If there’s one thing we know, it’s that this won’t continue forever. Periods of high volatility ALWAYS follow periods of low volatility. Are you ready for some “fireworks” in the stock market?

Our friends at Elliott Wave International are preparing their readers for opportunities and risks ahead. Today, I’m excited to share a new, free 12-minute video interview with EWI’s Chief Market Analyst, Steve Hochberg. For a limited time you can see it, FREE.

Steve walks you through his current outlook for U.S. stocks and shares 7 charts for the DJIA, E-Mini S&P 500, Russell 2000 and more — plus the sentiment indicators he’s tracking, to show you exactly what he sees next for U.S. equities.

This high-caliber market forecasting is normally reserved only for EWI’s paying subscribers! So, don’t miss this chance to see what’s in store for U.S. stocks (and MUCH more) — free.

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About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world’s largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.

By Elliott Wave International

Let’s assume financial markets are driven by news events. Negative news items cause prices to fall, while positive items fuel rallies. Easy enough, right?

Not exactly. See, there are several problems with this premise, most of all this: Investors’ interpretation of the news is constantly changing. To use those events as a gauge of future price action is like trying to shoot a straight arrow in the middle of a tornado.

Take, for instance, the recent news events surrounding the euro/pound currency exchange rate.

On May 18, a stronger-than-expected UK retail sales report was initially seen to be a major fundamental coup for the pound, as this news source makes plain:  

“Pound to Euro Exchange Rate: Sterling SURGES After UK Retail Sales Smash Expectations… Sterling woke from its slumber and then some, following the strong April retail sales data. This robust number has rekindled optimism in the ability of the UK economy to ride out the ongoing political uncertainty.

“Sterling has rediscovered its fight.” (May 18 Daily Star)

It doesn’t get any more bullish than that!

And yet, the very next day, sterling fell back into its “slumber” as that “rekindled” optimism blew out. Here, one May 19 news source attempts to explain away the pound’s rogue bearish move:

“Pound to Euro Exchange Rate: Sterling FALLS Despite Supportive Economic Growth in UK” (May 19 Daily Star)

So, essentially, the same news event deemed uber-bullish one minute is futile against the pound’s downtrend the next?

How about this instead: News is largely irrelevant to a market’s underlying trend. In our experience, price action is driven by investor psychology, which unfolds as Elliott wave patterns directly on a market’s price chart.

Like, say, the EURGBP. On May 11, our Currency Pro Service analyst Michael Madden identified a powerful bullish set-up on the intraday price chart of the EURGBP — namely, the start of a third-wave rally. Madden wrote:

“We are counting an impulse pattern complete off the 0.8315 low, wave (i) of ((c)), a corrective pullback, wave (ii), must not penetrate the same low in order to keep the bullish forecast alive and will create the next setup for higher in wave (iii).”

From there, the euro soared against the pound in a steady third-wave rally to two-month highs, the pound-“bullish” UK retail sales report notwithstanding:

As for where the euro/pound currency rate is headed next… our Currency Pro Service is 100% certain of one thing: The answer is not in the news!

Learn How the Elliott Wave Principle Can Boost Your Forex Trading Success

Put the power of the Wave Principle to work in your forex trading with this free, 14-page eBook. EWI Senior Currency Strategist Jim Martens shares actionable trading lessons and tips to help you find the best opportunities in the FX markets you trade.

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This article was syndicated by Elliott Wave International and was originally published under the headline EURGBP: A Picture of Elliott Wave Precision. 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.

By Elliott Wave International

In this new interview, Wayne Gorman, the head of our Educational Resources department, explains — based on his 30-year experience as a Wall Street risk manager, trader and analyst — how Elliott waves help you get “ahead of the game.”

Learn the why, what and how of Elliott wave analysis with the Elliott Wave Video Crash Course. Get free, instant access now.

* * * * * * *

[Editor’s note: The text version of the video is below.]

Alexandra Lienhard: Today on ElliottWave TV, I’m talking with Wayne Gorman, the head of Elliott Wave International’s educational resources department. Now Wayne, over the course of your career you’ve taught thousands of investors and traders how to forecast using the Elliott Wave Principle. So I’m curious, in your experience have you found the Wave Principle to be more useful to investors or to traders or both?

Wayne Gorman: I would say– well first Alex, it’s great to be here. I would say that it’s good for both. Using Elliott wave, you can forecast and trade on a short term basis or a long term basis as an investor. So it’s useful for all time frames except maybe the very shortest time frames.

AL: And what’s the best way to get started learning the Elliott Wave Principle? When you’re teaching a new group of students, where do you start?

