Volatility Shakes Bond Markets

Is the debt bomb about to go off?

The yields on U.S. Treasuries and European sovereign debt have risen sharply in a relative short time.

Bond prices trend inversely to yields — which means debt portfolios have suffered substantial losses.

From mid-April through May 6, yield on German 10-year bunds spiked 47 basis points. Yields on 10-year U.S. Treasuries jumped 29 basis points in just the past week.

Volatility in the bond market continued on May 7. In just a few hours, the yield on the 10-year bund jumped 21 basis points before pulling back. Bear in mind that sovereign bond yields rarely move more than a fraction of one percent in a day.

Long-term bonds have been hit particularly hard. The yield on 30-year U.S. Treasuries topped 3% for the first time this year.

“We’ve been hurt,” said [an] investment manager at Aberdeen Asset Management. “The movements of recent days have been extremely unusual … .” (Financial Times, May 7)

German government debt is regarded as a benchmark for European assets.

Take a look at this chart of Euro-Bund futures from our May 6 Financial Forecast Short Term Update:

Similar to the credit crisis in 2007-2009, the rout is starting in the bond market, where the pace of evaporating liquidity is quickening. Bids are pulled, prices crack, yields rise and it leaks out toward other asset classes. The turn in bonds in the U.S. and Europe is a sign that the “debt bomb” … is about to go boom.

The April Elliott Wave Financial Forecast warned subscribers about the insanity that pervades the world’s bond markets. Take a look at this chart and commentary:

Many bonds that are perceived to be the safest credit risks guarantee investors a loss. To our knowledge this has never occurred on such a widespread basis in the history of finance. Yields on nearly a third of the euro area’s $6 trillion of government bonds are below zero, which means that bond buyers are guaranteed to lose money if they buy these bonds and hold them to maturity.

The risk of widespread defaults also lurks in the world’s credit markets.

Here’s what well-known hedge fund manager Stanley Drunkenmiller recently said:

Back in 2006/2007, 28% of debt being issued was B-rated. Today 71% of the debt that’s been issued in the last two years is B-rated. So, not only have we issued a lot more debt, we’re doing so with much [lower standards].

All told, the world’s credit markets are on very unstable ground. Expect that ground to get even shakier in the months ahead.


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NASDAQ Leads the Stock Market Bubble

Another bubble is about to pop. In March 2015, we covered the return to a popular fascination with technology.

The striking resemblance to 2000’s technology mania is not going unnoticed. How can it? With the NASDAQ’s much heralded return to 5000 and magazine covers proclaiming “Google Wants You To Live Forever,” concern about an “asset bubble” is being raised. But this is actually another throwback to early March 2000, when the NASDAQ reached its all-time high and the Financial Forecast remarked on a “public ambivalence toward warnings of any kind.”

This March 7 headline from a major financial paper offers a perfect example of how this “normalization” works: “Forget 2000. It’s a Different Investing Ballgame.” Really? Yeah, really. “It really is different this time,” says another. “The crazy valuations seen at the turn of the millennium — when silly concepts, such as collecting eyeballs, attracted billions of dollars from breathless speculators wanting to get in on the new, new thing — are absent.”

There’s just one problem with this assessment, it’s not accurate. Here’s the reality, or should we say surreality, as depicted in Bloomberg on March 17:

The Fuzzy, Insane Math That’s Creating
So Many Billion-Dollar Tech Companies

The article discloses how companies are shooting to “astronomical valuations,” mostly with Internet ideas that capture people’s bullish imaginations and, as in 2000, cause them to look beyond mundane things such as cash flow and profits. Once again, such stone-age metrics are less important than “the number of people using the product” and “whether they pay for it. Investors salivate over what’s called ‘hockey-stick’ growth curves, indicating massive uptake. Costs, especially operations costs, are largely ignored.”

As in 2000, the fever has been spreading fast. According to Bloomberg, start-ups with billion-dollar valuations were once dubbed “unicorns” because of their rarity. Now, Bloomberg counts more than 50 of them. Many have expanded ten-fold, so a new buzzword, “decacorn,” now applies to those with capitalizations of more than “$10 billion, which includes Airbnb, Dropbox, Pinterest, Snapchat and Uber.”

Of course, the driving force behind many of these investments is the same–a fear of missing out (FOMO).

“A severe case of FOMO can cause some to do crazy things to get into the hottest deals,” says Bloomberg. This is exactly what the Financial Forecast said in March 2000, when we explained why people fail to heed ample warnings in the final throes of a mania: “Acting on such an opinion might mean missing something on the upside. ‘The average person must ride it out,’ says [a] Nobel Prize winner. Quotes such as these will deserve preservation in bronze when the bear market is mature.” Clearly, that time still lies ahead.

