Results | Performance | Articles

Here you'll find results summaries of our technical analyses for the stock markets, commodities, bonds and Forex pairs we regularly analyze as part of the Global Elliott Wave Coverage subscription service, so you can get an idea of the contents and results of our comprehensive technical analysis services. There's also the occassional article in between. To receive notifications about Results updates, articles and other news from EWT Investing, please subscribe to our email newsletter, using the form below.

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Brazil Bovespa Index technical analysis Elliott Wave Theory

Our technical analyses of Bovespa Index during H1 2017

The Brazilian Bovespa Index (also referred to as IBovespa) entered a correction during H1 2017, and was generally range bound during this time period. It was a quite difficult time period to analyze and trade. Let’s see how we did. As usual for these explorations, here’s a chart with the most important and nouvel analysis updates spliced in. Some of the comments have been slightly redacted due to size limitations. Please click the chart to open a full-size version in a new tab:

Elliott Wave Theory technical analysis on the Bovespa Index during H1 2017.

On January the 23rd, in the Weekly part of the Bovespa analysis section, we made the case that Bovespa Index was close to topping out and entering a large-scale correction. At the time, we thought a sharper drop was more likely than the sideways formation it turned out to become. At least this was a decent enough call on a weekly basis, though the timing certainly not-so-precis from a Daily chart standpoint.

On the analysis update issued on the 24th of February, before regular trading started, we warned that Bovespa Index was overbought. However, the signal was not the strongest, and we didn’t make a definite call that the top was in, it must be said.

On the 20th of March, we issued a warning that Bovespa Index was a few percent from a strong oversold signal. This turned out to be a decent enough call, the index stopped the decline slightly lower a few days later and basically moved sideways for month from there.

On the 20th of April, in the Weekly part of the Bovespa analysis section, we put forth that an important signal level in one of our systems had been hit, which usually correlates with rebounds and sometimes even trend reversals in the markets. As it turned out, that market the bottom before a substantial month-long rally.

On the 11th of May, our wave analysis indicated that Bovespa Index should hit at least 71000. This clearly did *not* happen, as the sudden flare-up of the ongoing political crisis in Brazil, caused the market to drop violently on the 18th of May. The market topped out that cycle at 68792, which is clearly lower than our proposed minimum target of 71000.

However, in that same update, we also mentioned that if a critical level at 64720 was lost, then Bovespa might swiftly fall down towards 60000, which is almost exactly what happened after the loss of the critical level. If someone bought our 20th of April call for a reversal, and used 64720 or higher as stoploss, they’d probably escape this flash crash with break-even or even a small profit.

On the 22nd of June, we made the next call for the Bovespa Index, which was that an advance to approximately 64000 would commence soon, despite the index looking weak. This turned out to be correct, and the index rose to the 64000 level approximately 20 calendar days later.

On the 13th of July, we put forth that an adjustment to our preferred wave count would probably be necessary, and we speculated that if a break of 65600 was to occur, that the index would continue to 69500+. As of the 4th of August, the Bovespa Index closed on 66898, and it remains to be seen if our call for 69500+ will materialize.

Summary.

H1 2017 turned out to be a choppy range bound affair for the Bovespa Index, in contrast to the trending nature of the Bovespa during H2 2016 (here’s the summary of our H2 2016 technical analyses of the Bovespa Index).

Despite our best efforts, we didn’t fully nail the top in February 2017, even if we did at least warn in January that a large correction would soon start.

The correction from February to April turned out to be fairly uneventful, but at least we got the start of the April-May rally quite closely called.

We missed the top on the 16th of May – which occured lower than we had expected – and the subsequent flash crash, even though our proposed critical level and stoploss at least rescued our subscribers who used it, from more than half the flash crash.

We did almost call the start of the rally in June, which is still ongoing, and now it of course remains to be seen if our proposed target of 69500+ will be hit next.

Sideways, choppy markets are known to frustrate most investors, traders and analysts. We are not immune to the difficulties of a choppy market. All we can do is work hard, try to find the likeliest outcome, as well as trying to find any strong contending adverse scenarios, and present them to our readers.

Interested readers can access our Bovespa analysis through our Global Elliott Wave Coverage subscription service.

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Carl Malmberg
Carl Malmberg
Technical Analyst at EWT Investing
Carl has analyzed and traded the financial markets 12+ years and counting.
Founder of the Extended Elliott Wave Theory.
Access to our Market Analysis section is provided by the Global Elliott Wave Coverage subscription, which gives you access to 20 financial market analysis sections, with at least 5 updates published per day. Sign up today at only $19 per month! Subscribers to our services will find our more in-depth analysis on the trends in the various global financial markets in the Market Analysis section.
 
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AEX Holland Technical Analysis Elliott Wave Theory

Results of our Elliott Wave Theory analysis for the AEX Index during H1 2017

So, how did we do analyzing the AEX Index of the Netherlands, during H1 2017? Let’s have a look. As usual, we’ve prepared a summary chart, with the most important analysis updates spliced in. Some of the comments have been redacted for brevity’s sake, the space in the chart is limited, as is quite evident. Please click the chart to open a full-size version (opens in new browser tab).

AEX Elliott Wave Theory analysis 2017-07-28

Let’s have a look, point by point.

At the end of December 2016 as you can see by point #1, our technical systems still flagged AEX as overbought, and the index initiated a fairly complicated sideways formation not long after, which lasted slightly more than one month.

Then on the 7th of February 2017 (#2), one day before the correction actually ended, our analysis suggested more upside remaining in the AEX. However, at the time, we did not expect a big upside move to unfold, but rather a more modest one. So, while this call did pan out in the short-term, we didn’t get the size of the advance correctly.

Then on the 1st of March (#3), our systems flagged AEX as severely overbought, which is quite uncommon. What happened? Well, the index did correct slightly for 5 trading days in total, before advancing again, which we at the time weren’t certain would occur. Another decent call, but still, the specifics of the unfolding pattern remained unclear to us.

On the 13th of March (#4), there was yet another “extremely overbought” reading registered, and we warned that “this [is] a very questionable spot for new positive positions”, which turned out to be a fairly good call. The AEX proceeded to trade choppily sideways for more than a month, making it difficult for anyone not skilled at short-term trading to make Money in the index.

On the 28th of March (#5), the market structure started suggesting a powerful move upwards would unfold at some not-too-distant point in the future.

On the 18th of April (#6), the day the AEX hit the first bottom in what would two days later turn out to be a double bottom, we suggested that this was probably just a final corrective wave, before a “quite powerful /../ wave upwards”. That turned out to mark the bottom of the month-long corrective phase, and the AEX advanced strongly shortly after that.

On the 25th of April (#7), after a gap up, we warned that an overbought condition had developed, and the AEX did slow down and correct slightly for 3 days.

On the 9th of May (#8), we warned that extremely overbought conditions had been registered in the AEX, and that risk was very high. We also warned of a large correction incoming. Was this an excellent top call? Well, on the 3rd of May, in a preceding AEX update which there isn’t space for in this chart, we expressed some uncertainty about the sustainability of this move, and that it was likely drawing close to an end.

