is the sum of the previous two:0,1, 1, 2,3,5,8,13,21,34,55 and so on. The Fibonacci sequence also governs the number of waves that form in the movement of aggregate stock prices.
Take a look at this figure from the Wall Street classic book, Elliott Wave Principle:

The book notes:

The essential structure of the market generates the complete Fibonacci sequence. The simplest expression of a correction is a straight-line decline. The simplest expression of an impulse is a straight-line advance. A complete cycle is two lines. In the next degree of complexity, the corresponding numbers are 3, 5 and 8. This sequence can be taken to infinity. The fact that waves produce the Fibonacci sequence of numbers reveals that man's collectively expressed emotions are keyed to this mathematical law of nature.

Right now, the Fibonacci sequence reveals a big clue about the stock market's NEXT big move.
Learn How You Can Use Fibonacci to Improve Your Trading
If you'd like to learn more about Fibonacci and how to apply it to your trading strategy, download the free 14-page eBook, How You Can Use Fibonacci to Improve Your Trading.
EWI Senior Tutorial Instructor Wayne Gorman explains:

• The Golden Spiral, the Golden Ratio, and the Golden Section
• How to use Fibonacci ratios/multiples in forecasting
• How to identify targets and turning points in the markets you trade
• And more!

See how easy it is to use Fibonacci in your trading.

This article was syndicated by Elliott Wave International and was originally published under the headline Fibonacci Reveals the Stock Market's Next Big Move. 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.

U.S. Dollar: Why It Pays to Use the Elliott Wave Model

See the signs that could’ve helped you nail two junctures in the greenback's trend

By Elliott Wave International

The legendary football coach Vince Lombardi believed that a winning team is built on mastering the game's basics -- so much so that at the start of the season he would "remind" veteran players, "Gentlemen, this is a football."
Lombardi would even take them out to the field, discuss the boundaries and remind the players that the goal is to get the football into the end zone.
This relentless review of the basics paid off. His team, the Green Bay Packers, won five championships, including the first Super Bowl.
It also pays to master the basics of Elliott wave analysis.
The basic Elliott wave pattern for financial markets is five waves in the direction of the main trend with corrections, i.e., moves against the trend, unfolding in three waves.
So, in an uptrend, prices would rise in five waves and fall in three waves. In a downtrend, prices would fall in fives and rise in three waves.
With that in mind, let's review how our U.S. Short Term Update editor made this bearish call on the U.S. Dollar Index last November.

The advance from the 91.011 low on September 8 to the 95.150 high on October 27 is still best labeled a three-wave structure. The implication of a three-wave advance is that the next-larger-degree of trend is down. So the dollar should eventually decline below 91.011 to complete the pattern from the January 3 high.
The Elliott wave "basics" delivered: That's exactly what happened.
Look at this chart from the February 16, 2018 Short Term Update, which said:

The [U.S. Dollar Index] declined to 88.253 today, breaking below the wave iii (circle) low. Prices have satisfied the minimum expectations for wave v (circle) and we are now able to label wave v (circle) complete. In turn, a complete fifth wave also means the five-wave decline that started at the 103.820 high on January 3, 2017 is complete. Prices should now be starting the largest advance of the past 13 months.

Indeed, the U.S. Dollar Index began to rise from that very day.
As the March 28 Short Term Update noted:

The [U.S. Dollar Index] jumped sharply to 90.147 today in the largest one-day intraday rally in 5 months.

Interestingly, around the last week of March, a group of hedge funds held its largest net-short position in U.S. dollar futures and options since August 2011.
Will the hedge funds turn out to be right, is the dollar rally expected to reverse?
Maybe. But remember, crowd psychology at big market turns often reaches an extreme like that, which -- from a contrarian perspective -- only helps you to validate your "basic" Elliott wave analysis.
If you are prepared to take the next step in educating yourself about the basics of the Wave Principle -- access the FREE Online Tutorial from Elliott Wave International.
The Elliott Wave Basic Tutorial is a 10-lesson comprehensive online course with the same content you'd receive in a formal training class -- but you can learn at your own pace and review the material as many times as you like!
Get 10 FREE Lessons on The Elliott Wave Principle that Will Change the Way You Invest Forever.

This article was syndicated by Elliott Wave International and was originally published under the headline U.S. Dollar: Why It Pays to Use the Elliott Wave Model. 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.

90% of Traders Lose Money. Some Don’t...

See how Elliott wave pattern analysis helped "craft a rock-solid trade" in ROKU in late November 2017

By Elliott Wave International

Fact: 90% of traders lose money. Also a fact: 80% of all day traders quit within the first two years. And, according to a July 16, 2017 Forbes article titled "Day Trading: Smart or Stupid?" many traders are "moaning and groaning" sleep-deprived suckers "trying to become rich... with 32-ounce bottles of Pepto-Bismol prominently displayed on their desks."