For compelling Elliott wave evidence of a culmination of the Mania Era, see the five-wave advance in the share price of the current technology leader, Apple Inc., on page 3 of the March Elliott Wave Theorist. As the Theorist notes, after rising more than 14,500% over the past 12 years, S&P Dow Jones Indices added the stock to the Dow Jones Industrial Average on March 19.

This is one more remarkable parallel to the prior technology mania, as Microsoft was added to the Dow Industrials just prior to its January 2000 top. Here’s how EWFF interpreted its addition in November 1999:

The ultimate concession to technology is due November 2, when Microsoft will be inducted into the Dow Jones Industrial Average. For most of the bull market, the world’s most dominant stock was excluded from the world’s premier blue-chip average. But just as RCA was added to the Dow in October 1928 (and removed in 1932), Microsoft has assumed its rightful place at the head of the pack, in time to lead the way down.

Apple has just been acknowledged in the same way and for the same reason. The pressure to pile onto the technology bandwagon has proved irresistible to the Dow’s purveyors. This has generally happened when the most important stock market reversals were at hand.

Editor’s note: This article is from Elliott Wave International’s brand-new investment report, Investors Face a Giant, Historic Bubble. It was originally published in the April issue of The Elliott Wave Financial Forecast, published March 27, 2015. For a limited-time, EWI has agreed to give our readers exclusive free access to the full report. Please click to read this most enlightening report now.

Is Unemployment Rate Really Getting Better?

The “Big Lie” About the U.S. Jobs Picture

Some 30 million people are either out of work or severely underemployed

The financial media heve been featuring stories with an upbeat outlook for the U.S. economy.

For example: The economy is on track for “the fastest growth in a decade” (Associated Press), and “Experts expect jobs aplenty in ’15” (USA Today).

This upbeat tone is related to December’s U.S. jobless rate of 5.6%, its lowest since June 2008.

But Jim Clifton, Chairman and CEO of Gallup, offers a different perspective on the jobs data. His February 3 article on Gallup’s website was headlined, “The Big Lie: 5.6% Unemployment.”

Right now, we’re hearing much celebrating from the media, the White House and Wall Street about how unemployment is “down” to 5.6%. The cheerleading for this number is deafening.

None of them will tell you this … If you are so hopelessly out of work that you’ve stopped looking over the past four weeks — the Department of Labor doesn’t count you as unemployed. … Right now, as many as 30 million Americans are either out of work or severely underemployed. …

If you perform a minimum of one hour of work in a week and are paid at least $20 … you’re not officially counted as unemployed … .

If you … are working 10 hours part time because it is all you can find … the government doesn’t count you in the 5.6%.

There’s no other way to say this. The official unemployment rate … amounts to a Big Lie.

A Federal Reserve chart shows that the civilian labor force has been shrinking for 15 years.

The February Elliott Wave Financial Forecast comments:

Why is [the U.S. Labor Force Participation Rate] falling when job growth is rising? The answer, we think, is the emerging force of deflation. Notice that the peak participation rate of 67.3% came from January to March 2000, as the major stock indexes topped, after which inflation first began to falter. When stocks rallied to their 2007 top, there was a mild bounce in the rate, but the latest stock market rally failed to generate any sustained rise in the rate of work force participation. Workers appear so discouraged that the pool of available employees is back to where it was in 1978. The opening chapter of Conquer the Crash …states, “The persistent deceleration in the U.S. economy is vitally important, because it portends a major reversal from economic expansion to economic contraction.”

What will the jobless picture look like at the bottom of an economic contraction?

The third edition of Conquer the Crash published in July 2014 and forecast:

The true unemployment rate in the U.S. and in most countries around the world will rise and eventually exceed 25 percent … .


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Why Expectations for Business Activity are Plunging

Editor’s note: This article is excerpted from “The State of the Global Markets 2015 Edition,” a comprehensive report by Elliott Wave International, the world’s largest independent market-forecasting firm (data through December 2014). You can download the full, 53-page report here — 100% free.

In its November issue, published on Oct. 31, EWI’s European Financial Forecast discussed the plunging 5-year/5-year forward swap, a market-based gauge that measures inflation expectations from five years to 10 years out, and stated, “Even the central bank’s preferred inflation metric shows nothing but flat or falling prices over the foreseeable future.”

In November, a “sharp deterioration in sentiment” (WSJ, 11/17/14) popped up in the economic surveys.

According to a poll conducted by Germany’s IW Economic Institute, nearly one quarter of the 2,900 companies surveyed (almost double the percentage from last spring) plan to cut investments in 2015. Likewise, the percentage of companies planning to increase spending fell from 44.1% to 29.8%.

