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Forex Analysis on Majors – Weekly Summary February 3

Cory Mitchell, CMT

As the week of February 3 comes to a close we look to what is expected for next week, and what transpired over the last week of trading. Forex analysis on majors is the focus: EUR USD, GBP USD, CHF USD and USD JPY. Specific levels are mentioned (highs and lows) below, it is recommended a small buffer is added or subtracted from these specific levels to avoid insignificant false breakouts.

Forex Analysis EUR USD

The EUR USD traded in a choppy fashion this week, contained with a range from 1.32324 (January 27) and a low of 1.30248 (February 1). The sideways movement takes place within a short-term uptrend which began back in mid-January. The rally has broken a longer-term trendline and a rise above the current range means another wave higher in the current trend. The A rise above 1.32324 points to a target of 1.3650 to 1.37–the upper trendline. There is also an intermediate target at 1.3440.

Only a weekly basis the EUR USD is currently moving 304 pips (based on ATR (12)). This means the 1.3440 target could be seen next week (if an upside breakout occurs), while the broader target of 1.3650 to 1.3700 could take multiple weeks to be reached.

On the other hand a drop back below the range low at 1.30248 indicates at least short-term weakness. It also should be kept in mind that a longer-term down trend is still in play.

My proprietary indicator, which is an excellent confirmation tool, is still in “up” mode but is reflecting the lack of upward momentum seen this week. This means it not time to bail on long trades, or go short at this time.

EUR USD Daily Chart

Source: Forex Yard

Forex Analysis GBP USD

The GBP USD moved higher over the week and managed to punch through resistance in the 1.58 region. As indicated in prior analyses this pair is moving within a large symmetric triangle pattern, and over the long-term now looks poised to continue heading towards that upper trendline of the triangle. The top of the triangle is a long away though (1.66), and not likely to be seen for some time.

The GBP USD is moving 290 pips on a weekly basis (based on ATR (12)). This should be kept in mind when picking targets and entries next week.

The uptrend since mid-January has been quite steep and does not offer concrete targets heading into next week. That said, there is resistance near 1.61, but is unlikely to be exceeded next week. Support should come in at 1.56, which is the old (broken) downward trendline.

The proprietary indicator still is in “up” mode on the Daily and Weekly charts. A positive sign of for long-term GBP USD bulls. This means it is not time to bail on long trades, and not time to go short. New entries are possible if this week’s high at 1.58815 is exceeded, but with little support for quite a ways getting in now seems a bit risky to me (rather wait for another entry).

The low of the week was 1.56529 and can be used a stop level on long positions (alternative to 1.56 trendline).

GBP USD Daily Chart

Source: Forex Yard

Forex Analysis CHF USD

The USD CHF moved marginally higher this week, but moved in a choppy range-bound fashion. 0.91136 was the low, with a high of 0.92487. This pair remains in a very interesting position as the long-term downtrend (weekly chart) battles it out with the short-term uptrend (daily chart).

The pair overall is still making higher highs and higher lows, but the move lower over the last couple weeks was the result of a failed breakout to the upside. This puts the long-term perspective of the pair in question.

Therefore, focus on the breakout of the range which contained it this week. If an upside breakout occurs the target is 0.9383. If a downside breakout occurs the target is 0.8979. These target are roughly 135 pips, or a little more than half of the weekly average 217 pips this pair moves (ATR(12)).

As for my favorite indicator, it is in “down” mode on the daily and weekly charts. This means it is not time to abandon shorts, or go long at current levels (mid-range). The breakout of the range can be used for entries or stops, but I would use it more for exits than new entries. The pair has been choppy over the last couple months and is surrounded by support and resistance levels. I will be leaving this pair alone until a dominant trend once again emerges.

CHF USD Daily Chart

Source: Forex Yard

Forex Analysis USD JPY

This pair has also been a choppy bugger, but there were some relatively big moves this week and last. While this week’s movements could be dissected, the end result is that the price action is currently dominated by the long-term range this pair has been in since mid-2011. There have been splendid jumps and significant dumps but it all culminates in a steaming pile of indecision.