WG: Yeah, that’s a great question. The first thing that pops into my mind is to read Elliott Wave Principle by Frost and Prechter, that’s how I started. I started back in 1985. And you can’t just read that book once. You may have to read it several times, especially chapters 1 through 4. I myself I recall reading it at least three times before it finally jelled. And even after that, I had to constantly refer back to it. And in addition to that, of course, I would say there was a number of online courses that focused in on specific patterns or guidelines, so that’s helpful. When I started learning it I didn’t have the benefit of a whole library of online courses. I had the book and there was one seminar. It was a series of tapes– they were converted to DVDS. The 10-DVD set. But today we have an enormous amount of resources that you can use, and then you just have to practice. And of course, the best thing is to practice labeling charts where you can compare your labels to an analyst– another analyst who’s using a Elliott wave for the sake of comparison. And that’s how you really get started.

AL: Now you mentioned seminars and online courses, and you’ve taught thousands of people all over the world in seminars, online courses, and one on one consultations, as well. So I’m curious, in your experience, what’s the biggest error that you see investors and traders who are newer to the Wave Principle make?

WG: I would say the biggest error is not sticking with the Wave Principle itself. It’s very difficult to extricate yourself from the old ways of thinking using economic fundamentals. And it’s hard to stay away from being influenced by the news and so on. You really have to divorce yourself from these conventional methods and just stick to Elliott Wave. It takes quite a while, and it’s very tempting to– when you see a piece of news or some type of statement that somebody makes– it’s tempting to fall back on the old ways of doing things. So it’s a matter of discipline. Sticking to the model. You really have to ask yourself, do you really believe in this? Because you must believe in this. You cannot go halfway.

AL: In addition to forecasting using the Wave Principle, you have quite an extensive history of using the Wave Principle to trade both for the companies you worked for and for your personal accounts. So Wayne, simply put, why is the Wave Principle so effective?

WG: Well. I would say the main– well, one of the key advantages is that it helps you to identify turning points well before the fundamentals have turned. In other words, the way the process works is that social mood– which is reflected in the stock market– social mood is the first thing that reacts, and what happens is the economic fundamentals follow. So you can be way ahead of the game if you use Elliott wave because Elliott wave will tell you, will show you when social mood has changed. Because the fundamentals will continue to move in the same direction, even though mood has changed and maybe the stock market has changed. And you can anticipate that if you just rely on the economic fundamentals, you’ll be staying the wrong way for quite some time until they finally turn. So I think it’s that, and the fact that it’s not a gimmick. It’s not a black box thing. It’s well rooted in sociology and psychology. There’s a lot to it, a lot behind it, when you really analyze the psychological and sociological aspects of how people in mass. Mass psychology– how people react. You know, crowd behavior, and how crowd behavior works. And a lot of people just are not aware of that. So again, the big advantage is spotting these turn turning points way in advance of when the fundamentals turn.

AL: Thanks for talking today, Wayne, and offering these insights.

WG: Thanks very much, Alex. It was a pleasure to be here.

By Elliott Wave International

There are nearly 50 commodity markets traded all over the world at any given time. That’s one for every state in the United States.

So, how is an investor or trader supposed to know which of these markets to follow and which ones to dismiss?

Well, for our long-time Commodity Junctures editor Jeffrey Kennedy, the answer is simple: Don’t wait for an Elliott wave pattern to develop on a market’s price chart. But rather, choose price charts that already present discernible Elliott wave patterns.

Jeffery will be the first to admit — sometimes, they show up in the most unlikely of places.

Back in November of 2016, Jeffrey (at a Commodity Junctures subscriber’s behest) found an opportunity on the price charts of a market he never included before in his 20-plus years as EWI’s senior commodity analyst –rubber.

That opportunity took the shape of one of the most exciting Elliott wave patterns: the ending diagonal. It’s a five-wave pattern labeled 1-5 that can only form in the final position of a wave sequence — i.e., wave 5 of an impulse, or wave C of a correction.

Most importantly, when this pattern ends, it’s followed by a swift and powerful reversal that retraces the entire length of the diagonal. Here’s its idealized diagram, in bull and bear markets:

In his November 2016 Monthly Commodity Junctures video episode on rubber, Jeffrey made the case for a post-diagonal thrust UP for the long-suffering rubber market:

“We’ll be discussing a market that I’ve actually never spoken about before. I was surprised to find very high quality wave patterns on the charts. This is how we can label the weekly price chart of rubber.

“An ending diagonal in the wave c position. Subsequent price action has been quite impulsive to the upside. Now, as you know, whenever an ending diagonal terminates, it tends to resolve quite swiftly and quite sharply back to beyond the origin of the pattern, and that comes into play about 285.5.

“As we move into 2017, I suspect that we will have retraced that entire move to the downside that essentially took two-and-a-half years to form.”

From there, rubber prices made a serious commitment to the upside, soaring to a four-year high on January 26.

Now, according to mainstream analysis, rubber’s shocking rebound off 11-year lows is the result of weeks’ long floods in Thailand, the world’s top rubber producer.

You, however, now know the real story: Rubber’s rally began long before the sky’s opened up in Southern Thailand. It kicked off in late November, as the result of a complete Elliott wave ending diagonal pattern.

When it comes to choosing the right commodity market at the right time, the independent perspective of Elliott wave analysis goes a long way.

By Elliott Wave International

March 31, 2014 was no time to issue a bearish forecast for crude oil — or so it appeared.