In fact, the more officials seem to push the story of a great global recovery, the harder the deflationary evidence seems to push back.

Global Business Activity Expectations

Notice that the balance of companies expecting to increase business activity in the next 12 months just fell to its lowest level since the survey began five years ago.

Markit’s accompanying analysis presents many more lowlights (emphasis added):

Worldwide

  • Expectation of business activity weakened among both manufacturers and service providers.
  • Hiring and investment plans rest at post-crisis lows.
  • Price expectations deteriorated further.
  • Optimism in manufacturing fell to its lowest since mid-2013, while optimism in services slumped to the lowest in the survey’s five-year history.

In the United States

  • The most striking development was the extent of the downturn in the U.S., where optimism hit a new survey low, with the service sector seeing a particularly dramatic decline.”

In Europe and Emerging Markets

  • Business confidence in Spain and Italy was the lowest recorded since this time last year.
  • In Germany and France, confidence was far lower … with both ‘core’ countries seeing the lowest levels of optimism since June of last year.
  • Business expectations across the main emerging markets fell on average to the lowest seen in the survey’s five-year history.

To be clear, deeply rooted economic pessimism often precedes a low in stocks and social mood. But what exists today is something quite different: Namely, investors display excessive optimism toward stocks, while economic fundamentals only continue to deteriorate. We have noted, for example, that J.P. Morgan equity strategists just upgraded European stocks from underweight to overweight, believing that the region is “due a period of outperformance vs. the U.S.” (Reuters, 11/17/14) Yet, economists at J.P. Morgan just downgraded its GDP forecast, calling for world growth to come in at 2.6%. The International Monetary Fund likewise cut its forecast for global growth — for the sixth time in less than two years. At 3.3%, world growth will fall from 3.6% a year ago and from 4.1% a year before that.

We simply don’t buy any of these projections. The critically stretched position of the world’s major stock markets calls for economic downgrades to persist until the worldwide economy enters another full-blown contraction, which is likely sometime in 2015.

Editor’s note: This article is excerpted from “The State of the Global Markets 2015 Edition,” a comprehensive report by Elliott Wave International, the world’s largest independent market-forecasting firm. For a limited time, you can download the full report, for free, and use its year-in-preview insights to prepare, survive and prosper through the global investment landscape of 2015 and beyond. Download the full, free, 53-page report here.

3 Ways To Identify Support and Resistence

We will consider three ways to identify price support and resistance in the markets you trade.

  1. Previous highs and lows
  2. Trendline support
  3. Fibonacci Ratios

These examples are adapted from Jeffrey Kennedy’s time tested Trader’s Classroom service.


1) Uptrends terminate at resistance while downtrends terminate at support. Previous highs and lows often act as resistance and support.

In ALCOA Inc (AA), the September 2012 selloff found support near the previous July 2012 low.

The February 2013 peak occurred following a test of resistance at the January peak at $9.33.

2) Trendlines offer resistance and support for prices.

The 2008 advance in Gold found support numerous times near the trendline that connected the lows of the move, as you can see below:

Conversely, the trendline connecting the highs of Wheat’s 2012-2013 decline provided resistance for countertrend price action.

3) Fibonacci ratios also identify resistance and support. As Elliotticians, we often look at retracements, the most common being .382, .500 and .618. In Akamai Tech, Fibonacci support ignited the July and November 2012 rallies:

In the same chart you can also notice how Fibonacci resistance in AKAM halted the July 2012 and February advances.

For more free trading lessons on trendlines, download Jeffrey Kennedy’s free 14-page eBook, Trading the Line — 5 Ways You Can Use Trendlines to Improve Your Trading Decisions. It explains the power of simple trendlines, how to draw them, and how to determine when the trend has actually changed. Download free eBook now. We believe this eBook will provide you with a tool set that will improve your success ratio at trading financial markets.

From Faith to Failure: Abenomics

After decades of deflation in Japan, we thought there was hope and the deflating money supply and falling prices were gone. But during the last two quarters we once again witnessed relentless deflationary pressure in Japan despite record stimulus that promised inflation. Well, inflation is missing in action. Deflation still rocks the nation! Surprised?

Why the biggest monetary stimulus effort in the world did NOT stop deflation in its tracks

When Shinzo Abe became the Prime Minister of Japan in December 2012, he was regarded with the kind of reverence that politicians dream about. He was featured in a hit pop song (“Abeno Mix”), hailed as a “samurai warrior,” and featured on the May 2013 The Economist cover as none other than Superman.

But in the two short years since, Abe as Superman has been struck down by the superpower-zapping force of economic kryptonite. On November 17, government reports confirmed that Japan’s brief respite from a 20-year long entrenched deflation was over as the nation’s 2nd & 3rd quarter GDP shrank 7.2% and 1.6% respectively.