That was actually a fairly good call in retrospect, but, the AEX did advance almost an additional +2% after our call on the 3rd of May, before actually topping out fully. We can however take credit for offering a very clear warning about very high risk on the 9th of May as shown at point #8, and we turned out to be right about a large inbound corrective formation, although it didn’t go as low as 490 as originally envisioned by us. More on that later.

On the AEX analysis update for the 20th of June (#9), we warned that an important critical level had been lost, and that we would personally stay away from the AEX index at the time. This turned out to be a great call, as the index proceeded to trade down considerably over the next 15 days.

Then on the 4th of July (#10), we called for a strong 5th upwards to start fairly soon, with a quite likely minimum target at 540. Just a few days later, the AEX made a shake-out double-bottom with a hammer candlestick very close to our call, and then proceeded to advance upwards towards the end of July, as is evident in the chart. We’ll see if 540 can be tagged by this advance, as suggested by our analysis, it isn’t necessary, but it is quite probable.

Summary/Discussion.

Our Elliott Wave Theory technical analysis work for the AEX index during H1 2017, turned out to quite well. But, during the first 2 and ½ months of 2017, we somewhat underestimated the strength of the formation in the AEX, expecting a more compressed move, leading us to call for less upside than actually occurred.

However, from the mid of March, our analysis work for the AEX became more accurate. We managed to forecast the market moves better, calling an end to the April correction and forecasting a considerable upwards move which did manifest. We warned of very high risk very close to the top, and got it right that a big correction would follow (but it didn’t hit our initially proposed 490 zone). We more or less nailed the final shake-out panic low of the correction, and in the beginning of July, suggested a powerful 5th wave would follow, which it did.

Unfortunately, we didn’t get everything 100% right. We don’t have a crystal ball. We just work extremely hard for our subscribers, every trading day, year round.

Our Elliott Wave Theory technical analysis work on the AEX Index, is part of our Global Elliott Wave Coverage subscription service.

Carl Malmberg on FacebookCarl Malmberg on TwitterCarl Malmberg on Wordpress
Carl Malmberg
Carl Malmberg
Technical Analyst at EWT Investing
Carl has analyzed and traded the financial markets 12+ years and counting.
Founder of the Extended Elliott Wave Theory.
Access to our Market Analysis section is provided by the Global Elliott Wave Coverage subscription, which gives you access to 20 financial market analysis sections, with at least 5 updates published per day. Sign up today at only $19 per month! Subscribers to our services will find our more in-depth analysis on the trends in the various global financial markets in the Market Analysis section.
 
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10-Year US Treasury Notes Elliott Wave Theory Technical Analysis

Technical Analysis on the 10-Year US Treasuries from 2016-11 to 2017-07

It’s time for last week’s blog post (it was intended for last week but got delayed until today), in which we’ll take a look at the results of our technical analyses on the 10-Year US Treasury Notes, between November 2016 and early July 2017.

As usual, we’ve prepared a summary chart with the relevant technical analysis comments spliced in. Some of them are partially redacted for brevity, and as usual, we’ve only included technical analysis commentary that brought something new to the table, some “maintenance” updates which offered nothing new in terms of technical outlook and analysis conclusions have been left out. Please click the chart below to open a full-size version for your perusal.

Technical Analysis by EWT Investing on the 10-Year US Treasury Notes 2016-11 to 2017-07

In November 2016, post the election of Donald Trump, the US Treasuries sold off fairly violently, triggering sell signals in many technical systems. As the 126-level was hit, our composite technical analysis suggested that the 10-Year US Treasury Notes would hit at least the 123-level before bottoming out – which came true just a few week’s later in December 2016, when the 10Y-UST’s traded all the way down to a 122-handle.

In early 2017, on the 2nd of January to be exact, predictability was reduced in the short term for the 10Y-UST’s, but nonetheless, our analysis at the time called for the 126-128 range to be regained during the first six months of 2017, which came true in June 2017, as the 10Y-UST’s traded up all the way to 127. The markets can often be hard to accurately forecast in the short-term, but provide a greater confidence pattern in the medium-to-long term, and this was one such occasion.

On the 15th of March 2017, predictability increased considerably in the 10Y-UST’s, and we issued a call for the current declining formation from 2016, to finally come to an end. In hindsight, this was correct, and the UST’s reversed higher.

In mid-April 2017, our technical systems signaled that an overbought condition had arisen in the 10Y-UST’s, after a strong rise from mid-March. But, at the time we didn’t expect anything else than a minor correction, so it’d be unfair to claim that we called the entire subsequent decline back to a 124-handle in mid-May. Also, the bottom in mid-May was not something we specifically called out, to our systems predictability was low, and we only had the longer-term forecasts to go by at that time – hence, it’d also be unfair to claim that we called the bottom in mid-May 2017.

On the 9th of June 2017, our analysis pointed out a considerable chance that the 10Y-UST’s would advance towards 128, but also that there was an considerable chance that the 10Y-UST’s would first see a drop towards the 124 level. What happened was that the advance reached a 127-handle, but stalled and then the market fulfilled our secondary short-term possibility, declining all the way to a 124-handle in early July. This was yet again a typical example of why it’s really important to be aware of all of the probable scenarios at any given time – armed with our knowledge, an investor would’ve avoided chasing the upside too heavily without proper risk management.

Then, on the 7th of July 2017, our technical systems as well as Extended Elliott Wave Theory analysis, signalled a very oversold situation in the 10Y-UST’s, and with a strong structural probability of a reverse in direction. And indeed, that turned out to be the bottom (for that market phase…), with the UST’s bouncing considerably over the next few days. It’s also quite possible that we’ll now see the 10-Year US Treasury Notes trade towards a 128-handle, as we wrote on the 7th of July.

Conclusions.

The predictability of the 10-Year US Treasury Notes dropped considerably in December 2016, and thusly, short-term analysis was harder to make over the next few months.

While not 100% perfect in terms of nailing all short-term swings, and while sometimes pointing out that an ambigious situation had developed, our composite technical analysis using our Extended Elliott Wave Theory still managed to come up with very valuable conclusions at some key points along the way, allowing our clients opportunities to prevent losses, get some very good trade entries, and not be whipsawed out at either overbought or oversold market conditions.

If you are trading the 10-Year US Treasuries and want to gain access to our technical analysis, don’t hesitate to sign up today (opens in new tab) and secure a subscription slot, or Contact us (opens in new tab) for more information should you have any questions.

Carl Malmberg on FacebookCarl Malmberg on TwitterCarl Malmberg on Wordpress
Carl Malmberg
Carl Malmberg
Technical Analyst at EWT Investing
Carl has analyzed and traded the financial markets 12+ years and counting.
Founder of the Extended Elliott Wave Theory.
Access to our Market Analysis section is provided by the Global Elliott Wave Coverage subscription, which gives you access to 20 financial market analysis sections, with at least 5 updates published per day. Sign up today at only $19 per month! Subscribers to our services will find our more in-depth analysis on the trends in the various global financial markets in the Market Analysis section.
 
Start my Subscription to Extended Elliott Wave Theory analysis at EWT Investing!

Are the Stock Markets parasitic? A Rebuttal of commonly held negative beliefs about the stock markets and trading.