But that’s exactly the scenario Elliott Wave International’s founder Bob Prechter showed his subscribers in his monthly Elliott Wave Theorist.

In 2013, crude had broken above $100 per barrel. It stayed mostly above that price for several months into 2014. Conventional wisdom was bullish on crude oil.

Yet on March 31, 2014, Prechter showed his readers how the bullish sentiment was actually a strongly contrary indicator. The Daily Sentiment Index then stood at 91% bulls — the most extreme bullish reading in the history of the indicator.

And, more importantly, Theorist charts showed subscribers why the bull run was near an end. The trend should turn soon.

“Markets cannot stand such a high level of optimism among commodity investors for long. Whatever happens to oil prices in coming weeks,” said Prechter. “The outlook is for much lower prices.”

Indeed — just as Prechter said — extreme optimism for crude oil did not stand for long.

The turn came less than three months later, in mid-June 2014. It wasn’t just that crude stopped going up; it crashed.

Through January 2016, the price for a barrel of crude fell 70%.

All that said, here’s what the chart below makes clear: The 2014 forecast was just one of many huge moves in crude in the past 10-plus years. See for yourself how Elliott Wave Theorist subscribers were ready.

Bob Prechter has a decades-long habit of defying expectations and forecasting major turning points. And the same approach that alerted subscribers to the turns in these markets is equally clear about the next big moves in their respective trends.

By Elliott Wave International

On a recent vacation to the Yucatan, my friend decided to get certified in scuba diving.

I, on the other hand, prefer breathing my air above water! But I did tag along with her to one of the classes, anyway. She learned how to handle and interpret all the various diver gauges: gas pressure, submersive pressure, depth, and on.

The one feature all those indicators had in common was a bold, red line to indicate the level the diver must obey to stay out of danger.

That’s when it hit me: Scuba-diving is a lot like financial markets. Investors and traders jump in — and use an array of safety gauges to keep them on the right side of price action.

Well, at least those investors and traders who use technical market indicators. For them, those bold, red lines indicating the point of danger — those are equivalent to the most critical component of market analysis: protective stops. The second prices cross this line, it’s time to “swim back up to the surface” and safely re-adjust your position.

For any investor/trader, then, the ultimate goal is to clearly identify these life-“lines” ahead of time, before jumping in. That, dear friends, is where our newest, FREE report “How to Set and Manage Stops With the Wave Principle” comes in.

Here is an excerpt:

“Let’s begin with rule No. 1: Wave two will never retrace more than 100% of wave one.

“In Figure 4-1, we have a five-wave advance followed by a three-wave decline, which we will call waves (1) and (2).

“An important thing to remember about second waves is that they usually retrace more than half of wave one, most often making a .618 Fibonacci retracement of wave one. So in anticipation of a third-wave rally — which is where prices normally travel the farthest in the shortest amount of time — you should look to buy at or near the .618 retracement of wave one.

“Where to place the stop: Once a long position is initiated, a protective stop can be placed one tick below the origin of wave (1). If wave two retraces more than 100% of wave one, the move can no longer be labeled wave two.”

Okay. Now let’s see how this strategy plays out in the recent performance of a real world market: The U.S. dollar/Japanese yen exchange rate (USDJPY). On December 16, our Currency Pro Service intraday analysis posted this update of the popular currency pair:

“The top of wave ((2)) 122.22 and the .618 Fibonacci retracement of wave i 122.27 offers a target zone where this wave ii should run into some resistance. Trading back below the wave (4) low 121.58 will signal … a wave ii top in place [and] wave iii [is] under way.”

As you can see on the chart above, our Currency Pro Service utilized the Wave Principle’s rules for wave 2 price action to identify these two trade-salvaging details:

• A high-probability top at 122.27, the .618 Fibonacci retracement of wave i
• And, while not explicitly stated in the written analysis, the potential protective stop is shown on the chart itself at the 123.476 level, the point at which wave ii would have retraced more than 100% of wave i (red horizontal line at top of chart)

Now, the next chart shows you how the USDJPY did indeed top near the .618 Fibonacci retracement of wave i, turning down in an impulsive turn to a five-month low.

To “dive” in the world’s leading financial markets, you need to know how to identify the critical life-“lines” of protective stops.

By Elliott Wave International

On Wednesday (Jan. 13) CNBC reported that,

“Almost $3.2 trillion has been wiped off the value of stocks around the world since the start of 2016, according to calculations by a top market analyst. U.S. stocks are now off $1.77 trillion, while overseas stocks are down $1.4 trillion.”

Stocks rallied on Thursday — but then tanked even harder on Friday, which probably made that $3.2 trillion figure even bigger.

But how can that be? Doesn’t money simply move from one asset class to another?

Our readers have asked us this question before — especially during the 2007-2009 financial crisis, when 54% of the Dow’s value got erased in just 18 months.