In the words of a November 20, 2014 New York Times article:

I’d say it’s time to call Abenomics a failure. All that is left is disappointment.

Why did Abenomics fail? That’s the one question “being asked in a shell shocked Japan,” observes the same New York Times piece.

Their shock is understandable. Shinzo Abe spearheaded the boldest and biggest economic stimulus campaign to revive growth and reduce debt not just in Japan’s history, but in the world’s. To give you an idea of its magnitude, consider this:

Abe greenlit daily quantitative easing interventions by the Bank of Japan equivalent to $15 billion per day.

– VS. –

At its peak, the U.S.’s QE program authorized “only” $85 billion a month.

Japan’s QE was three times larger than the Fed’s! According to the mainstream analysts, there was no way the strategy could fail:

“With Abenomics, Japan Catches a Sense of Revival… The architect of this resurgence is Prime Minister Shinzo Abe. His plan reflects a breadth of vision and coordination that no leader until Abe seemed interested in.” (Washington Post, May 24, 2013)

But, despite its historic size and the widespread faith in its success, Elliott Wave International’s team of analysts foresaw an entirely different outcome — namely, Abenomics would not be the alchemical instrument of economic change:

January 22, 2013: The Bank of Japan ups its inflation target rate to 2% and makes an “open-ended commitment to buy assets until the target is in sight.”

February 2013 Elliott Wave Financial Forecast: “In the area of central bank intervention, the ‘juice’ continues to flow… The effort to escape gravity illustrates just how detached central bankers remain from the reality that their efforts are imprudent, unfair, and doomed to fail.”

February 2013: Abenomics is hailed as the catalyst for the yen’s collapse.

March 2013 Asian Pacific Financial Forecast: “Most conventional observers are convinced that Japanese Prime Minister Abe’s New Liberal Democratic Party (LDP) administration has caused the yen to plunge… simply by promising to do whatever it takes to stop Japan’s deflation.”

“Conventional observers are just doing what they always do: looking back to around the start of a financial trend, finding a significant event from around that time… and then assuming that the event caused the trend.”

Chart of JPY/USD shows, however, that the yen completed a large-degree fifth wave in November 2011, one year BEFORE Abe even took office!

May 18, 2013 The Economist cover of Abe as superman writes: “Mr. Abe is electrifying a nation that had lost its faith.”

May 2013 Elliott Wave Financial Forecast: “Faith in the power of central banks to stem the ebbing tide of [deflation] remains strong. Ultimately, however, all of these efforts will fail.”

June 2013 Elliott Wave Financial Forecast: “As Japan’s economy teetered, Japanese Prime Minister Shinzo Abe instituted an unprecedented spending and monetary easing scheme despite a gross public debt that projects to a whopping 230% of GDP. It follows at least a dozen prior ‘stimulus’ efforts all of which failed. This effort is simply larger, so it will prove to be an even more spectacular failure.”

It’s been 2 year since Abenomics began, and the November 20 New York Times article confirms “its failure.” Since its inception:

  • Japan’s government debt has increased to 250% of GDP
  • The index of Japanese industrial output is 96.8, the exact same reading as 1989
  • Real household income has fallen by 6%
  • And Japan has an 11 trillion yen trade deficit -vs.- a 5 trillion yen trade surplus in 2010

Now, EWI’s educational resource team has put together a new, free report titled “What You Need to Know Now About Protecting Yourself From Deflation” that explains why

“The psychological aspect of deflation and depression cannot be overstated. When the social mood trend changes from optimism to pessimism, creditors, debtors, producers and consumers change their primary orientation fromexpansion to conservation. As creditors become more conservative, they slow their lending. As debtors and potential debtors become more conservative, they borrow less or not at all… These behaviors reduce the velocity of money, the speed at which it circulates to make purchases, thus putting downside pressure on prices. These forces reverse the former trend.”

A deflationary psychology has been entrenched in Japan for the last 20 years. It is now arriving in Europe. You will be inundated by news reports from all four corners of the globe on deflation’s progress, and what the world’s monetary authorities are doing to ensure it will remain a temporary, contained and manageable event.

The worst thing you could do is rest on their promises.

Our new, 11-page report “What You Need to Know Now About Protecting Yourself From Deflation” is 100% free. It takes your understanding of this complex economic shift to a radical level AND gives you the ultimate advantage of knowing how to thrive during economic downturns.

The best part is, the entire report is now available to you free — simply by joining Club EWI and its rapidly expanding community.Go ahead and click here for instant access!


This article was syndicated by Elliott Wave International and was originally published under the headline Abenomics: From Faith to Failure. 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.

Can Europe’s Deflation Be Like Japan?