Far too often these days, we hear the claim that “the stock markets are parasitic and serve no purpose except for parasites to live off of the working class”. This claim is utter nonsense, and even an utterly immoral claim, founded in laziness, hatred and jealousy, as will be made evident in and by this article.

Let’s examine what stock markets actually are, what their purpose is, and whether or not the claim can be substantiated.

 

Corporations – a brief overview.

For starters, we need to take a look at how a corporation is formed. A corporation is a juridical entity, with a certain number of issued shares, as the fundamental part of the capital structure of the corporation – the equity. Each share carries with it ownership of a certain part of the company, which translates to the shareholder being allowed to cast votes with a count equal to how much is afforded to each share multiplied by the amount of shares a shareholder has.

Example: Corporation ABC’s capital structure consists of 1000 shares. Shareholder XYZ owns 100 shares, and thus has a voting power of 10%.

Additionally, shares give the shareholder a right to receive dividend pay-outs.

 

It should be noted that some corporations do have differing series of shares emitted in the equity part of their capital structure. This is fairly common in Sweden for instance, where I live. Several of our largest and not-so-large corporations that are publicly traded, have A- and B-series of shares, with the A-series having a greater voting power per share than the B-series, and with the A- and B-series carrying equal rights to dividends. Additionally, so-called preferential stocks have increased in use in the last 10-year period, and which if used in a corporation’s capital structure, usually receive most if not all of the corporations payouts, but might not have any voting power, and which have a greater seniority in the capital structure. So everything is not so simple as I make it seem in some of the examples in this article.

To summarize before we continue, the equity side of a corporation’s capital structure formally entails:

  • Ownership.
  • Voting Rights.
  • Right to dividends from the corporation’s cashflow (usually only if profits are made).
  • Assumption of primary risk in case of a partial default or even total bankruptcy. Equities are hit first in a default situation.

 

Now, why would a company need to be registered as a juridical entity, and not as a sole proprietorship? The reason for this is that as a company grows, it might become very big and operate with potential liabilities that are far too big for any one individual to shoulder financially, morally and mentally.

Additionally, there are some economic endeavours which are very risky, but which yield large rewards if they are successful. The risks can be and often are far too great for a single person to shoulder with their personal private lives as a full backstop, as is the case with a sole proprietorship. A corporation structured as a separate juridical entity will in such a case provide a way to limit the risk for the people involved with running the operations of the corporation, as well as provide a way to create financing opportunities for the corporation.

 

Stock Markets – what primary purpose do they serve?

In most if not all jurisdictions, corporations can be private held and traded, or publicly traded. A corporation certainly doesn’t have to go to the public capital markets through an IPO (Initial Public Offering) and put all or parts of its equity up for trading there, if it doesn’t need any external capital to operate, or if it can find external capital outside of the public markets.

For instance, IKEA, the huge Swedish furniture manufacturer and vendor, whose founder Ingvar Kamprad is a billionaire, hasn’t traded on the public stock markets.

Other large companies have come and gone to the public capital markets. Sometimes they are acquired by competitors who are or aren’t themselves publicly traded companies. Sometimes they are bought by other interests who choose to hold them privately off the exchanges (or sometimes they only take a very large percentage of the shares off of the markets, leaving a smaller float that they do not own, still publicly traded).

 

So, the primary purpose of the stock markets to begin with, is to match up capital providers (willing buyers of the shares in the corporations) with corporations in need of financing and/or sellers of shares who choose to transact through the public exchanges.

We provide technical analysis with the Extended Elliott Wave Theory, of major stock markets around the world, in our Global Elliott Wave Coverage subscription service. (link opens in new tab)

Who owns the shares of companies, and why? What does it entail?

Buying shares in a company means that you as a buyer have provided a part of the capital structure which the company needs to operate. Your risk-taking provides jobs to people. You as a buyer are actively taking on risk and stand to lose money in a partial or whole default of the corporation. In return – and depending on the exact specifications of the capital structure of said corporation – you receive voting rights, and rights to dividend pay-outs from the profits of the business.

Additionally, share prices might fluctuate, and most certainly will if the stock is publicly traded, which might mean that you stand to gain from an increase in the market price of the stocks you own, but conversely, your shares could also lose if the market collectively decides to push down the price of the stocks you own.

 

Owning stocks is – unless the company is engaging in egregiously criminal acts – a moral and upstanding thing to do. You are taking on risk, so that others can be gainfully employed. In return, you receive a certain amount of the profits generated by the employees. This is the definition of capitalism, that your capital provides opportunities for others to work and survive, while rewarding you with a portion of their efforts in return, but while also placing the monetary risk if the company fails, squarely on your shoulders.

 

All in all and generally speaking, owning stocks of reputable companies, providing reputable services and goods to people, is a very noble thing to do. There is no question about it, unless one has been brainwashed by the hopeless shambles that nowadays pass for Western “education”, and believes that the usage of capital for the purpose of enabling production of goods and services is somehow “exploitation”. Funnily enough, jurisdictions which have disallowed or discouraged capitalism, are hopelessly underdeveloped.

This is certainly not to say that all big corporations are engaged in benevolent behaviour, especially not in this stage of Western civilization, as regulatory capture in most (if not all…) industries have allowed and encouraged increasing forms of corruption, as well as increasingly idiotic and short-sighted leadership of even some of the biggest and most important corporations out there. And some moneyed people are certainly corrupt criminals, if not in the eyes of the laws on the books, then certainly by any ethical standards worthy of mention.

But this is more of a late-credit-expansion-cycle type of phenomena, rather than an indictment of the act of capitalism itself, which is to provide others with the means of production of goods and services, which they could NOT provide for themselves, at least not in any quick and expedient and worthwhile fashion.

 

What function does trading of equities on the stock markets fulfil?

So, we’ve gone through these points thus far:

  1. What the equity side of a corporation’s capital structure is.
  2. What the equity side of a corporation’s capital structure does.
  3. The reasons for why a corporation might need to be structured as a juridical entity rather than being connected to a physical person as in a sole proprietorship.

Let’s now move on to what role and function the public stock markets and the trading flows satisfy. While most people in the Western populace usually have insufficient knowledge about equities in the sense I’ve already covered in this article, even less understood is the trading part of public stock markets, and why trading is necessary and an act that benefits society.

All human productive activity is future oriented. We take a certain action in the now, in order to gain an effect at some point in the future. Sometimes this effect is almost immediate, and sometimes it will only occur maybe decades into the future. For instance, creating some simple widget out of a piece of wood which we intend to sell later the same day, has a pretty much immediate effect. Starting a family and raising children (which used to be considered part of an economic survival strategy), or running our own business and/or partaking in some sort of lengthy R&D project, is something which will usually come to full fruition only much later.

 

Economic activity is all about guessing what other people will want to procure at some future point, measured in both goods and services. Through the institution of centralized and well-regulated means of exchange (money), humanity in most place around the world now operates with an advanced form of bartering system which enables us to effectively own and control and exchange a wide range of productive means, goods and services, all available to us through our own economic power.

That is, beyond the immediate work we can undertake because of our natural abilities, talents and/or education and experience, we can also use our condensed labour in the form of money, to purchase or set up productive assets which other people can operate.