Within this range are multiple levels of support and resistance. The most significant resistance level at the moment is 78.269 followed by 79.51. Barring something like an BOJ intervention these are unlikely to be hit next week. That said, knowing the BOJ is likely going to continue to intervene I prefer to pick up longs near support of the range or when a breakout to the downside fails (if I trade this pair at all, which is unlikely).

Current support is 76.012, seen this week. More crucial support is 75.557 (decade low). These can be used as stops on longs.

Weekly average movement is 87 pips (based on ATR(12)). Daily movement is about 44 pips for the 24 hour period.

While there are some potential trades here, I prefer to wait for a defined trend to emerge or something significant to occur.

USD JPY Daily Chart

Source: Forex Yard

Regards,

Cory Mitchell, CMT

Open a practice forex account with Forex Yard. See what forex is all about, try it out, and while you make some funny money trades…

check out my eBook on forex trading–Profiting From the Forex Market Using Chart Patterns–it provides forex trading strategies including set-ups, entries, stops and profit targets.

EUR USD triangle on 15 min chart

EUR USD triangle (turquoise lines) has formed heading into the European session. It is most visible on the 15 minute time frame.

Breakout target is 65 pips.

Downside breakout occurs if the pair drops below 1.3157. Target 1.3092. Stop 1.3191.

Upside breakout occurs if the pair moves above 1.3190. Target 1.3255. Stop 1.3160.

Daily chart is still in “up” mode, so an upside breakout is preferred.

Reward for risk is about 2:1 currently and will improve slightly over time.

As time progresses and the pair approaches the apex of the EUR USD triangle breakout levels will come in slightly, and also stops. Add 65 pips to the price of the breakout and place stop just outside the trend line on the opposite side of the breakout.

EUR USD 15 minute chart

Source: Forex Yard

Regards,

Cory Mitchell, CMT

The global currency market (forex) trades 24 hours a day during the week, and you can open an account for as little as $100. That means anyone can start taking steps towards financial independence. With forex you get amazing leverage so you can grow your money fast…if you follow some guidelines (go to the Trading Tutorial page and look under Forex to learn more).

 Here are few steps to get you started:

1. Open a practice account with Forex Yard. See what forex is all about, try it out, and while you make some funny money trades…

2. Look through the Trading Tutorials page, sign up for my free newsletter, read the posts on the Market Blog for trade ideas, analysis and trading tips.

3. If you want further guidance and forex trading strategies, check out my eBook on forex trading–Profiting From the Forex Market Using Chart Patterns (it provides forex trading strategies including set-ups, entries, stops and profit targets)

Disclaimer: This is not a recommendation to buy or sell. No part of this article should be considered personalized investment advice. As always, investors should consult with a licensed financial planner for help on their particular investment situations.

I recently covered three forex pairs on the blog. Here is a forex update on all three given the last couple days action : AUD USD, GBP USD and the EUR USD.

Forex Update – The AUD USD was last covered in post which looked at an ascending triangle pattern. In that post it was indicated an upside breakout at 1.0390 provides a target of 1.1113. The current rate is still a ways away from the target but continues to move in the right direction–about 350 pips onside. Just below 1.0760 has been a resistance area, and the pair currently trades at 1.0743. If the pair breaks through that area there is little resistance until the 1.10 region. Daily, 4 hour and hourly charts remain in “up” mode. Stops can be moved up to 1.0520. If trading multiple lots, some can be thinned off at a more conservative target at 1.0890 (500 pip gain).

AUD USD Daily Chart

AUD USD with trendlines, support/resistance, ATR and proprietary indicator

Source: Forex Yard

Forex Update – The GBP USD was just addressed on January 31 in GBP USD Heading Higher. Recent price action has indeed been higher, up more than 120 pips since that post. If the pair continues to move inside this large triangle it has been in, over the next month to two months it will gravitate towards 1.6350-1.66. Daily, 4 hour and hourly charts are in “up” mode. Support should now come in at 1.56.