While the stock market has recently seen all time highs in the the United States, despite Federal Reserve’s quantitative easing runs, inflation has been mute. In fact there is talk that FED may just keep printing money if deflation continues to be a concern! Across the ocean, money printing has continued for some years as well, but deflationary forces still cause enough worries. Late the mainstream media started to ask the taboo question: Can Europe go into a deflationary period like Japan had after 1990?

Europe: The ONE Economic Comparison That Must Not Be Named… Was Just Named

The Continent is now teetering on the edge of a “Japan-style” deflation. Here’s our take on it.
It’s happened. The one economic comparison Europe has dreaded more than any other; the name that’s akin to Lord Voldemort for investors has been uttered: “deflation.”

And it’s not just “deflation.” You can still spin that term in a positive light if you get creative enough. Say, for example,

“Falling prices during deflation actually encourage consumers to spend.”

But once you add the following two very distinct words, there’s no way to turn that frown upside down. And those words are“Japan-style” deflation.

Japan has languished in a deflationary cycle pretty much since the late 1990s, its once booming economy reduced to ‘lost decades’ of stagnation. Europe is now teetering on the edge.” (Sept. 19, Associated Press)

Which begs an obvious question: Weren’t Europe’s central banks supposed to prevent this very scenario from happening via their unprecedented, 4-year-long campaign of “money-printing,” bond-buying and interest-rate-slashing?

The answer to that question is… yes. Those actions were indeed supposed to boost inflation.

What’s more, no one can say the European Central Bank didn’t utilize every available tool in their arsenal to try and accomplish that end. The problem is they were fighting a losing battle.

And, we are both happy and sad at the same time to report that from the very beginning, when the first rate cut was loaded into the save-the-economy cannon, we at Elliott Wave International foresaw that Europe’s retreat toward deflation was unavoidable.

Here’s a quick recap of what led us to that conclusion.

– 2011 –

January 2011: The “D” word is way off the mainstream radar. Soaring oil, grain, and commodity prices has fueled widespread fears of runaway inflation. Writes one January 22, 2011 LA Times article:

“Around the world, many countries aren’t confronted with the debilitating forces of deflation, but the opposite — inflation. Annualized inflation in the euro zone rose above the 2% target rate for the first time in more than 2 years.”

February 2011: The European Central Bank unveils its brand-new Long Term Refinancing Operations (LTRO), extending nearly half a trillion euros in 3-year loans to banks at negligible interest rates — to stimulate the economy (and inflation).

July 2011: U.K.’s consumer price index declines, prompting a sigh of relief, not a shudder of fear from the Bank of England, who says “we can now breathe a little easier.”

(VS.)

Our August 2011 European Financial Forecast:

“We maintain our stance, however, that the looming threat is not inflation but deflation. Far from a sense of relief, the Banks’ paramount feelings should soon develop into an unrelenting dread.”

September 2011: U.K.’s consumer price index peaks at 5.2% and officially sets the downtrend in motion.

– 2012 –

January 2012: The Bank of England adds another 50 billion pounds to its asset purchase program, bringing its 3-year campaign of “money-printing” to 325 billion. The European Central Bank is less than 14 years old, yet total assets at the ECB breach 3 trillion.

February/March 2012: U.K. producer price inflation comes in higher than expected, prompting one U.K. economist to say: “PPI: Another wake-up call for apoplithorismosphobes,” the clinical term for those who fear deflation. The economist goes on to recommend that sufferers “seek therapy.” (March 12 Wall Street Journal)

(VS.)

Our July 2012 European Financial Forecast:

“Our models say that inflation rates will keep failing until they’re again measuring the rate of deflation as they last did briefly in 2009.”

August 2012 European Financial Forecast makes the first comparison of Europe to Japan:

“European leaders,” by slashing rates and printing money “seem determined to replicate Japan’s experience. Their efforts will not stop consumer price deflation.”

– 2014 –

May 2014 European Financial Forecast:

“The chart shows that British CPI accelerated lower after falling from a counter-trend peak of 5.2% back in September 2011, with year-over-year price growth just ticks above its late-2009 low.

“More than half of the 28 EU nations either teeter on the brink of deflation or have succumbed to falling prices already.

“The following chart shows that economic stagnation has reached even Germany, Europe’s most robust economy.”

September 2014 European Financial Forecast:

“In a related phenomenon, the press has now jumped on the slew of similarities between Europe’s flagging economy and Japan’s… Clearly, the parallel paths of the two regions have become impossible for the press to ignore.

“The central bank’s latest deflation-fighting contrivance is a €400 billion package of targeted LTRO loans, which are designed to compel banks to lend to ordinary business owners. Also like Japan, the ECB has slashed its main refinancing rate to 0.15% and now charges for banks’ overnight deposits. The result? Shown below, Europe’s largest economy, Germany, just contracted 0.2%; French economic output has ground to a halt; and Italy just entered its third recession since 2008.