This is what the stock market helps us accomplish; the acquiring and divestment of productive assets. A centralized marketplace for productive assets of various sorts, where we can increase our productive capability, or divest some of it, all through the medium of money.

 

This much is probably obvious to most readers. Where it gets interesting, is when we start to ask some critical questions with respect to how the trading of financial assets on the stock markets takes place. Here are some common questions/objections/claims:

  • “The stock markets are parasitical and not part of the real economy.”
  • “What economic value is there in short-term trading?”
  • “We should restrict short-term trading and force people to hold their stock investments for longer periods of time.”

 

The first claim – “The stock markets are parasitical and not part of the real economy”, or even the claim that “the stock markets drain the real economy”, is flat out wrong. As clearly outlined and explained earlier in this article, the stock markets are all about allocating capital to corporations, so that gainful economic activity can be undertaken (or developed), and people have jobs to go to, and all on an order of magnitude that is far greater than could be shouldered by corporations in the form of sole proprietorships.

All well-developed well-functioning economies rely on corporations and capitalism, with no exceptions to date, at least none that I know of. And the stock markets fulfil the role of being capital allocators and providers to some of the bigger corporations. And it is corporations of all manners and sizes that are a significant part of the real economy in the world of today.

Companies tied to physical persons (sole proprietorships) are simply too small to handle the multitude of complex systems required by the many of processes needed to produce most of the advanced goods we enjoy consuming today. On the other hand, there are also certainly cases where a large company is simply too big and too complicated to get certain things done. I’m not arguing for “big business only”, that would be a violation of the free market capitalism I advocate for (although I’m not a libertarian in the strict sense of the word).

 

The second question is “What economic value is there in short-term trading?”.

In general, short-term traders tend to provide the market with a more-or-less continuous flow of price quotes, as well as narrowing the bid and ask spread. That is, short-term traders make the market more transparent, and more actionable for all other participants on the sidelines. Their actions serve to provide other market participants, who might not be short-term traders, with a very clear picture of at which price they can trade in or out of a particular financial instrument.

Short-term traders are also rewarded (if they are any good, and most of them aren’t…) with money if they guess the future outcome correctly in the financial markets, and punished if they make mistakes and lose money.

Since effective human economic activity rests on being able to accurately predict both cycles in nature, but also what our fellow humans might want and need to buy from us or other people, the markets serve to reward those who are skilled predictors of the actions of others, with more money and resources, that they themselves can then allocate.

Hence, short-term trading is both ethical and moral, because it finds or makes winners who can provide greater economic outcomes that benefit other people, and rewards them with more resources to spend as they see fit.

Actually, long-term trading/investing does the same thing, if we boil things down.

However, not all short-term trading is equal. Over the last years, an epidemic of dubious if not outright fraudulent HFT practices have arisen, and not been stopped by the relevant authorities. Perhaps most egregious is the type of HFT front-running of other participants market orders, which sometimes seems to occur with the blessings of the exchange operators, and which inflicts small but over time (and in volume…) considerable losses for other market participants.

This type of short-term HFT is morally and ethically bankrupt, since it rests not on accurately predicting what others might do, but on actually taking their order data – which should be confidential until the moment it hits the books – and trading in front of it where possible. This type of short-term trading is fraudulent, unethical and one shouldn’t have any respect at all for any institution involved in this sort of shady, back-alley thuggery-and-muggery type of micro-becomes-macro-thievery at all. This is not to imply that all HFT programs operate in this way.

I’ve been an active trader and market analyst for more than a decade (actually closing in on two decades… time flies…), and if we disregard price movements in singular stock names on occasion, I’ve not seen any evidence that the market patterns have been effective altered by all the computerized trading – my opinion is that all of the HFT actors cancel each other out when it comes to the patterns formed in the markets. My conclusion is that HFT hasn’t altered the fundamental ways markets behave at all. If we want to find something that has, we should look to central banks and their insane and irresponsible balance sheet expansion.

 

The third claim, “We should restrict short-term trading and force people to hold their stock investments for longer periods of time.”, is a very ill-thought out suggestion.

If traders are forced to hold positions for longer periods of time, that will simply bring about the following considerations/consequences:

  • Since a position can no longer be quickly liquidated if the trader has made a mistake in his analysis process, he or she will want to pay less for the financial asset in question, or not participate at all in trading it.
  • Forced longer holding periods will also force traders to take the dividends pay-outs into much greater considerations, driving demands for the direct yield (the effective interest rate in %) to generally be higher, and/or lowering the price of the stock until the direct yield is more palatable. This has to do with the fact that being forced to hold risk for a certain amount of time, means you will want to be more compensated for the act of doing so.
  • Greater and perhaps unnecessarily large capital flows will go to businesses which are already well-established and reliable, and which are less likely to cause any unwanted surprises for the traders during the holding period. In turn, this will deprive riskier but potentially very good business opportunities that might produce a greater amount of wealth and prosperity for the whole economy, of the funding these businesses might need, effectively reducing innovation and causing further economic stagnation.

In general, Monetary Velocity in the entire economy will drop considerably if long-term holding periods are enforced on the stock markets, thus reducing the wealth, prosperity and living standards considerably, and arresting innovation. Just the very act of restricting the stock market trading will bring this about, according to the laws of economics and human psychology, because the free exchange of capital and ideas about the future will be constrained, and the knock-on effects are too large for most haters of free-market capitalism to even begin to comprehend.

A small caveat here is in order: The suggestion made by many HFT critics, for example Karl Denninger, that holding periods and order placement restrictions measured in at least a few seconds are to be instituted to prevent some fraudulent HFT practices that involve illegal displays of order depth, is very unlikely to constrain economic activity and innovation.

Forcing market orders to be valid for at least 1 second or so, is in line with human reaction speeds. Spoofing of order depth which the HFT actor has no intention of actually executing at, but only uses to force human traders to take actions, should be limited or outright forbidden, as it is already outlawed by the Terms of Service agreements for most if not all public exchanges.

 

Where the critics and haters of capitalism get it wrong.

The claim that capitalism doesn’t work and that the free markets and capitalism itself needed to be rescued in the aftermath of the 2007-2009 financial crises, rests upon the fact that numerous types of bailouts were launched to prop up various financial institutions in the West, using taxpayer money. Critics of the market economy take this to mean that capitalism cannot survive without state power, a conclusion which is totally wrong.

Sadly, the numerous taxpayer financed bailout process disrupted the function of the free markets, which can simply be described as rewarding success and punishing failure and carelessness. For several years leading up to the crisis, state power had been improperly intervening in the financial markets, restricting parts of their natural function, propping up bad companies, cutting central bank interest rates to low, and most of all, allowing banks to get away with thoroughly criminal lending practices that were in obvious breach of the law.

Prior to the crisis, the Western financial system wasn’t totally free. Indeed, banks had access to state powers to backstop them to some degree, in form of the taxpayer backed Federal Reserve System in the US, and in the form of the ECB in Europe.

However, if you do give banks such a backstop, you MUST at the same time also institute regulations regarding the practices of bank lending. Otherwise, you are simply encouraging fraud.

And here’s where things went wrong. State power was erroneously instituted to backstop the banks, while a balancing amount of regulatory state power was NOT PROPERLY APPLIED in the form of proper supervision of the banks’ lending practices.