GBP USD with trendlines, support/resistance, ATR and proprietary indicator

Source: Forex Yard

Forex Update – The EUR USD has also been moving higher but in a more choppy fashion than the GBP USD over the last couple days. If the EUR USD can push through resistance at 1.3230 it is likely to extend higher towards the upper trend channel line at 1.35. Stops can be moved up to 1.30 if resistance is broken. Short-term momentum has been see-sawing, but currently daily, 4 hour and hourly are in “up” mode.

EUR USD with trendlines, support/resistance, ATR and proprietary indicator

Source: Forex Yard

Regards,

Cory Mitchell, CMT

 If you want further guidance and forex trading strategies, check out my eBook on forex trading–Profiting From the Forex Market Using Chart Patterns (it provides forex trading strategies including set-ups, entries, stops and profit targets).

Disclaimer: This is not a recommendation to buy or sell. No part of this article should be considered personalized investment advice. As always, investors should consult with a licensed financial planner for help on their particular investment situations.

Applying Fibonacci to Stock Market Patterns
It’s easier than you might think! 
February 1, 2012

By Elliott Wave International

Patterns are everywhere. We see them in the ebb and flow of the tide, the petals of a flower, or the shape of a seashell. If we look closely, we can see patterns in almost everything around us. The price movements of financial markets are also patterned, and Elliott wave analysis gives you the tools to interpret those patterns.

The Fibonacci sequence is vital to Elliott wave analysis — as a matter of fact, R.N. Elliott wrote that the Fibonacci sequence provides the mathematical basis of the Wave Principle. Once you understand the Fibonacci sequence, it’s easy to apply it to the markets you trade.

The following excerpt is from a new eBook from Elliott Wave International Senior Tutorial Instructor Wayne Gorman: How You Can Use Fibonacci to Improve Your Trading. Wayne explains how the Fibonacci sequence is derived and how it can be used to understand market behavior.

Learn how you can download the entire 14-page eBook below.

The Golden Ratio and the Golden Spiral

Let’s start with a refresher on Fibonacci numbers. If we start at 0 and then go to the next whole integer number, which is 1, and add 0 to 1, that gives us the second 1. If we then take that number 1 and add it again to the previous number, which is of course 1, we have 1 plus 1 equals 2. If we add 2 to its previous number of 1, then 1 plus 2 gives us 3, and so on. 2 plus 3 gives us 5, and we can do this all the way to infinity. This series of numbers, and the way we arrive at these numbers, is called the Fibonacci sequence. We refer to a series of numbers derived this way as Fibonacci numbers.

We can go back to the beginning and divide one number by its adjacent number — so 1�1 is 1.0, 1�2 is .5, 2�3 is .667, and so on. If we keep doing that all the way to infinity, that ratio approaches the number .618. This is called the Golden Ratio, represented by the Greek letter phi (pronounced “fie”). It is an irrational number, which means that it cannot be represented by a fraction of whole integers. The inverse of .618 is 1.618. So, in other words, if we carry the series forward and take the inverse of each of these numbers, that ratio also approaches 1.618. The Golden Ratio, .618, is the only number that will also be equal to its inverse when added to 1. So, in other words, 1 plus .618 is 1.618, and the inverse of .618 is also 1.618.

This is a diagram of the Golden Spiral. The Golden Spiral is a type of logarithmic spiral that is made up of a number of Fibonacci relationships, or more specifically, a number of Golden Ratios. For example, if we take a specific arc and divide it by its diameter, that will also give us the Golden Ratio 1.618. We can take, for example, arc WY and divide it by its diameter of WY. That produces the multiple 1.618. Certain arcs are also related by the ratio of 1.618. If we take the arc XY and divide that by arc WX, we get 1.618. If we take radius 1 (r1), compare it with the next radius of an arc that�s at a 90� angle with r1, which is r2, and divide r2 by r1, we also get 1.618.

