The Elliott Wave Principle: A "Marvel" of Technical Analysis

Our FREE webinar "How to Spot Reliable Trade Setups in Any Market and Any Time Frame" is back by popular demand

By Elliott Wave International

Just when you thought there'd been every possible adaptation of the Marvel comics movie franchise, we've thought of one more: A Marvel installment based on financial market analysis.
At one end of this Marvel market universe is Technipede: Like the insect he's named for, Technipede uses hundreds of technical disciplines to stand on for evaluating a market's strength or weakness. Bollinger bands, candlesticks, pivot points, TRIX, harmonics, advance/decline, and on -- a different technical "leg" for each market and each time frame.
On the other end is bulging muscled Fundamentalist: Hero of the mainstream, Fundamentalist mines the news for every story that may affect future price action -- supply/demand data, earnings, scandals, profits, political disruptions, weather patterns, and so on.
But neither one of these figures is any match for the most powerful character in this Marvel market universe -- Jeffrey Kennedy, editor of our Trader's Classroom and Commodity Junctures Service. Jeffrey's strength comes from 25-plus years of mastering the Wave Principle and its ability to identify high-confidence trade setups in any market, across any time frame.
Every trading day, Jeffrey delivers the benefits of Elliott analysis to subscribers, via price charts in a wide variety of real-world markets. Take, for example, the retail king Amazon Inc. In the fall of 2018, Amazon was falling hard amidst a broader "meltdown" in FAANG stocks. Wrote one October 29 Bloomberg:

"How long can they go? That's the key question for traders looking at some of Wall Street's largest technology and internet stocks. People keep calling bottoms and getting hurt; they're trying to catch falling knives."

But in his October 30 Trader's Classroom video lesson, Jeffrey showcased one of the five principle benefits of Elliott wave analysis; namely, its ability to determine the maturity of a trend. There, Jeffrey identified Amazon's 2018 selloff as a fourth -wave correction.
Using the Elliott guideline of the depth of corrective waves, Jeffrey pinpointed a probable end to Amazon's selloff "at or near the prior fourth wave extreme," namely the lows seen in February and March of 2018. That meant Amazon had "another $100 or $200 bucks to the downside" before bottoming. (Jeffrey's chart reprinted below)

From there, Amazon continued its selloff into late December before settling 177 bucks lower, just as Jeffrey anticipated, a beautiful opportunity for traders.
What about a smaller time frame? Here, we go to the August 15 Trader's Classroom where Jeffrey used one of the three cardinal Elliott wave rules to manage near-term risk in Dollar General (DG). He identified a wave 4 pullback, which, if correct, meant prices could not enter the price territory of wave 1 -- 126.55. This established a clear, make-or-break level to place a protective stop. (Jeffrey's chart reprinted below)

If prices stayed above that level, then DG would present a strong "buying opportunity" in a fifth wave rally to the "150-155 area." And that's exactly what happened via a powerful gap up and weeks long rally into Jeffrey's upside target window.

What about an even smaller time frame for one of the most volatile commodity markets -- crude oil? In the Sept 13 Daily Commodity Junctures, Jeffrey showed a core Elliott wave pattern on crude's price chart -- a contracting triangle. This pattern lingers sideways for a frustratingly long time, only to resolve in a powerful thrust. Armed with this knowledge, Jeffrey set the stage higher and said, "I won't be surprised to see it pop up into the 60's." (Jeffrey's chart reprinted below)

The next trading day, crude gapped up in its largest single-day rally since the 1991 Gulf War.
Okay, there's obviously no such thing as a Marvel market universe. Elliott wave analysis is not akin to Iron Man's shield of invincibility. But as these examples from Jeffrey Kennedy show, having Elliott in your trading arsenal makes it very possible to identify high-confidence opportunities in actual markets.
Which is why we've decided to bring you one of our most popular resources of Elliott education -- "Discover 5 Reliable Setups in Just 26 Minutes," taught by -- you guessed it -- Jeffrey Kennedy.
In this 26-minute long lesson, Jeffrey shows you how to quickly spot 5 price patterns. When you see one of these setups, you'll know that prices are very likely to break hard, and soon.
The best part is, this 26-minute lesson is FREE to Club EWI members! You may not walk away a superhero; but you will have a supreme understanding of all things Elliott and its ability to identify trade setups in any market, on any time frame.
Learn More and Sign Up Now.