This malfeasance on parts of the Western governments, created an unbalanced and not really free market, where because of state power, the banks could freely engage in utterly disgusting behaviour with respect to lending. It could not have happened without state power meddling in the free markets and disrupting them to some degree.

Then, once the crisis struck, the governments of the West made a most serious mistake again, when they disallowed the natural cleansing fires of bankruptcies, to clear out the bad debt from the economy, and destroy bad actors and bad companies.

In other words, state power created the imbalances which led to the financial crisis, which was then blamed on free market capitalism, and used by dishonest and in most cases ignorant politicians and socialist social commentators, to call for more state power. The political Left claims that the markets failed and then needed state power, but the reality is that it was malfeasant state power (something the Left wants more of) and state interference in the previously relatively free and fair markets, that caused the festering credit disease that ultimately triggered the crisis of 2007-2009. This is what the political Left always engage in. They create problems, blame them on everyone else, and then try to usurp more power.

 

The financial market should have been left to their own devices before, during, and after the financial crisis.

The banking sector and the financial markets did NOT need any help at all during the financial crisis. None whatsoever. What was needed then, and is still needed, is that governments stop interfering in the financial markets and stop trying to hold up a system stacked with insolvent enterprises with horrid amounts of bad debts on their books.

If nothing had been done in terms of interventions, the free market would have bankrupted as much bad debt and as many corrupt and in some cases criminal institutions as would be necessary to restore monetary velocity and general trust in the economy.

And instead of the zombie economy of the last 8 years, which has served to further hollow-out the middle class in the US and Europe, we’d be in a much healthier economic paradigm, with bad decisions being punished by the markets, most of the bad debt defaulted. We would probably not have today’s environment of continuing credit expansion which even now is starting to fail, and which no longer drives GDP growth sufficiently to be considered sustainable.

Unfortunately, state power in the West has NOT been applied properly since the financial crisis, and today’s situation is in many respects even worse than it was before the last crisis struck.

 

Concluding thoughts on the nature of the stock markets and trading.

The equity markets are an indispensable part of decreasing capital allocation hurdles in the modern economy. Through the equity markets, anyone with condensed work (money) can acquire or divest themselves of productive assets, be they already producing or be they speculative, as the investors and traders wish.

Our modern capital markets offer the to-date most flexible and unobtrusive and non-coercive way to allocate capital as one sees fit.

They also reward those among us who are the best predictors of future economic and human outcomes (well, at least they used to do, before the central banks (state power, which is very dangerous and often leads to very bad outcomes…) decided to most foolishly start to make winners and losers at their leisure utilizing tax payer funds, a devastating crime against the whole economy and an absolutely disgusting show of disrespect for all the good that (relatively) free markets and free enterprises have brought humanity over the last 500-800 years or so).

As such, trading at both shorter and longer time horizons is by itself a productive process, and it has the positive outcome of – over time – redistributing wealth to people who are better at deciding what to do with it. With some HFT practices being an exception, as noted.

 

The Leftist propaganda against the free markets and the stock markets is utter nonsense, spouted by radicals who have laid waste to academia in the West and reduced it to a laughable state of idiocy (just go watch some videos of politically correct “professors” and “students” at your random US college or university, and you’ll get the picture…), and whom themselves are largely parasitic entities, living off taxpayer funds. Additionally, many if not most of the Leftists are utterly ignorant about how the free market system functions.

And yet these Leftists, who in most cases live on taxpayer funds and are actual parasites themselves, dare hold the opinion that the stock markets and trading is parasitic? This is not only ridiculous, it is outrageous and a totally unacceptable display of arrogance and stupidity.

Their anti-free market propaganda is a dangerous testament to what negative and incompetent and hateful people do with their time, if given the means to survive by benevolent and naïve productive tax payers. The left criticizes an economic system which has led to the greatest boom in productivity and prosperity of all recorded human history. So great has the positive transformation of free market capitalism been, that even corrupt dictatorships have benefitted from existing in a world dominated by powerful free-market nations.

There is absolutely nothing immoral about trading the financial markets. Indeed, the risk-taking it involves is most noble, in the sense that it provides other people with means they do not have themselves, of producing goods and services and sustain themselves while doing so. (Yes, there are some exceptions, for instance, dubious financial instruments issued by dubious institutions and individuals – but fraud is unfortunately present in every sphere of human life to some degree.)

What we all should do, is make sure that we continuously highlight malfeasance and immoral and unethical behaviour amongst all sectors of life, be it the public sector or the private sector businesses. What we absolutely shouldn’t do, is to engage in utterly dishonest attacks upon the free market which has lifted the entire world up enormously over the last few centuries, in terms of living standards, and demand its abolishment. We need more free market capitalism, not less.

More study materials:

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Carl Malmberg
Carl Malmberg
Technical Analyst at EWT Investing
Carl has analyzed and traded the financial markets 12+ years and counting.
Founder of the Extended Elliott Wave Theory.
Access to our Market Analysis section is provided by the Global Elliott Wave Coverage subscription, which gives you access to 20 financial market analysis sections, with at least 5 updates published per day. Sign up today at only $19 per month! Subscribers to our services will find our more in-depth analysis on the trends in the various global financial markets in the Market Analysis section.
 
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S&P500 Elliott Wave Theory Technical Analysis

Technical Analysis on the S&P500 from late 2016-12 to 2017-03.

Here’s a summary of our technical analysis on the S&P500 from 2016-12-28 to 2017-03-27. For new readers, at EWT Investing, we use our own modified version of the Elliott Wave Theory as well as other technical systems and indicators, to try and arrive at a comprehensive technical picture of the markets at any given time.

For this summary, let’s have a look at approximately the last 3 months of analysis updates. In the chart below, key updates that introduce new theories on market developments, have been spliced in. For the sake of brevity, some phrases which are only important for subscribers who are reading the constant flow of updates, have been edited out. Elliott Wave labels that are still active and to the benefit of our subscribers have been smudged out. And the chart is a light-version, compared to what our subscribers get. Please click the chart to open a full-size version of it:

S&P500 Elliott Wave Theory Technical Analysis EWT Investing

During December of 2016, we were tracking a potentially very dangerous formation in the S&P500, which did not pan out. However, while much of the debate in mainstream financial media was centered around whether or not the Dow Jones Industrial Average would hit 20,000, we were certain that S&P500 would take out 2285 (which would almost guarantee that Dow would hit 20k), before topping out.

Indeed, S&P500 hit 2285 a few weeks later, and on the 31st of January 2017, we issued a new analysis update, warning that an important top could possibly be in place. However, the situation was not clear cut, and the S&P500 did not take out lower and more important sell signal levels during the initial decline, which compelled us to warn of a possible trend continuation upwards, whilst pointing out a potentially very catastrophic scenario if the market would drop just a little more.

As it turned out, the S&P500 rallied strongly into February of 2017. It would be unfair to say that we predicted this rally, because we did not have it as a most favoured scenario at the time of the 2017-01-31 update. The only thing we can claim is that we correctly pointed out 2285 as a trigger level for a trend continuation upwards.