Fibonacci-Based Behavior in Financial Markets

We can visualize that the stock market or financial markets are actually spiraling outward in a sense. This is a diagram of the stock market whereby the top of each successive wave of higher degree (in terms of the Wave Principle) becomes the touch point of an exponential expansion or logarithmic spiral. We can actually visualize the market in this sense, and we will see later on, in terms of Fibonacci ratios and multiples, how this unfolds.

This is a diagram of the Elliott wave pattern. It is a typical diagram showing us the higher degree in Roman numerals with wave I up (motive) and wave II down (corrective). One of the connections to Fibonacci ratios and numbers is that with Elliott wave, if we look at how many waves there are within each wave, we end up with Fibonacci numbers.

Learn How You Can Use Fibonacci to Improve Your TradingIf you’d like to learn more about Fibonacci and how to apply it to your trading strategy, download the entire 14-page free eBook, How You Can Use Fibonacci to Improve Your Trading.EWI Senior Tutorial Instructor Wayne Gorman explains: The Golden Spiral, the Golden Ratio, and the Golden Section How to use Fibonacci Ratios/Multiples in forecasting How to identify market targets and turning points in the markets you trade And more! See how easy it is to use Fibonacci in your trading. Download your free eBook today >>

This article was syndicated by Elliott Wave International and was originally published under the headline Applying Fibonacci to Stock Market Patterns. 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.

It looks like the GBP USD could be heading higher.

The pair found support above the ascending trendline of a massive triangle pattern.

GBP USD Weekly Chart

GBPUSD with Triangle, trendlines, support/resistance, ATR and proprietary indicator

Source: Forex Yard

Strength over the last couple days has pushed my proprietary indicator into the “moving higher” zone and the downward sloping trendline within the triangle was broken several days back.

This upside break could trigger a move into the upper portion of the triangle–1.6350-1.66–over the next month to two months.

Short-term though, upside momentum has been waning as the pair can’t push through 1.58–an area tested multiple times since November, but could not be penetrated. The pair will need to get through this area for the price to move higher. This is the area I am watching currently. A rise above is  bullish, but if the pair starts to retreat the only support is the downward sloping trendline near 1.56. If that level does not hold the GBP USD is likely to slide further with no further support till 1.55–and anywhere below 1.56 means it is time to step back and re-evaluate.

GBP USD Daily Chart

GBPUSD with trendlines, support/resistance, ATR and proprietary indicator

Source: Forex Yard

Regards,

Cory Mitchell, CMT

Disclaimer: This is not a recommendation to buy or sell. No part of this article should be considered personalized investment advice. As always, investors should consult with a licensed financial planner for help on their particular investment situations.

The global currency market (forex) trades 24 hours a day during the week, and you can open an account for as little as $100. That means anyone can start taking steps towards financial independence. With forex you get amazing leverage so you can grow your money fast…if you follow some guidelines (go to the Trading Tutorial page and look under Forex to learn more).

 Here are few steps to get you started:

1. Open a practice account with Forex Yard–one of the brokers I use. See what forex is all about, try it out, and while you make some funny money trades…

2. Read through this site–especially the Trading Tutorials page (scroll through and read just the articles that interest you to start), sign up for my free newsletter, read the posts on the Daily Blog for trade ideas, analysis and trading tips.

3. That will get you started, and if you read through all that, it may be the only information you need. If you want further guidance and forex trading strategies, check out my eBook on forex trading–Profiting From the Forex Market Using Chart Patterns (it provides forex trading strategies including set-ups, entries, stops and profit targets)–or check out some of the trading programs and resources below.

I am back from my time in the sun, and having not checked email, facebook, twitter or the news for over a week, I find the markets moving upon my return. Stocks have been pushing higher, in-line with the EUR USD correlation, as the Euro has also been moving higher vs. USD.

The EUR USD rallied above the short-term downward sloping trendline back on January 19. A proprietary indicator I use also bottomed out and indicated an upside move on January 16 as the pair was unable to make lower lows.

In the context of the broader analysis (see EUR USD Forecast 2012) the pair had reached a point where a reversal was likely.