You may be wondering this, too. Well, here’s an answer — from Ch. 9 of Bob Prechter’s New York Times Business bestseller, Conquer the Crash:

Financial Values Can Disappear
(Excerpt, Conquer the Crash, ch. 9)

People seem to take for granted that financial values can be created endlessly seemingly out of nowhere and pile up to the moon. Turn the direction around and mention that financial values can disappear into nowhere, and they insist that it is not possible. “The money has to go somewhere … It just moves from stocks to bonds to money funds … It never goes away … For every buyer, there is a seller, so the money just changes hands.”

That is true of the money, just as it was all the way up, but it’s not true of the values, which changed all the way up.

Asset prices rise not because of “buying” per se, because indeed for every buyer, there is a seller. They rise because those transacting agree that their prices should be higher. All that everyone else — including those who own some of that asset and those who do not — need do is nothing.

Conversely, for prices of assets to fall, it takes only one seller and one buyer who agree that the former value of an asset was too high. If no other bids are competing with that buyer’s, then the value of the asset falls, and it falls for everyone who owns it. Financial values can disappear through a decrease in prices for any type of investment asset, including bonds, stocks and land.

Anyone who watches the stock or commodity markets closely has seen this phenomenon on a small scale many times. Whenever a market “gaps” up or down on an opening, it simply registers a new value on the first trade, which can be conducted by as few as two people. It did not take everyone’s action to make it happen, just most people’s inaction on the other side.

The dynamics of value expansion and contraction explain why a bear market can bankrupt millions of people. At the peak of a credit expansion or a bull market, assets have been valued upward, and all participants are wealthy — both the people who sold the assets and the people who hold the assets. The latter group is far larger than the former, because the total supply of money has been relatively stable while the total value of financial assets has ballooned. When the market turns down, the dynamic goes into reverse. Only a very few owners of a collapsing financial asset trade it for money at 90 percent of peak value. Some others may get out at 80 percent, 50 percent or 30 percent of peak value. In each case, sellers are simply transforming the remaining future value losses to someone else.

In a bear market, the vast, vast majority does nothing and gets stuck holding assets with low or non-existent valuations. The “million dollars” that a wealthy investor might have thought he had in his bond portfolio or at a stock’s peak value can quite rapidly become $50,000 or $5000 or $50. The rest of it just disappears.

You see, he never really had a million dollars; all he had was IOUs or stock certificates. The idea that it had a certain financial value was in his head and the heads of others who agreed. When the point of agreement changed, so did the value. Poof! Gone in a flash of aggregated neurons.

So, the answer comes down to “money” vs. “value.” Financial values don’t move from one asset to another. They can just disappear.

By Elliott Wave International

It’s the start of the winter holidays — which, if your family is anything like mine, is also the beginning of a long tradition of deeply regrettable line-crossing, i.e.:

• Crossing that line into interrogating “new” dinner guests as to why they are still single
• Crossing that line into inviting your recently divorced sister-in-law to “stay as long as” she needs
• Crossing that line into a third (no, let’s be honest) fourth helping of pecan pie

In these cases, crossing “the line” is the first step down a proverbial mine field of emotional and physical discomfort. And there’s no going back!

But in the world of technical analysis of financial markets, crossing one kind of line is often the first step to identifying a high-confidence trade set-up. The line I’m talking about is the trendline.

Trendlines are exactly what they sound like — lines that identify the dominant price trend of a particular market. Simply put, they connects two points, usually price highs or price lows. And, as our chief commodities analyst Jeffrey Kennedy explains, “trendlines are one of the simplest and most effective tools a trader or analyst can employ.”

In order to see why, here are two real-world examples of major market reversals forecast by Jeffrey Kennedy with the help of trendlines.

— Gold —

In the November 2010 of our Monthly Commodity Junctures, Jeffrey employed a rare trendline timing technique to calculate the next likely turning point in gold’s future:

“As always, we begin with a 1-2 trendline and a parallel of that line against point 3. Next, we connect points 3 and 2 to identify that line’s midpoint 4. The timeline begins at point 1, February 5, and moves through point 4 to cross the trendline drawn from point 3 on December 6.

How do we use this information? For starters, we mark this date on our calendars and watch and wait.”

So, how did this timing technique pan out? Well, the next chart shows you exactly what happened: Gold hit $1431.10 per ounce, the high of the year in 2010 on December 7, missing the forecasted market turn by a single day. In the weeks that followed, gold fell 8.6%.”

— Orange Juice —

In the May 3, 2011 Daily Commodity Junctures, Jeffrey set the bullish stage in orange juice after prices broke through a specific trendline:

“Prices have penetrated critical trendline resistance on a daily closing basis. As you know, I am a huge advocate of trendlines, as well as daily closing price action. In other words, today’s events are significant in the fact that it signals a resumption of the larger uptrend and clears the way for higher prices beyond this year’s high of 179.30.”

From there, O.J.’s uptrend went into full swing, with prices soaring well above the year’s high as Jeffery anticipated:

The truth is, no technical tool works alone — and that includes trendlines. In the world of market forecasting, there is no magic all-purpose measure.