Our next major analysis update for the S&P500 was written on the 16th of February. The strong market advance had killed off a potential very negative Elliott Wave scenario, which we noted. Also, a revision was made to our most favoured Elliott Wave count at the time. In the update, we set up the 2380 level as the best place to short the S&P500 from.

A few days later, on the 22nd of February, the S&P500 was flagged at extremely overbought levels in our adaptive channel system, and we warned that a consolidation or correction was likely imminent. As it turned out, the S&P500 settled the overboughtness by conducting a sideways 4th wave.

Before the start of trading on the 28th of February, we issued a new update, in which we called for a minor correction, to be followed by an advance to 2380-2400. Again we made the assessment that taking negative positions on the S&P500 would be best achieved from 2380+. As it turned out, the correction became very shallow and in fact ended that day, with the S&P500 gapping up the next day, achieving our primary 2380-target and the secondary 2400-target all in the same trading day. That indeed marked the top for that market phase.

The next significant update – there were of course updates made in between for our subscribers, but due to the market moves, not unique enough to include in this summary – was made on the 27th of March, when before the start of trading, we noted that the S&P500 was extremely likely to hit oversold levels early in the day’s trading, and that the end to the corrective decline was most likely close at hand. We also noted 2321 as a critical level (in the cash index), and it was untouched, though, barely. The S&P500 rallied considerably intra-day and has carried on from there.

It now remains to be seen if our call for 2430 to be reached, will actually materialize.

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Carl Malmberg
Carl Malmberg
Technical Analyst at EWT Investing
Carl has analyzed and traded the financial markets 12+ years and counting.
Founder of the Extended Elliott Wave Theory.
Access to our Market Analysis section is provided by the Global Elliott Wave Coverage subscription, which gives you access to 20 financial market analysis sections, with at least 5 updates published per day. Sign up today at only $19 per month! Subscribers to our services will find our more in-depth analysis on the trends in the various global financial markets in the Market Analysis section.
 
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Silver/USD Elliott Wave Theory Technical Analysis

Track record: Technical Analysis on Silver/USD from 2016-10 to early 2017-03.

It’s time to have a look at our analysis of Silver/USD (new window) from October 2016 through early March 2017. Here’s a chart summarizing the most important analysis updates, excluding minor updates that only confirm other previously made analysis updates. Have a look at this chart, as usual, a bare-bones chart stripped of almost all indicators we use, as well as any Elliott Wave (new window) labels. Parts of the spliced in comments have been masked because they reveal what is yet to be subscribers-only. Click the chart to open a full-size version:

Silver/USD Elliott Wave Theory Technical Analysis by EWT Investing

Back in October 2016, pattern clarity for Silver/USD was low on most time frames, and we didn’t have any particularly probable Elliott Wave formation to go by. It is important to know when pattern clarity and uncertainty is high. It’s one of the most hard-learned lessons for traders, Investors and analysts who really want to get it right. Trust us.

Anyway, one of the technical systems we use for our comprehensive technical analysis, was flagging an extremely oversold in Silver/USD situation on the 6th of October, of a degree that almost always leads to significant bounces or consolidations. Not a super-bold call perhaps, given the degree of violence in the drop, but the market soon found a support zone, and proceeded to rebound significantly.

The preceding drop back down post the election of Donald Trump as POTUS, however, was not predicted by us to any meaningful degree, we only had a critical level which was busted and warned that positive scenarios looked murky, but nothing in terms of a stated opinion. So, miss on that market move, on our part.

Then on the 21st of November 2016, our adaptive channel system once again warned that oversold conditions were approaching. As it turned out, the market did consolidate and correct upwards, but not in a particularly easily traded way.

Then in late December 2016, pattern clarity in Silver/USD improved considerably, allowing us to make some longer-term wave pattern calls with increased confidence on the 30th of December 2016. The first one of them, that Silver/USD would hit $18, was achieved some 2.5 months later, as we know today. We’ll see if the rest of targets – masked in this free summary update – are also hit. The jury’s out on those, as the saying goes.

On the 27th of January 2017, as Silver/USD was correcting against what we perceived to be a support cluster, our composite technical analysis made it clear that we believed a trend resumption upwards was the most likely (barring a break of then-critical level $16.20, which didn’t occur). Incidentally, and somewhat unexpectedly, Silver/USD bottomed that very day.

On the 2nd of March 2017, while the uptrend in Silver/USD persisted in what we postulate is an A-wave, we were very certain it was close to ending. Usually, it pays to trade in the direction of the trend, but sometimes you have to make calls for it to end. (Finding this balance is one of the hardest things in the world of trading and investing.) Anyway – Silver/USD had hit and somewhat surpassed our $18-target, and while the bigger structure is quite likely to hit $19 later this year, it was time to warn of a top.

Incidentally, that call for a correction hit the general top price zone fairly well, and Silver/USD has since corrected quite violently all the way down to the support around – it almost immediately confirmed the correction by blasting through the important $17.90-level.

Analysis updates written after the 2nd of March are not included in this summary.

All in all, our Silver/USD-analysis from October 2016 to early March 2017 has been fairly good, certainly not perfect during Q4 2016 (pattern clarity was low to us), but very good from late December 2016 to early March 2017.

A call which we make in this free analysis summary is for Silver/USD to hit $19 some time during 2017. The jury’s is out on that call, and if Silver/USD falls through the $16.65-area during this corrective phase, then the $19-goal will probably (but not certainly) have failed. Of course, we continuously re-evaluate our technical analysis readout of the markets, but as things look for Silver/USD at the time of this free analysis summary, $19 remains a target for later this year. We shall see.

Carl Malmberg on FacebookCarl Malmberg on TwitterCarl Malmberg on Wordpress
Carl Malmberg
Carl Malmberg
Technical Analyst at EWT Investing
Carl has analyzed and traded the financial markets 12+ years and counting.
Founder of the Extended Elliott Wave Theory.
Access to our Market Analysis section is provided by the Global Elliott Wave Coverage subscription, which gives you access to 20 financial market analysis sections, with at least 5 updates published per day. Sign up today at only $19 per month! Subscribers to our services will find our more in-depth analysis on the trends in the various global financial markets in the Market Analysis section.
 
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MICEX Technical Analysis Elliott Wave Theory

Track record: Technical Analysis on MICEX (Russia) from 2016-12 to 2017-02

Let’s go through our analysis updates for the Russian stock market index MICEX, from late 2016-12 to mid 2017-02. MICEX is the Russian stock market index denominated in Russian Rubles, while RTS is the index denominated in US Dollars. To get a clear view without the extra interference of currency fluctuations, we prefer to analyze the MICEX, although RTS is often widely quoted both inside and outside Russia.

There’s an old investor adage which goes something like “When in doubt, stay out.”. Sometimes the markets are just filled with dangers and uncertainty and low risk/reward, and at such a point, we have to advise our clients of said dangers.

Let’s have a look at a bare-bones chart with our comments spliced in. These summary charts lack indicators and all Elliott Wave markings, by the way, the charts in our subscribers-only analysis sections are deeper. Click the chart to open a full-size version:

MICEX Technical Analysis Elliott Wave Theory

On the 13th of December 2016, the MICEX hit absurdly extreme levels of “overboughtness” in our adaptive channel system (shown in a separate Daily time-frame chart, available to subscribers), and we were forced to proclaim the current market level to be dangerous to enter at that time. The next day, the MICEX initiated a significant correction lasting almost two trading weeks, which brought the price to a neutral position in the adaptive channel.