The world has finally woken up to the possibility of a Japan-style deflation in Europe — years after the writing was already on the wall.

Now, you need to prepare for what’s to come.

The best part is, Elliott Wave International’s Founder and President, Robert Prechter, as written a book that can help you do just that. And you can read 8 chapters of Prechter’s bestseller, Conquer the Crash, free.


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Gold Price Direction

Where is the gold price heading? Will gold keep crashing? Since hitting a record high of $1921.50 per ounce in September 2011, gold prices have erased 30% in value. By the end of day on October 3, 2014, gold prices were circling the drain of a 15-month low.

After such devastation, the global community of gold analysts, advisors and investors finds itself scattered as an anthill colony after being stepped on by a giant bear paw. This recent Forbes article captures the divisiveness among gold watchers:

“‘Survey Participants Split Over Gold Price Direction‘ as a potential decline in the U.S. dollar competes against ‘geopolitical reasons’ for prices to bounce.”

This magnifies an important point, namely:

Mainstream financial analysis uses news events to gauge where prices may be headed. The problem with this strategy is that it does not anticipate trend changes — it only reacts to the changes that have already happened, almost always leaving you one step behind.

Naturally, this reliable unreliability leads to uncertainty among those invested in the market’s trend.

Elliott wave analysis takes a radically different approach. Rather than looking outside the market for clues into future price action, Elliotticians look to the price charts themselves. There, they identify fixed and finite patterns which shape the market’s near- and long-term character.

You can use gold’s 3-year-long sell-off as a prime example. Back in 2010-2011, gold’s bullish “fundamental” picture was allegedly in the bag. The U.S. Federal Reserve just launched its $1-trillion-a-year quantitative easing program, which was widely expected to fuel gold’s inflationary fire. An August 25, 2011 Gallup Poll confirmed:

“Americans Choose Gold as the Best Long-Term Investment.”

Elliott Wave International, however, saw a different outcome for gold on the metal’s price chart: an impending decline. In theSeptember 2011 Elliott Wave Financial Forecast, our analysis included the following chart, which showed gold prices at or near the end of a decade-long, 5-wave advance.

Gold’s wave structure is consistent with a terminating rise. [Elliott waves progress and therefore top out in 5 waves]. As this monthly chart shows, prices exceeded the upper line of the channel formed by the rally from the 1999 low in what Elliott terms a throw-over. A throw-over occurs at the end of a fifth wave, and represents a final burst of buying. The pattern is confirmed as complete once prices close back under the upper line, which currently crosses $1650.”

So, that was then. What about now?

Today, the mainstream is divided between opposing fundamental forces. But at the San Francisco Money Show in August 2014, Elliott Wave International’s chief market analyst Steve Hochberg identified a very compelling reason to form a united front in gold’s future — an Elliott wave triangle pattern.

You can hear the exact point when Steve shared this exciting development to his audience via this clip from his Money Show presentation:

Steve goes on to explain how pinpointing this triangle helps him lay down a forecast for “what gold is going to do from here on out.”

Would you believe that gold prices should “rally” for a year, maybe even two??

Would you also believe you can watch Steve’s entire Money Show presentation on gold (not just the 30-second preview featured here!), FREE?

Well, you absolutely can. For a limited time only, Elliott Wave International is releasing Steve’s Money Show presentation on gold — in two 5-minute long videos.

This very special offer is FREE to all Club EWI members. Simply complete your free Club EWI profile and get instant access to Steve’s presentation >>

Prepare for the Stock Market Crash

How to Prepare for the Coming Crash and Preserve Your Wealth

Bob Prechter first released Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression during a stock-market high in 2002, and it quickly became a New York Times–bestseller. Now he has updated the book with 188 new pages for a second edition, and it looks like it, too, will be published near a stock-market high. John Wiley & Sons plans published the new edition in late October. Visit Elliott Wave International for information on how to order the new edition from major online retailers.

As was widely reported in the dark days of late February and early March 2009, Prechter called for the start of the biggest stock market rally since the 2007 high. He recommended speculators close the S&P short position that he recommended at 2007 top. Since then, the S&P has soared more than 80 percent in 2 years and seems to have topped in 2011. During the rally Prechter has called virtually all the minor tops to get in short positions for speculators. As of October 2011, his last short at the stock market top and the gold short has paid off. In his monthly newsletters, Prechter continues to remain bearish and thinks market will continue to decline with lower highs and lower lows with many bear market rallies that will make it look like a bull market.