But what we can say is this: Trendlines — used in conjunction with the Wave Principle and other tools like MACD or RSI — is the mark of a truly complete technical toolbox.

And here’s the best part: Jeffrey Kennedy is such a huge advocate of trendlines that he wrote a book about them — a free 14-page eBook that is, titled

“Trading the Line: Five Ways You Can Use Trendlines to Improve Your Trading”

Want to learn how to draw your own trendlines — and gain an advantage you’ve never had before?

“Trading the Line” — Jeffrey’s 14-page eBook — is available now, for FREE! Simply sign up today to join our 300,000-plus member free Club EWI community and get instant access to this exclusive trader resource.

Get free, instant access to this resource

By Elliott Wave International

The question: Why use the Wave Principle when trading or investing?

The answer: To avoid the herd that usually loses money in the markets.

The explanation: Herding makes it difficult to follow the most useful trading advice to buy low and sell high. More often than not, what really happens is that you hear about a stock or an index and decide to buy it because it’s in the news. Why is it in the news? Usually because the price has been going higher. Lots of people in the financial media say that it’s doing well, so you decide to “get in now” — even though you know the shares are not at a low. After all, why would people talk up the stock if it were headed down? And you wouldn’t really want to buy a stock other people were selling … would you?

Once you buy, one of these three things usually happens:

1. The stock or index continues up for a brief time. You manage to hold on until just after it turns down, and sell so that you get out near the top. (You didn’t buy low, but you sold it for more than you paid and made some money.)
2. It goes up and then down, and then up and down again — and again — while you agonize. You read whatever you can find to help decide whether to stay in or get out. You finally get out about where you got in. (You neither bought low nor sold high, nor did you make any money.)
3. It turns down after you purchase it. And it keeps drifting down until you can’t stand it anymore. So you sell. (You bought high and sold low; depending on how long you held it, you lost a little or a lot of money.)

The outcome: Either you win small, you come out even (except for brokerage fees), or you lose either big or small. What happened to the simple and elegant idea of buying low and selling high? Well, that idea vanished in the labyrinth of your quickly turning, emotional mind. When it comes to real-time decisions, it seems nearly impossible to do what you know you should do to make the most money. The irrational mind beats out the rational mind. Welcome to the world of herding.

Elliott Wave International’s educational guru, Wayne Gorman, explains it this way in the Elliott Wave Crash Course:

“The process is being driven by an emotional, unconscious response by investors who look at the market subjectively and impulsively and who must make decisions under conditions of ignorance and uncertainty. … Most people tend to engage in what we call herding. They follow the actions of others, whether those others are on the right side of the market or not.

“The result is that prices move up and down according to investors’ optimism and pessimism. Investors use the news to rationalize their emotional decisions, and most people lose money.”

Even the big boys do it. Stock mutual funds tout their investing know-how, yet this chart shows that they also succumb to buying at tops when prices are high and selling at lows. It compares 40 years of the S&P 500’s price moves with the changes in stock mutual funds’ cash vs. assets ratio. When the percentage of cash is low, it means that the funds are buying stocks and keeping less cash (marked as “Bought” on the chart). When the percentage of cash is high, they are selling stocks and converting to cash (marked as “Sold” on the chart).

Gorman again: “Notice that funds are heavily invested in stocks at top of markets and little invested in stocks at major bottom. This pattern tends to repeat itself over time — and results in losses.”

This chart from the September 2015 Financial Forecast shows the S&P along with the U.S. equity mutual funds’ cash-to-asset ratio, inverted. You can see the low cash levels in both 2000 and 2007, as well as the persistent historic levels now.

The better way to do it: The Wave Principle, on the other hand, provides rules and guidelines to help you avoid the herd of investors, particularly as they react to the latest news. You can see patterns in price charts and decide when a market may be about to turn up or down; you can also plan when to trade or invest with some objectivity.

If you would like to get the full story on why it’s worthwhile using the Wave Principle to trade and invest, then watch the first video in the Elliott Wave Crash Course, called, “Why Use the Wave Principle?”

How to view the video: All you need to do is become a member of Club EWI. There is no cost, and there aren’t any strings attached. Get free, instant access to “Why Use the Wave Principle?”

By Elliott Wave International

When Ralph Nelson Elliott discovered the Wave Principle nearly 70 years ago, he explained how social (or crowd) behavior trends and reverses in recognizable patterns. You can learn to identify these patterns as they unfold in the financial markets, and use them to help anticipate where prices will go next. Elliott Wave International has developed a free comprehensive online course — The Elliott Wave Tutorial: 10 Lessons on the Wave Principle — which describes these patterns and explains how they relate to one another.

To use the Wave Principle as you analyze the markets, you need a basic understanding of the Elliott method — the rules and guidelines, the literal shape of individual waves, even when the larger trend may turn.

To get you started, we’ve included an excerpt from the free Elliott Wave Tutorial, adapted from Elliott Wave Principle by Frost and Prechter, and a short video clip from the live presentation, Tips from a Pro.