Early on the 5th of January 2017, or rather, a few days before, the MICEX had hit the 2260-target we’d set a couple of days earlier in a minor update not really worth mentioning here (hence, it’s non-inclusion in the chart). However, on the 5th of January, our combined technical analysis indicated that risk/reward for long (positive) positions had dropped, and that things had improved greatly for short (negative) positions, or just outright liquidation and going to cash.

What followed was a drawn out decline over the next three weeks. On the 23rd of January 2017, the MICEX hit oversold levels in our adaptive channel, which we warned our subscribers of. Shorting at that time carried a bad risk/reward.

Then, just days later, the Russian stock market shot up violently, and hit overbought levels again on the 27th of January, which we remarked in the technical analysis update due for that day. As it turned out, that overbought price level was indeed a bad spot to buy the index.

From there on out, with our analysis methods, the MICEX was in a void. Possibly, an Expanding Triangle (see the Eliott Wave Theory guide for more information) was developing. On the 14th of February, we remarked that *maybe* the triangle had reached its end stage, and if true, then the MICEX would bounce strongly. However, there was a competing possibility in the short-term, which suggested a 3rd wave down was underway. Because there was no really good way to discern between the two, we clarified that according to us, Risk/Reward was bad for both positive and negative positions, at that spot.

As it turned out, our adherence to the old market adage “When in doubt, stay out.” was totally justified, and the MICEX traded down almost -5% in the coming two weeks, a significant move, which our subscribers – if they had positive positions on the MICEX (and yes, most people only like to trade the long side of the market) – were sufficiently and accurately warned of.

As for me personally, the last time I traded MICEX was in November-December of 2016, through index-following mutual funds, locking in a decent profit. Post that time period, predictability decreased enormously, and I’ve personally chosen to stay out of the MICEX for some time now.

All in all, these MICEX technical analysis updates of ours, served their purpose in all cases, warning our subscribers about market extremes, and uncertainty/conflicting market possibilities which warranted staying out/managing risk carefully.

Carl Malmberg on FacebookCarl Malmberg on TwitterCarl Malmberg on Wordpress
Carl Malmberg
Carl Malmberg
Technical Analyst at EWT Investing
Carl has analyzed and traded the financial markets 12+ years and counting.
Founder of the Extended Elliott Wave Theory.
Access to our Market Analysis section is provided by the Global Elliott Wave Coverage subscription, which gives you access to 20 financial market analysis sections, with at least 5 updates published per day. Sign up today at only $19 per month! Subscribers to our services will find our more in-depth analysis on the trends in the various global financial markets in the Market Analysis section.
 
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Gold/USD Elliott Wave Theory Technical Analysis

Track record: Technical Analysis on Gold/USD 2017-01 to 2017-02

Time for another summary of our Gold/USD-analysis track record. The success continues. Back in December 2016, we almost bottom-ticked the Gold/USD-price, as can be seen in our summary we wrote in early January, Track record: Gold/USD – 2017-01-14. Here’s the summary chart we made back then (click the chart to open a full-size version), and please remember that as usual, the charts we use for our summaries are stripped of almost all indicators and all Elliott Wave-labels (which are reserved for our paying subscribers):

Gold / USD Elliott Wave Theory analysis at EWT Investing

And we have continued to be very successful in analyzing Gold/USD. It’s time for a new summary and a new chart. Here’s the new chart below, again, please click it to open a full-size version of it, and again, please remember that we don’t show Elliott Wave-labels nor our full set of indicators in the summarization charts:

Gold/USD Elliott Wave Theory Technical Analysis EWT Investing

So, as we covered in the previous analysis summary for Gold/USD, we managed to call the latest bottom area for Gold/USD fairly well, almost to the day, and with an insignificant price difference, back in the final days of December 2016. Initially, our target was $1200-1220, of which $1200 was hit on the 12th of January 2017.

Next call we made was a minor warning on the 18th of January, that Gold/USD was overbought according to one of our indicator systems. This system does sometimes give false signals if a very strong trend is underway, but usually, it caps the market advances and declines pretty well. It is mainly used to further evaluate the potential risk/reward for positive or negative positions, at any given time. For all financial markets we analyze, we provide our subscribers with a special Daily chart with this indicator system.
As is readily available from the chart, Gold/USD did start a fairly significant sideways correction at the time.

On the 30th of January, the technical picture in Gold/USD cleared up even more, and issued a call for Gold/USD to trade to at least $1233 and at most $1260 over the next 1-2 months (the latter part of that prediction is yet to be fully borne out by the market though… we’ll see how it fares).

Then on the 21st of February, in our update, we noted that $1233 had been hit, and that $1260 was next to probably be tested, and that shorting from that level would be appropriate.

And again, on the 27th of February, just below $1260 in the Gold price series we use (it hit $1265~ish in the futures), we noted that while the trend did remain up, it was likely to end very soon – and the Gold/USD market has dropped since and broken several important supports.

Now, to be sure, the market has not yet borne out whether or not we will be right with our call that a multi-week correction in Gold/USD started from $1260 the other day. Maybe, maybe not. We’ll see. We can’t be right all the time, but we certainly strive for and hope to be. 🙂

To summarize the summary

All in all, this was a series of very good Gold/USD calls on our part. If you are interested in our Gold/USD analysis, you can get access to it (and currently 19 other financial market analysis sections) at only $19 per month (+possible VAT) through our Global Elliott Wave Coverage subscription service. We will accept a maximum number of 1000 members on this analysis service.

Carl Malmberg on FacebookCarl Malmberg on TwitterCarl Malmberg on Wordpress
Carl Malmberg
Carl Malmberg
Technical Analyst at EWT Investing
Carl has analyzed and traded the financial markets 12+ years and counting.
Founder of the Extended Elliott Wave Theory.

Access to our Market Analysis section is provided by the Global Elliott Wave Coverage subscription, which gives you access to 20 financial market analysis sections, with at least 5 updates published per day. Sign up today at only $19 per month! Subscribers to our services will find our more in-depth analysis on the trends in the various global financial markets in the Market Analysis section.
 
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India

Track record: Technical analysis on the BSE Sensex 2016-11 to early 2017-02

Let’s have a look at our technical analysis updates for the BSE Sensex over the last couple of months. BSE Sensex is a stock market index for Bombay, India, and it is one of the stock market indices we analyze 1-2 times per week.

Here’s a chart with some of our analysis comments spliced in. Please note that we’ve masked some information, and that this chart doesn’t contain any Elliott Wave Theory markup, and none of our indicators. Click the chart to open a full-size version of it. Please note that our updates for most of February 2017 are not included in this summary.

BSE Sensex Elliott Wave Theory technical analysis EWT Investing 2016-11 2017-02

Back in November of 2016, our methodology strongly suggested that the BSE Sensex would be in a quite irregular trading environment for the next half-year to a year, at least, and that large price swings between 23500 and 28000 could be expected. At that time, wave structure was very unpredictable, but it did suggest an irregular trading environment, and not a strong downtrend. As it turned out, the BSE Sensex never reached the lower end of the range we suggested, but instead proceeded to create an interesting sideways structure next, and has then rallied.