From the 15 minute chart right up to the daily chart this pair is in a uptrend (the shorter time frames did see a decline over the last 14 hours). With the start of the week, my weekly chart even turned turned slightly bullish. The weekly bullish signal won’t be confirmed till the close of the week, but all time frames moving in the same direction is a positive signal for a higher Euro. So what does that mean?

There is potential that a reversal is underway as the EUR USD Forecast 2012 indicated a turn in late January to early February. Risk should always be managed though, and just because the trend is higher right now does not mean jumping into a long position without a plan (In a recent article on Probabilities I discuss how Trend and Magnitude are the most crucial factors in trading).

EUR USD Daily Chart

EUR USD with trendlines, support and resistance, ATR and proprietary indicator

Source: Forex Yard

On a daily basis the chart is still in bullish territory, but losing a bit of steam. The 4hour and hourly chart are testing support, but the 30 min has has turned back higher indicates that support is likely to hold.

EUR USD 30 Min Chart

EUR USD with trendline, support/resistance, ATR, proprietary indicator and Europe and US sessions are highlighted

Source: Forex Yard

Look for long trades between 1.3080 and 1.3120 with stops near 1.3060. The pair is moving higher within a relatively tight trend channel, with swings back and forth within the channel only taking a few days. Therefore, look for an exit near the upper of the channel–1.3350 to 1.3400.

If the EUR USD trend channel breaks to the downside (drops below the stop level) it could fall further. Will take the loss, wait and look for a better entry point.

Regards,

Cory Mitchell, CMT
VantagePointTrading.com

Disclaimer: This is not a recommendation to buy or sell. No part of this article should be considered personalized investment advice. As always, investors should consult with a licensed financial planner for help on their particular investment situations.

The global currency market (forex) trades 24 hours a day during the week, and you can open an account for as little as $100. That means anyone can start taking steps towards financial independence. With forex you get amazing leverage so you can grow your money fast…if you follow some guidelines (go to the Trading Tutorial page and look under Forex to learn more).

 Here are few steps to get you started:

1. Open a practice account with Forex Yard–one of the brokers I use. See what forex is all about, try it out, and while you make some funny money trades…

2. Read through this site–especially the trading tutorials page (scroll through and read just the articles that interest you to start), sign up for my free newsletter, read the posts on the Daily Blog for trade ideas, analysis and trading tips.

3. That will get you started, and if you read through all that, it may be the only information you need. If you want further guidance and forex trading strategies, check out my eBook on forex trading–Profiting From the Forex Market Using Chart Patterns (it provides forex trading strategies including set-ups, entries, stops and profit targets)–or check out some of the trading programs and resources below.

Credit Crisis: Are We Set Up for The Perfect Storm?
Robert Prechter discusses what’s backing your dollars 
Originally published January 26, 2012

By Elliott Wave International

In this video clip, taken from Robert Prechter’s interview with The Mind of Money, Prechter and host Douglass Lodmell discuss “real” money vs the FIAT money system, and what is backing your dollars under our current system. Enjoy this 4-minute clip and then watch Prechter’s full 45-minute interview here >> as they discuss the credit crisis.

Watch the full 45-minute interview FREEGet even more valuable insights as Mind of Money host Douglass Lodmell interviews Elliott Wave International’s President, Robert Prechter, about how to keep your money safe, the deflation versus inflation debate, the credit crisis and many more topics that are critical to your financial future.Start watching the free 45-minute interview now >>

Probabilities Part 2: Scoring the Probabilities in Trading

By Cory Mitchell, CMT

Part 1: Probabilities: What are the odds probabilities in trading are calculated wrong?  introduces probabilities and some potential issues – namely Availability Bias.

At the end of that article the following question was posed:

 

A man likes two women, and is going to ask both of them out. For each woman there is a 50% chance she will say YES and a 50% chance she will say NO (like flipping a coin). Neither woman knows of the other, and the answer of one woman in no way affects the answer of the other woman.

-Our man wants to know what the odds are he will get only one date?

-Since it could lead to complications, he also wants to know what the odds are he will get at least one date?