Here is your quick lesson excerpted from The Elliott Wave Tutorial:

In his 1938 book, The Wave Principle, and again in a series of articles published in 1939 by Financial World magazine, R.N. Elliott pointed out that the stock market unfolds according to a basic rhythm or pattern of five waves up and three waves down to form a complete cycle of eight waves. The pattern of five waves up followed by three waves down is depicted in Figure 1-2.

One complete cycle consisting of eight waves, then, is made up of two distinct phases, the motive phase (also called a “five”), whose subwaves are denoted by numbers, and the corrective phase (also called a “three”), whose subwaves are denoted by letters. The sequence a, b, c corrects the sequence 1, 2, 3, 4, 5 in Figure 1-2.

At the terminus of the eight-wave cycle shown in Figure 1-2 begins a second similar cycle of five upward waves followed by three downward waves. A third advance then develops, also consisting of five waves up. This third advance completes a five wave movement of one degree larger than the waves of which it is composed. The result is as shown in Figure 1-3 up to the peak labeled (5).

At the peak of wave(5) begins a down movement of correspondingly larger degree, composed once again of three waves. These three larger waves down “correct” the entire movement of five larger waves up. The result is another complete, yet larger, cycle, as shown in Figure 1-3. As Figure 1-3 illustrates, then, each same-direction component of a motive wave, and each full-cycle component (i.e., waves 1 + 2, or waves 3 + 4) of a cycle, is a smaller version of itself.

Every wave serves one of two functions: action or reaction. Specifically, a wave may either advance the cause of the wave of one larger degree or interrupt it. The function of a wave is determined by its relative direction. An actionary or trend wave is any wave that trends in the same direction as the wave of one larger degree of which it is a part. A reactionary or countertrend wave is any wave that trends in the direction opposite to that of the wave of one larger degree of which it is part. Actionary waves are labeled with odd numbers and letters. Reactionary waves are labeled with even numbers and letters.

Watch this video clip from Tips from a Pro for more on Elliott waves:

EWI’s Chief Currency Strategist Jim Martens explains how learning to use Elliott waves can be as simple as counting to 5 and knowing your A-B-Cs.

A limited time offer to enjoy this free report by Elliottwave international founder Robert Prechter. This offer will expire on August 22nd 2011 so follow the link below to download now.

The Dow plummeted some 1800 points in the
past weeks.

If the extreme market volatility has you confused
and scared, studying history can help you put
today’s market in perspective.

Robert Prechter has just released a FREE report
to give you a glimpse into his in-depth analysis
— including an 84-year study of stock
values – that will help you understand
and prepare for today’s critical market juncture.

Read his FREE report “Reality Check: Studying the Past to Bring Clarity to the Future” now.

Our friends
at Elliott Wave International (EWI) have brought
back one of their most sought-after free resources, The
Best of Trader’s Classroom eBook for two
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Download Your Free Best of Trader’s
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Dear Trader,

You know how difficult it can be to successfully trade the markets. And although
the volatility that we’re seeing lately offers great opportunities, it can
also add to a trader’s frustration. That’s why our friends at Elliott Wave
International are releasing one of their most popular trading eBooks, The Best
of Trader’s Classroom, free through May 16.

Since 1999, EWI Senior Analyst and trading instructor Jeffrey Kennedy has
produced dozens of Trader’s Classroom lessons exclusively for his subscribers.
EWI reviewed over 100 lessons and selected these 14 that offer the most critical
information that every trader should know.

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• And 10 more!

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Elliott Wave International has just announced
the beginning of their popular commodity FreeWeek
event, where non-subscribers can test-drive some
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Now through noon Wednesday, March 23 (Eastern
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As
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FreeWeek is one of EWI’s most popular programs,
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Please don’t hesitate to tell your friends about
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The Socionomics Conference
offers the latest insights
from this groundbreaking
new science.

Socionomics is
the fruition of Bob Prechter’s
insight regarding social mood.
This comprehensive theory is
helping investors connect the
dots from the past to the future
to where they are right now.
In this first-ever Socionomics
Conference, Prechter will host
speakers who are using socionomics
in their work and research.
Elliott Wave International
has made it as easy as possible
to attend — including an exceptional
price, convenient travel access
(Atlanta), and a venue close
to the airport. Click here
for information.

The coming 2011 Socionomics Summit on April 16 in Atlanta will
indeed discover “New Horizons” — which is precisely
what this emerging science has done time and again in recent
years.

Attendees will be able to
hear, ask questions of, and
mingle with 14 of
the foremost academics, writers
and researchers who contribute
to the science of socionomics.
Even now, their innovative
work is helping to define the
critical role that social mood
plays in human affairs.
The featured speakers include:

• Successful hedge fund manager Scott
  Reamer
• Indiana University professors Johan
  Bollen and Huina
  Mao, contributing
  authors of the widely-reported
  academic paper “Twitter
  mood predicts the stock
  market”
• Scholar and best-selling
  author of Mood Matters, John
  Casti
• Emmy award-winning Minyanville
  sage Kevin Depew
• The man who discovered
  socionomics, Robert
  Prechter

This list is just the beginning.
Speakers also include the Socionomics
Institute’s research fellow
at the University of Cambridge, Matt
Lampert, as well as
in-house researchers Alan
Hall and Euan
Wilson, whose research
continues to demonstrate how
social mood drives social action.