Anyways, on the 5th of January of 2017, the BSE Sensex had created a very interesting set of conditions, suggesting that a breakout towards 28000 was probable if the index could break a particular trendline (not shown in this chart), but that there was some resistance just ahead (a composite resistance level), which could be strong enough to stop the advance. As it turned out, the resistance cluster only managed to stop the BSE Sensex a couple of days, before it broke through and activated our buy signal and target of 28000.

The 28000 target was then reached on the 1st of February 2017. On the 2nd of February, our analysis suggested a top of some degree was imminent, and at that time, we speculated that the entire advance would actually potentially be over, and specified certain critical levels on the downside that had to be taken out.

Now, as it turned out, the BSE Sensex did start a minor correction not long afterwards, but it turned out to only be a sideways formation, and the index has continued higher since. None of our critical sell signals which were needed to confirm a top were triggered.

Summary.

So, all in all, the following can be said:

  • In November 2016, we were correct in our wave analysis suggesting that the BSE Sensex was not in a downtrend, but rather in a large-scale sideways correction. It didn’t, however, touch the bottom of the range we suggested at that time.
  • In January 2017, we alerted our subscribers to a certain set of conditions, including a potential buy signal, which then led to an advance of approximately +5%. This represents an annualized gain of approximately +60%.
  • In early February 2017, we were too early in calling for the entire uptrend to be over, only a minor sideways correction ensued.

All in all, a decent series of analysis updates on the BSE Sensex. We got the general type of market behaviour correct back in November, and more or less locked in a move of approximately +5% in a month from early January to early February 2017, which translates to annualized gains of approximately +60%. It could have been worse, and it could have been better.

Carl Malmberg on FacebookCarl Malmberg on TwitterCarl Malmberg on Wordpress
Carl Malmberg
Carl Malmberg
Technical Analyst at EWT Investing
Carl has analyzed and traded the financial markets 12+ years and counting.
Founder of the Extended Elliott Wave Theory.
Access to our Market Analysis section is provided by the Global Elliott Wave Coverage subscription, which gives you access to 20 financial market analysis sections, with at least 5 updates published per day. Sign up today at only $19 per month! Subscribers to our services will find our more in-depth analysis on the trends in the various global financial markets in the Market Analysis section.
 
Start my Subscription to Extended Elliott Wave Theory analysis at EWT Investing!
bank-note-euro-bills-paper-money EUR/USD technical analysis

Track record: Technical Analysis on the EUR/USD – 2016-12 to 2017-02

Our success in analyzing the EUR/USD forex pair continues. Before the EUR/USD declined considerably during the latter part of 2016, we informed our clients of the considerable decline to come, as covered in this blog post: https://ewtinvesting.com/2016/11/28/track-record-eurusd-2016-11-28/ .

Some time has passed, and with it some market phases, and so it’s time for a news summary of our latest EUR/USD analysis updates, this time for the period ranging from late-December 2016 up to early February 2017.

As usual, we’ve taken a barebones chart (the charts available to our subscribers contain a lot more information, as well as Elliott Wave labels, which is purposefully left out here) and spliced in our analysis updates. I hope you can read it, we had to shrink the text size slightly to fit all of it into one chart. Oh, and please click the chart to open a full-size version:

EUR/USD Elliott Wave Theory technical analysis at EWT Investing

On December the 20th 2016, we noted that significant positive technical divergences were building (noting than these conditions were usually seen at significant bottoms), and that with the EUR/USD being very oversold, this was a questionable time to be short (negative positions) the EUR/USD. While we didn’t unequivocally call a bottom, the EUR/USD did in fact end the downtrend that same day. We also noted the important 1.054 level, noting that a passage of it would likely terminate all immediately negative scenarios.

On the 2nd of January 2017, we became slightly more bullish, and set 1.08 as a very probable target for H1 2017. We also noted that a loss of the 1.04 level would be somewhat negative, but that a break of a falling trendline (not shown in this chart) at 1.0515 and declining, would be bullish and point towards at least 1.065+.

The next few days, the EUR/USD briefly took out 1.04, but then turned around and traded strongly through the falling trendline (which was at 1.051 by then), triggering the positive scenario with a primary target of 1.065+, and the EUR/USD then proceeded to trade upwards to our 1.065+ goal, hitting it a short while later on the 12th of January.

Approximately two weeks after that, on the 24th of January, the EUR/USD hit significant resistance at 1.075, close to our 1.08-target, and we warned that this was a bad time to initiate new long (positive) positions in the EUR/USD. We pointed out the existence of a strong support cluster around 1.055-1.061, which the EUR/USD proceeded to test shortly thereafter.

On the 30th of January, as the support was being tested, we became decidedly less clear regarding the short-term pattern clarity, however reiterating our underlying belief that the EUR/USD would move higher over the next few months. In fact, the support cluster we’d pointed out actually held, and the EUR/USD proceeded to take out 1.08 shortly after that, ironically, with us less certain than before, that it would happen so soon.

On the 3rd of February, we noted that our 1.08-price target for H1 2017 had been hit, and that while strongly overbought conditions weren’t present yet, it would be appropriate to take profits on any existing positions and keep the remainder running with a trailing stoploss/-gain.

Summarizing our late-December-early Febraruy EUR/USD analysis updates.

So how did we do? It’s safe to say we more or less called the bottom area where the downtrend in the EUR/USD was terminated in January, however, it would be dishonest to say we nailed it at the exact price level the decline stopped, because our trailing positive signal level was only trigged at approximately 1.051, and the decline actually stopped at approximately 1.038.

However, our price target at 1.065 was hit and surpassed shortly after our positive trigger was surpassed. It’s then fair to say that we were on target all the way up to 1.075, a significant potential trading profit, counting from our first signal at 1.051.

From there on out, more specifically from the 30th of January, it wouldn’t be fair to say we called the last advance to 1.08 clearly from a trading perspective, because market clarity dropped for our methodology, and at that time, we only noted that we expected a choppy move upwards over the next few months. From a macro-wave perspective, we were right.

So, from 1.051 to 1.075, more or less, we were on target. Not bad at all. In fact, potentially very profitable.

The future moves of the EUR/USD?

It’s important to note that market predictability varies over time. This is a core component of our methodology. From personal experience, we know that insisting that the markets are always equally obvious in their behaviour, is a very good way to end up in bad trades and lose money. So, we’ll see what the future holds and what we can provide to our subscribers in the next market phase.

If you want to read our EUR/USD-analysis (and analysis updates on many other financial markets) as we publish them, and not in our summaries bi-monthly or quarterly summaries, you need to be an active subscriber to our Global Elliott Wave Coverage subscription service.

Carl Malmberg on FacebookCarl Malmberg on TwitterCarl Malmberg on Wordpress
Carl Malmberg
Carl Malmberg
Technical Analyst at EWT Investing
Carl has analyzed and traded the financial markets 12+ years and counting.
Founder of the Extended Elliott Wave Theory.
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