-He then decides that maybe he will see how it goes with the first woman, before he asks out the second one. If the first woman says YES, what are odds the second woman will also say YES?

There are no tricks here (like one woman is actually a man or something stupid like that), the probability for each scenario is our only concern.

I received several email responses, and no one got all the answers correct. When looking at probabilities it can be of great help to create what is called a “sample space.” From the sample space it is easy to see what the odds are of a potential outcome are.

To create a sample space we write down all the potential outcomes. In this scenario there are 4 potential outcomes, based on each woman saying YES or NO. The potential outcomes are as follows, set up as (woman 1 response, woman 2 response):

(YES, YES), (YES, NO), (NO, YES), (NO, NO).

Using the sample space we can answer our questions:

-The odds he will get one date: 50% (only two outcomes out of four have only have 1 YES in them)
-The odds he gets AT LEAST one date: 75% (we include all outcomes with 1 or more yeses – three outcomes out of four).
-If the first says YES, what are the odds the second says YES? 25%. There is only one outcome from the sample space which satisfies a YES YES response and thus has a 1 in 4 chance of occurring.

Since very few people get these answers correct, it is likely decisions are being made in trading which are not based on accurate information. Using probabilities in trading can greatly affect performance, and not understanding probabilities in trading can mean what you think you are doing is very different from what is actually occurring.

Sometimes we make things too complex…

Find the highest probabilities in trading means simplifying when we need to, asking the most basic question and working from there. Such as: is the market moving higher or lower? And then asking which is likely to be trigger first, my stop or profit target? These questions can get complicated, but keep them as basic as possible at first, and then (if needed) introduce more advanced techniques to hone in.

Can you keep it simple (keep in mind our brains are not wired for probabilities, so don’t be discouraged if you don’t get this one)? Consider the following question:

In university me and friend got drunk one night in a nearby city and failed to make it back for our statistics exam the following morning. We hatched a plan not to tell the professor we were out drinking, but rather to tell him I got a flat tire on the way to the exam (my friend in the car with me). Me and my friend went to the professor’s office and said we were sorry for missing the exam, but we got a flat tire on the way to exam and that missing the exam was unavoidable. We asked if we could write another exam at his convenience. To our surprise he said “OK…wait outside for 5 minutes.”

We sat outside and a few minutes later he came out and handed us both a sheet of paper and sent us to separate rooms. There were only two questions.

On the first side of the page was a statistics question worth 5 points (similar to the one above).

On the other side of the sheet was a second question worth 95 points: “What tire was it?” In order to get the 95 points we both had to identify the same tire.

What are the odds that, not having discussed which tire went flat, me and my friend both pick the same tire? My friends insists that there is a 1 in 16 chance; is he correct?

Take a moment and ponder what the odds are we both pick the same tire.

My friend failed statistics. The odds are 1 in 4. After creating the sample space you will see that many cancel each other out, because in this case order does not matter. We either pick the same tire or we don’t.

Traders often make trades much more complicated than they have to be. They see so many variables, like my friend seeing 16 potential outcomes, instead of reducing the trade down to relevant factors. They hear things on TV, read something in the newspaper, or read an article online and believe it will impact the market or will affect the odds of a trade they are considering. They fail to realize almost all these factors are irrelevant, and simply complicate the trading process but do not increase the odds of success.

As discussed in the first article, the market is going to move in a certain direction regardless of how many arguments I present for or against that move–piling on arguments and indicators to prove a point does improve odds. This means we must focus on analyzing only factors that affect price, and not try to fit indicators and methods to price movements–this creates lots of variables which mean absolutely nothing because they do not affect price, they respond to price.

So what are the relevant factors and how do we calculate probabilities in trading?

Probabilities in Trading: Relevant Factors

To me there are only two primary relevant factors. There are then secondary factors under the relevant factors which help to aid in the analysis.

The primary relevant factors are Trend and Magnitude. The Trend affects price (and is price), because humans are emotional and trends create greed and fear at different stages. Trend may also include Chart Patterns which are created and break down based on human emotion. Magnitude determines the volatility, velocity and projected price targets of a move. Price move in waves–sometimes smooth, sometimes choppy–but since we know markets always move in waves and those waves provide us with information on the extent to which the market is moving the information is very relevant.