Thomas Cook's Fall from Grace

A Cautionary Tale for the Entire Global Economy

By Elliott Wave International

Since its very first 11-mile train tour on July 5, 1841, the Thomas Cook travel company has been taking adventure-seekers around the world, from river cruises down the Nile (a.k.a. "Cook's Canal"), railcars up to the mouth of Mount Vesuvius, and spaceships to the surface of the moon! (Between 1950 to 1996, Cook's "Moon Registry" had a 100,000-flight manifest).
But on September 23, 2019, Thomas Cook filed for one of the most dismantling bankruptcies in recent history, shuddering the world's oldest travel firm and leaving hundreds of thousands of travelers high and dry. The stranding prompted the UK's largest-ever peace time repatriation effort, a 10-day long, 60 million-pound rescue effort coined Operation Matterhorn.
So how did Thomas Cook's fall from grace happen? Well, there's one easy target: "Why did Thomas Cook Go Bust? ... One factor towers above all others: the huge pile of debt." (Source: September 23, 2019 Guardian). Essentially, after decades of tamping down unpaid loans, the company's $2 billion debt burden erupted (as the volcano Vesuvius in 1944, which destroyed Cook's funicular railcar the "Vesuvio"), burning the business into a bankrupt crisp. But that isn't the whole story. Cook's massive debt didn't cause its collapse. Not finding someone to bail it out of said debt -- did.
To understand the distinction, late 2017/early 2018 becomes pivotal. At the time, Thomas Cook was flying high with renewed growth, the birth of a new tourism market in Turkey and Egypt, a revival of an old 1980's ad campaign "Don't Just Book It, Thomas Cook It!," its first-ever foray into commercial TV, and a soaring stock price which had increased five-fold since the dark days of the 2011 financial crisis. All of this, even though the firm was heavily indebted to its shareholders and strapped by credit-funded buyouts.
But the "D" word wasn't seen as a deterrent to future growth. You gotta spend money to make money: "Few in London's tourism industry have publicly suggested the capital will suffer" (Source: July 2017 Bloomberg). Specific to Thomas Cook, a February 8, 2018 news source cheered:

"We believe that Thomas Cook has reported a robust set of Q1 results which show that it has continued to grow booking volumes strongly, despite passing through material cost inflation to customers."

As late as April, analysts upwardly revised their ratings from "neutral" to "buy," prompting this April 30, 2018 The Times headline: "Sunny Outlook for Thomas Cook." The bullishness was predicated, however, on the idea that markets are driven into the future by present data, such as strong earnings, when in fact, they are driven by human behavior. An exclusive report from Elliott Wave International, "What You Need to Know Now About Protecting Yourself from Deflation",explains:

"When the social mood trend changes from optimism to pessimism, creditors, debtors, producers and consumers change their primary orientation from expansion to conservation. As creditors become more conservative, they slow their lending.

These behaviors reduce the "velocity" of money, i.e., the speed with which it circulates to make purchases, thus putting downside pressure on prices. These forces reverse the former trend."

From an Elliott wave perspective, the shift in mood unfolds in the form of technical patterns on a company's stock chart. In July 2017, an important tourism bellwether, the FTSE 350 Travel & Leisure Index, displayed five waves up since 2009, thereby signaling an impending change of direction. The index bobbled along for 10 months, but, in May 2018, prices finally broke, and a mere 20% decline was apparently all it took to take down Britain's overindebted travel giant Thomas Cook. In just the past 12 months, Cook's investors have suffered through three profit warnings and watched the value of their stock plummet to 10 pence, a 93% decline. Some analysts argue that the shares are worth less than that.
From the June 2019 European Financial Forecast

Ultimately, highly indebted companies are fine so long as social mood is rising, which supports a willingness to assume risk and lend. The speed and extent of Thomas Cook's fall from grace shows what can happen when that mood reverses. The question now isn't if, but who will be the next industry icon left stranded with no one willing to come to the rescue?
Club EWI's exclusive report, What You Need to Know Now About Protecting Yourself from Deflation, pivots off the idea that the signs of major sea change in the global economy are underway and writes: "If you miss that, you miss the warning. Meaning: you won't see the beast in time. " Fortunately, the entire report is available for FREE to all Club EWI members. Get instant access.