Please know that the phrase “new
horizons” is no exaggeration.
As published in The Socionomist,
our recent studies of social
mood have anticipated a
mind-boggling series of global
trends and events:

• “War and Peace in
  the Middle East” (Dec.
  2010) was weeks ahead of
  the violence and shockwaves
  of protest that changed the
  political landscapes of Egypt,
  Tunisia, Yemen, Libya and
  beyond.
• “Authoritarianism” (April
  2010) forecasted increased
  internet regulation and warned
  of a possible cyber war —
  months before the WikiLeaks
  controversy broke.
• “The Coming Collapse
  of Modern Prohibition” (July
  2009) anticipated the dramatic
  escalation of violence in
  Mexico’s deadly drug war.
  It also called for growing
  American tolerance of marijuana
  use.
• “Authoritarianism” (April
  2010) warned of unprecedented
  new forms of government control
  even in ostensibly free countries
  like the U.S. Since then,
  news events include the advent
  of secret government GPS
  controls on cars, airport
  pat-downs and document checks
  on train travel inside U.S.
  borders.
• “The Developing European
  Tinderbox” (Dec. 2009)
  preceded the biggest story
  in Europe in 2010 — the
  re-kindling of old ethnic
  and national hostilities
  and the possible coming dissolution
  of the euro.

For more information about the 2011 Socionomics Summit: New Horizons
in the Study of Social Mood, simply follow this link.

Regards,

Robert Prechter’s Elliott Wave
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Announcements: Robert Prechter
and the folks over at Elliott Wave International have just released
an urgent new report for bond holders and mutual fund investors.
Prechter’s report, The Next Major Disaster Developing for Bond Holders,
is the first of its kind from EWI. Never before has the world’s
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without committing to a paid subscription. Learn more about Prechter’s 10-page report on the developing risks in bonds now — it’s yours for free.

Greetings investor,

If you have money in mutual funds,
Treasury bonds, municipal bonds
or high-yield bonds, Robert Prechter has just issued a crystal-clear
warning for you: Your money could be at risk.

Prechter, the famed market forecaster
who specializes in Elliott wave
analysis, sent similar warnings
about the Nasdaq in 2000, real estate in 2006, the blue chips in
2007 and commodities in 2008. His forecasts proved deadly accurate.

In trademark fashion, Prechter
now has his readers focused on
something most mainstream investors,
analysts and advisors are taking
for granted: the safety and stability of the bond market.

Why worry about the safety of bonds,
you ask? A recent USA Today article
reported that investors put a “record-shattering” net $376 billion into
bond mutual funds in 2009, and
individual investors and mutual
funds are “still showing the love” in 2010.

After such explosive growth, Prechter
says bond investors have been pushed
to the edge of a mile-high cliff.
Millions of investors are just one step away from tumbling over
the edge.

If your hard-earned savings are
exposed to the developing risks
in these markets, you owe it to
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warning.

Download your free copy of Robert Prechter’s new 10-page report, The Next Major Disaster Developing for Bond Holders, now — it’s free.

If you were a lone bull in a herd of stampeding buffalo, your survival instincts would tell you to follow the herd, regardless of its direction. The same is true for the successful trader or investor maneuvering within the financial herd called the Stock Market. As trader psychology changes, so do the Markets.

The Elliott Wave Principle captures the essence of trader psychology. It is an effective, visual representation of traders’ human nature to follow ‘in a crowded path’ extreme optimism followed by extreme pessimism, and then repeat the process again and again. The Elliott Wave patterns capture the continuous unfolding of the extremes depicted as Stock Market sentiment.

Traders cannot rely on news and events to drive the Stock Market. History has shown that news and events related to the Market have no consistent effect on its direction because of the influence of unfolding Market sentiment. For instance, Market reaction to the same news can be extremely positive at one given time, but then extremely negative at another given time.

Elliott Wave patterns display to the trader the most likely future Market direction based on current pattern structure. By understanding Elliott Wave pattern characteristics, a trader can identify higher probable outcomes from lower probable outcomes thereby reducing investment risk.

The classic Elliott Wave patterns consist of impulsive and corrective waves. An impulsive wave moves in the same direction as the current trend and is made of five sub-waves. A corrective wave moves against the current trend and is made of three sub-waves.

The formation of sub-waves can be extremely varied. However, general tendencies to note for trading purposes are as follows:

The first sub-wave in either an impulsive or corrective wave can be difficult for a trader to accept because it is the fist wave to run counter to currently prevailing direction;
The second sub-wave in either an impulsive or corrective wave may pose an opportunity for the trader to respond if he/she missed the first sub-wave as it represents a partial retracement of the first sub-wave;

The third sub-wave of an impulsive wave can be the most predictable and strongest of the sub-waves as momentum has been established;

The fourth sub-wave of an impulsive wave may demonstrate more volatility in its retracement than the second sub-wave; and

The fifth sub-wave of an impulsive wave and the third sub-wave of a corrective wave may be less predictable and more volatile than the other sub-waves because they are determining the end to the larger wave.