Secondary factors include analysis tools used to determine trend and magnitude. For some this may include, trendlines, cycles moving averages, Fibonacci retracements/fans, an ATR indicator, RSI, etc . No matter the tools used, focus should be given to trend/chart patterns and magnitude.

So what are the odds of scoring a winning trade? Each trade is different, but the odds increase by trading with the trend and being aware of market magnitude. Trade against the trend and your odds decrease. Don’t account for magnitude and you are basically gambling on whether your stop or profit target will get hit. Many traders place their profit target so far away, hoping for a home-run trade that the probability the target will get hit is almost zero. If on a daily basis the EUR USD moves 110 pips, and you are continually trying to capture 250 pips a day on a daytrade, your odds of success are very small. Even if you trade with the trend you are likely to be stopped out far more often than your target is hit.

Do I Need to Calculate Actual Probabilities in Trading?

The short answer is No–you don’t need to come up with a probability for if a trade will be profitable or not (such as 62% or 28%). Calculating probabilities for each trade makes things much more complex than they need to be, and would likely be exceeding hard to do. If you can find a system that allows you trade with the trend, and then account for magnitude in determining where to place stops and profit targets you will have already placed the odds in your favor. Losses will still occur, as that is part of trading, but over-the long run you essentially become “the house” in Vegas–gaining an edge over other market participants.

So before you place a trade ask yourself two simple questions: Am I trading with the trend? And does the magnitude (movement) of the market dictate that I am likely to be able to get out at my profit target within the time frame I want? Analytical tools should be used to determine these factors.

If you can’t answer the questions, don’t trade. If the answer to either question is NO, then don’t trade. Only when the answer to both questions is YES are the probabilities on your side.

This does not mean the market will always hit your target, sometimes you will be stopped out, but more often than not if you answer YES to these questions you stand a better chance of being profitable.

How you determine Trend and Magnitude is up to you and your trading system, but keep it simple to keep the probabilities on your side.

Regards,

Cory Mitchell, CMT
VantagePointTrading.com

The global currency market (forex) trades 24 hours a day during the week, and you can open an account for as little as $100. That means anyone can start taking steps towards financial independence. With forex you get amazing leverage so you can grow your money fast…if you follow some guidelines (go to the Trading Tutorial page and look under Forex to learn more).

You owe it to yourself to get involved. Unlike stock trading you don’t need thousands of dollars to get started, and you can trade at night, after work…you decide.

 Here are few steps to get you started:

1. Open a practice account with Forex Yard–one of the brokers I use. See what forex is all about, try it out, and while you make some funny money trades…

2. Read through this site–especially the trading tutorials page (scroll through and read just the articles that interest you to start), sign up for my free newsletter, read the posts on the Daily Blog for trade ideas, analysis and trading tips.

3. That will get you started, and if you read through all that, it may be the only information you need. If you want further guidance and forex trading strategies, check out my eBook on forex trading–Profiting From the Forex Market Using Chart Patterns (it provides forex trading strategies including set-ups, entries, stops and profit targets)–or check out some of the trading programs and resources below.

Technical Indicators: A Love-Hate Relationship
Part I: How One Technical Indicator Can Identify Three Trade Setups 
January 27, 2012

By Elliott Wave International

Trading using technical indicators — such as the MACD, for example — can do one of two things: help you or hurt you.

Elliott Wave International’s Jeffrey Kennedy explains what he loves and hates about technical indicators and shows you how he uses them to his advantage in this excerpt from his FREE eBook, The Commodity Trader’s Classroom.

I love a good love-hate relationship, and that’s what I’ve got with technical indicators. Technical indicators are those fancy computerized studies that you frequently see at the bottom of price charts that are supposed to tell you what the market is going to do next (as if they really could). The most common studies include MACD, Stochastics, RSI, and ADX, just to name a few.