The question is, why? We can successfully put men on the moon. We can perform open heart surgery. We can map the human genome. So why is it so hard to stay on the right side of financial markets?
The reason is simple. What should be a completely emotion-free zone -- the trading room "floor" or brokerage office or personal computer screen -- is often a breeding ground for elevated heart rates and sweaty palms. We may know the odds, but that doesn't stop mainstream culture from fanning the flames of blind hope in a bull market that can't quit. Here, these recent news items paint the emotionally charged scene:

"5 Ways to Make Millions in the Stock Market" (Huffington Post)

"Penny Stock Trader: From $1500 to $1 Million in 3 Years"

(CNN Money)

"U.S. Stocks Surge! The Bull Market is Back" (Forbes)

It's not rocket science: Emotion is the number one enemy of successful trading. Which means the number one ally is UN-emotional, objective market analysis that doesn't focus on the news, or which way the crowd is running. Some traders know its name: technical analysis.
For the past 20-plus years, Elliott Wave International's chief market analyst Jeffrey Kennedy has personally tried and tested dozens of technical tools, from old-school to cutting-edge, even developing his own in the process. The end result is a what Jeffrey calls a "holistic" arsenal for identifying high-confidence trade set-ups in any liquid market, and on any time frame.
In one of his most popular educational videos "4 Keys to Crafting Rock-Solid Trades," Jeffrey outlines four simple steps of the "pre-flight checklist" for an emotion-free trading strategy. Take steps one and two:

• Identify the trend, and trade with it. Choose the path of least resistance and have the wind at your back. Utilize pullbacks; those are the opportunities to rejoin the trend.
• Once you've successfully identified the trend, look for a price pattern you recognize.

---

(Editor's Note: Right now, you can get Jeffrey Kennedy's "4 Keys to Crafting Rock-Solid Trades for free! Follow the link to begin)

---

As an Elliottician, the patterns Jeffrey looks for are the five core Elliott wave patterns, each of which adhere to specific rules and guidelines. Take, for instance, the impulse wave, pictured below. Its middle part, wave 3, travels far and fast in a short period of time.

Here's a clip from the video where Jeffrey reveals a common "tell" of third wave price action -- acceleration gaps:

How about applying this simple tool to a real-world market? Well, here we go back to the November 29, 2017, Trader's Classroom, in which Jeffrey identified a telltale impulse wave underway on the price chart of the newly minted, Nasdaq-listed IPO for the popular video-streaming company Roku Inc. (ticker symbol: ROKU). A dead giveaway of the impulse move was the large acceleration price gap in wave three, pictured here:

Remember that emotionally charged mainstream culture we talked about at the beginning? Well, following its September 28, 2017 IPO debut, the street was cuckoo for ROKU, which soared 67% on its first day of trading. Here, the following news items from the time capture the hype:

• "Roku: One of the Markets Hottest Stocks" (Sept. 28 Fortune)
• "Is There Any Stopping Roku?" (Nov. 13 Barron's)

But again, amidst the sound and fury, Jeffrey Kennedy kept his emotions in check. In fact, in the November 29 Trader's Classroom video, Jeffrey provided a breadth of historical evidence showing how, in many cases -- GoPro, GrubHub, Redfin, Snapchat, and more -- IPOs will enjoy an initial "honeymoon period" only to come crashing down for much-needed "foundation building" before reclaiming the upside:

With prices nearing the end of an Elliott wave impulse, Jeffrey warned that ROKU was similarly vulnerable:

"We are currently in that honeymoon period in Roku. It's easy to get excited about an IPO and you want to, when everything is awesome.

"From an Elliott wave perspective, within wave five, it appears we need another push higher to above 51.8. I do like the upside and it's natural to do so because hey, we're in the honeymoon period. But remember, following that time, the pressure may be to the downside."

The next chart moves forward in time to show how Roku rose into Jeffrey's cited target only to lose its footing in a multi-month decline:

The facts don't lie. Trading successfully is hard. But as Jeffrey Kennedy has learned after decades of discipline and practice, the best defense against becoming the 90% is objectivity.
Get immediate access to Jeffrey Kennedy's free 20-minute video, "4 Keys to Crafting Rock-Solid Trades." In this video, Jeffrey reveals his time-proven tricks to ID top trade set-ups in the markets you follow. Learn more now.

This article was syndicated by Elliott Wave International and was originally published under the headline 90% of Traders Lose Money. Some Don’t.... 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.