The first edition of Conquer the Crash, which was published in early 2002, was “on the mark” with regard to our current economic environment — so much so that it’s uncanny. Prechter’s message has been good for investors who kept their money safe and for speculators who profited from declines. And he still expects a great buying opportunity ahead for those who can keep their money safe until it arrives. Here is a short list of some of the accurate predictions he made in 2002 that have come to fruition:

Credit Deflation

“Usually the culprit behind [simultaneous stock and real estate] declines is a credit deflation. If there were ever a time we were poised for such a decline, it is now.” Chapter 16

Bailout Schemes

“If [governments] leap unwisely into bailout schemes, they will risk damaging the integrity of their own debt, triggering a fall in its price. Either way … deflation will put the brakes on their actions.” Chapter 32

Banking and Insurance Stocks

“We will see stocks going down 90 percent and more … [and] bank and insurance company failures….” Chapter 14

Collateralized Securities

“Banks and mortgage companies … have issued $6 trillion worth of [securitized loans]…. In a major economic downturn, this credit structure will implode.” Chapter 19

Derivatives

“Leveraged derivatives pose one of the greatest risks to banks….” Chapter 19

Mortgage-Backed Securities

“Major financial institutions actually invest in huge packages of … mortgages, an investment that they and their clients (which may include you) will surely regret…. Chapter 16

Fannie Mae and Freddie Mac

“Investors in these companies’ stocks and bonds will be just as surprised when [Fannie and Freddie’s] stock prices and bond ratings collapse.” Chapter 25

Banks

“Banks are not just lent to the hilt, they’re past it. In a fearful market, liquidity even on these so called ‘securities’ [corporate, municipal, and mortgage-backed bonds] will dry up.”… One expert advises, ‘The larger, more diversified banks at this point are the safer place to be.’ That assertion will surely be severely tested….” Chapter 19

Insurance Companies

“The values of insurance company holdings, from stocks to bonds to real estate (and probably including junk bonds as well), will be falling precipitously…. As the values of most investments fall, the value of insurance companies’ portfolios will fall…. When insurance companies implode, they file for bankruptcy….” Chapters 15, 24

Real Estate

“What screams ‘bubble’ – giant, historic bubble – in real estate today is the system-wide extension of massive amounts of credit to finance property purchases…. [People] have been taking out home equity loans so they can buy stocks and TVs and cars…. This widespread practice is brewing a terrible disaster.” Chapter 16

Rating Services

“Most rating services will not see it coming.” Chapter 25

Political Leaders

“A leader does not control his country’s economy, but the economy mightily controls his image.” Chapter 27

Short-Selling Ban

“In a bear market, bullish investors always come to believe that short sellers are ‘driving the market down’…. Sometimes authorities outlaw short selling. In doing so, they remove the one class of investors that must buy.” Chapter 20

Psychological Change

“When the social mood trend changes from optimism to pessimism, creditors, debtors, producers and consumers change their primary orientation from expansion to conservation….” Chapter 9

Confidence

“Confidence has probably reached its limit. A multi-decade deceleration in the U.S. economy … will soon stress debtors’ ability to pay…. Total credit will contract, so bank deposits will contract, so the supply of money will contract….” Chapter 11

Falling Tax Receipts

“Governments … spend and borrow throughout the good times and find themselves strapped in bad times, when tax receipts fall.” Chapter 32

“Retirement programs such as Social Security in the U.S. are wealth-transfer schemes, not funded insurance, so they rely upon the government’s tax receipts. Likewise, Medicaid is a federally subsidized state-funded health insurance program, and as such, it relies upon transfers of states’ tax receipts. When people’s earnings collapse in a depression, so does the amount of taxes paid, which forces the value of wealth transfers downward.” Chapter 32

“The tax receipts that pay for roads, police and jails, fire departments, trash pickup, emergency (911) monitoring, water systems and so on will fall to such low levels that services will be restricted.” Chapter 32

For more information on the new second edition of Conquer the Crash, visit Elliott Wave International. Bob Prechter has added 188 new pages of critical information to his New York Times bestseller.

Bob Prechter’s “Conquer The Crash”: Eight Chapters For Free

When EWI President Robert Prechter sat down to write the first edition of Conquer The Crashin 2002, the idea that the United States would enter a period of what news authorities coined “economic Armageddon” several years later was unheard of.

Flashing back, the major blue-chip averages were rebounding off a historic bottom, the notorious dot.com bust was making way for a powerful housing boom, Fannie Mae’s chief executive was named “the most confident CEO in America,” then President George Bush was enjoying a 60%-plus approval rating, Gulf War II hadn’t begun yet, and when it did, a “quick and easy victory” was supposed to follow, and the Federal Reserve was largely credited with slaying the big, bad bear via the sharp blade of monetary policy.
Five years later, the tables turned. The U.S. housing market endured its worst downturn since the Great Depression; Fannie Mae’s CEO was ousted amidst a mortgage crisis of incalculable damage. George W. Bush left the oval office with a record low approval rating of 25%, and the expected “cakewalk” victory in Iraq became a “quagmire” and national dilemma.