In addition, traders can increase their probability of success by placing entry and exit points near levels favoring a change in Market direction. For example, placing an entry for a long position near the start of an upward impulsive wave has a higher degree of being successful than placing an entry for a long position near the end of an upward impulsive wave.

Forecasting Market direction from Elliott Wave patterns does not provide certainty, but rather a probability of Market direction. There can be more than one valid interpretation of wave patterns, each carrying a probability of being an accurate portrayal of Market direction.

Traders should keep in mind that it is typical for Elliott Wave patterns to be continually reassessed and altered as Market sentiment unfolds to provide a higher probability of Market forecast. Alteration of wave patterns should be viewed not as a weakness, but as a strength. To be sure, the Market is quite dynamic; therefore, any tool used to help forecast the Market must be dynamic, too.

It is important to note the principals and use of Elliott Waves have persevered for over 70 years, when in 1938, in collaboration with C. J. Collins, R.N. Elliott introduced ‘Elliott Wave Principals’. Mr. Elliott believed that while stock market prices may appear random and unpredictable, they actually follow predictable, natural laws that can be measured and forecast by implementing wave patterns based on Fibonacci number analysis, also pioneered by Mr. Elliott.

Mr. Elliott theorized that common waves are characterized by Fibonacci proportions of 38%, 50%, and 62%. Impulsive waves relate to one another in Fibonacci proportions and corrective waves tend to retrace in Fibonacci proportions.

Mr. Elliott, encouraged so greatly by the response to his theory in the investment world, expanded it to apply to all collective human behaviors. His final and most comprehensive work titled ‘Nature’s Law-The Secret of the Universe’ was published in 1946, two years before his death.

If inflation is a quiet thief, then deflation
is an armed burglar. You wouldn’t invite either
into your home, yet chances are that one of the
two is stealing your money right now.

Elliott Wave International, the world’s largest
market forecasting firm, has just released a
free report that reveals which of these threats
you should prepare for right now.

The free 8-page report is adapted from Bob Prechter’s
New York Times best-seller, Conquer the Crash,
which was published far before the latest headlines
warned of inflationary and deflationary dangers.  

Even after strong countertrend rallies, global
stocks, bonds and commodities are still well
off their multi-year highs. All the while, the
U.S. dollar has rallied. This broad-based asset
deflation is forcing investors to rethink the
deflationary scenario. Is it possible that the
Fed can’t prevent deflation as its chairman,
Ben Bernanke, once promised?

It’s hardly the time to ignore Prechter’s prescient
message of how to survive and prosper in the
today’s market environment.

Protect yourself and your loved ones.

Visit Elliott Wave International to Download Your Free Report on Inflation and Deflation.

Ralph Nelson Elliott discovered the Wave Principle in the 1930s.
Over the decades, his discovery was kept alive by a handful of
individuals. A few of those, such as Bolton, Prechter and Frost,
educated investors on how to use pattern analysis in financial
markets.

To help out Elliott Wave International’s readers in learning
the basics of the method, we put together a free 10-lesson online
tutorial. Here’s an excerpt. To get it in full, look for details
below.

EWI’s Basic Elliott Wave Tutorial
Lesson 1, excerpt

At that time [of his discovery], with the Dow in the 100s, R.
N. Elliott predicted a great bull market for the next several
decades that would exceed all expectations at a time when most
investors felt it impossible that the Dow could even better its
1929 peak. As we shall see, phenomenal stock market forecasts,
some of pinpoint accuracy years in advance, have accompanied
the history of the application of the Elliott Wave approach.

Under the Wave Principle, every market decision is both produced
by meaningful information and produces meaningful information.
Each transaction, while at once an effect, enters the fabric
of the market and, by communicating transactional data to investors,
joins the chain of causes of others’ behavior. This feedback
loop is governed by man’s social nature, and since he has such
a nature, the process generates forms. As the forms are repetitive,
they have predictive value.

The market…is not propelled by the linear causality to which
one becomes accustomed in the everyday experiences of life. Nor
is the market the cyclically rhythmic machine that some declare
it to be. Nevertheless, its movement reflects a structured formal
progression. In markets, progress ultimately takes the form of
five waves of a specific structure.

Three of these waves, which are labeled 1, 3 and 5, actually
effect the directional movement. They are separated by two countertrend
interruptions, which are labeled 2 and 4, as shown in Figure
1-1. The two interruptions are apparently a requisite for overall
directional movement to occur.

At any time, the market may be identified as being somewhere
in the basic five wave pattern at the largest degree of trend.

Read the rest of this 10-lesson Tutorial and see multiple charts
now, free! All you need is to create
a free Club EWI profile.