Anticipating these and other “shocks” to the global system is the unparalleled achievement of “Conquer The Crash.” Here, the following excerpts from the book put any doubt to rest:

  • Housing: “What screams bubble – giant historic bubble – in real estate is the system-wide extension of massive amount of credit.” And “Home equity loans are brewing a terrible disaster.”
  • Bonds: “The unprecedented mass of vulnerable bonds extant today is on the verge of a waterfall of downgrading.”
  • Fannie Mae & Freddie Mac: “Investors in these companies’ stocks and bonds will be just as surprised when the stock prices and bond ratings collapse.”
  • Politics: “Look for nations and states to split and shrink.” And — “The Middle East should be a complete disaster.”
  • Credit Expansion Schemes “have always ended in a bust.” And — “Like the discomfort of drug addiction withdrawal, the discomfort of credit addiction withdrawal cannot be avoided.”
  • Banks: “Banks are not just lent to the hilt, they’re past it. In a fearful market, liquidity even on these so called ‘securities’ [corporate, municipal, and mortgage-backed bonds] will dry up.” (176)

If the tools in Bob Prechter’s analytical toolbox, namely Elliott wave analysis and socionomics (Prechter’s new science of social prediction based on the Wave Principle), enabled him to foresee these “sea changes” in the economic, social, and political landscape — the only question is: What else do the pages of the “Conquer The Crash” reveal?

Well, your opportunity to find out just got a whole lot easier. Right now, you can download the 8-chapter Conquer the Crash Collection, free. It includes:

Chapter 10: Money, Credit And The Federal Reserve Banking System
Chapter 13: Can The Fed Stop Deflation?
Chapter 23: What To do With Your Pension Plan
Chapter 28: How To Identify A Safe Haven
Chapter 29: Calling In Loans & Paying Off Debt
Chapter 30: What You Should Do If You Run A Business
Chapter 32: Should You Rely On The Government To Protect You?
Chapter 33: Short List of Imperative ‘Do’s’ & ‘Don’ts”

Visit Elliott Wave International to learn more about the free Conquer the Crash Collection.

How to be safe in an economic crash

People worry. Sometimes it helps, sometimes there is nothing we can do. I came across some research on the subject of worry. Here’s how it was presented:

Things People Worry About:

  • things that never happen – 40%
  • things which did happen that worrying can’t undo – 30%
  • needless health worries – 12%
  • petty, miscellaneous worries – 10%
  • real, legitimate worries – 8%

Of the legitimate worries, half are problems beyond our personal ability to solve. That leaves 4% in the realm of worries people can do something about.

I thought about our gigantic national debt and weak economy. These seem to fit into both subcategories of “real” worries. You can’t do much as an individual to solve the nation’s debt and economic problems, yet you can prepare for a worsening economic downtrend.

Do we see evidence for an economic turn for the worse?

Well, consider that the evidence is so overwhelming that it took 456 pages of the second edition of Robert Prechter’s book, Conquer the Crash, to cover it. And since that book published, Prechter has consistently devoted his monthly Elliott Wave Theorist to the facts and evidence behind his forecast.

Here’s a chart from the book that was updated by Elliott Wave International in March 2012:

  • The downturn from 2008 is critically important, as it shows that after an almost unbroken 60-year climb, the contraction is underway. It surely has much further to go, because it is still a third higher than it was at the outset of the last debt deflation in 1929.
  • The Elliott Wave Financial Forecast, March 2012
  • The rating agencies are well aware of what the above chart means. You probably know that Standard & Poor’s downgraded U.S. debt from the nation’s long-standing triple-A to AA+. Now, another rating agency has taken their rating even lower:
  • Rating firm Egan-Jones cuts its credit rating on the U.S. government to “AA” from “AA+” with a negative watch, citing a lack of progress in cutting the mounting federal debt.
  • CNBC.com, April 5
  • Robert Prechter’s bestseller, Conquer the Crash, provides practical information about what you can do to protect your finances in the coming economic implosion. And right now, Elliott Wave International is offering 8 lessons from Conquer the Crash in a free 42-page report that covers:
  • What to do with your pension plan
  • How to identify a safe haven
  • What you should do if you run a business
  • A Short List of Imperative “Dos” and Don’ts”
  • And more

In every disaster, only a very few people prepare themselves beforehand. Discover the ways you can be financially prepared and safe.

Get Your FREE 8-Lesson “Conquer the Crash Collection” Now >>

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