The No. 1 (and Only) Reason to Hate Technical Indicators
I often hate technical studies because they divert my attention from what’s most important – PRICE.

Have you ever been to a magic show? Isn’t amazing how magicians pull rabbits out of hats and make all those things disappear? Of course, the “amazing” is only possible because you’re looking at one hand when you should be watching the other. Magicians succeed at performing their tricks to the extent that they succeed at diverting your attention.

That’s why I hate technical indicators; they divert my attention the same way magicians do. Nevertheless, I have found a way to live with them, and I do use them. Here’s how: Rather than using technical indicators as a means to gauge momentum or pick tops and bottoms, I use them to identify potential trade setups.

Three Reasons to Learn to Love Technical Indicators
Out of the hundreds of technical indicators I have worked with over the years, my favorite study is MACD (an acronym for Moving Average Convergence-Divergence). MACD, which was developed by Gerald Appel, uses two exponential moving averages (12-period and 26-period). The difference between these two moving averages is the MACD line. The trigger or Signal line is a 9-period exponential moving average of the MACD line (usually seen as 12/26/9 so don’t misinterpret it as a date). Even though the standard settings for MACD are 12/26/9, I like to use 12/25/9 (it’s just me being different). An example for MACD is shown in Figure 10-1 (Coffee).

The simplest trading rule for MACD is to buy when the MACD line (the thin line) crosses above the Signal line (the thick line), and sell when the MACD line crosses below the Signal line. Some charting systems (like Genesis or CQG) may refer to the MACD line as MACD and the Signal line as MACDA. Figure 10-2 (Coffee) highlights the buy-and-sell signals generated from this very basic interpretation.

Although many people use MACD this way, I choose not to, primarily because MACD is a trend-following or momentum indicator. An indicator that follows trends in a sideways market (which some say is the state of markets 80% of the time) will get you killed. For that reason, I like to focus on different information that I’ve observed and named: Hooks, Slingshots and Zero-Line Reversals. Once I explain these, you’ll understand why I’ve learned to love technical indicators.

Keep reading about Hooks, Slingshots, and Zero Line Reversals in The Commodity Trader’s Classroom. This free eBook is filled with 32 pages of actionable trading lessons, such as: How to Make Yourself a Better Trader How the Wave Principle Can Improve Your Trading When to Place a Trade How to Identify and Use Support and Resistance Levels How to Apply Fibonacci Math to Real-World Trading How to Integrate Technical Analysis into an Elliott Wave Forecast Download your FREE Commodity Trader’s Classroom eBook today!

This article was syndicated by Elliott Wave International and was originally published under the headline Technical Indicators: A Love-Hate Relationship. 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.

Elliott Wave International has just released a free 14-Page eBook, How You Can Use Fibonacci to Improve Your Trading. Created from a $129 two-volume set, it’s available free until February 6. Learn more here.

Dear Trader,

You may be missing trading opportunities that are staring you in the face. The charts you look at every day could reveal high-confidence trade setups and market turning points, and you can learn how to find them, today.

Elliott Wave International (EWI) has just released a free eBook, How You Can Use Fibonacci to Improve Your Trading.

It features 14 chart-filled pages that explain Fibonacci and provide practical tools to help you formulate and execute your own trading strategy by combining wave analysis with Fibonacci relationships. You’ll never look at charts the same way again!

Created from a $129 two-volume eBook by EWI, this valuable report is offered free until February 6.

Don’t miss out on this opportunity to learn how Fibonacci can change the way you trade forever.

Download your free eBook now.

Warmest regards,

Cory Mitchell, CMT

Vantage Point Trading

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.

Hello All,

It is time to get out of the cold and  take a vacation. I will be getting some sun, and heading to Central America till January 30. During that time it is unlikely there will be any site updates/posts, and I will not be checking or responding to emails (that is going to be hard!).

When I get back it is going to be a busy and exciting time. We will be about a month away from the launch of the VPT Member’s Area which will allow members to access my personal forex analysis and trades set-ups, as well insider lessons, videos and articles. I am pumped about it as it has been a long time coming. Check out Member’s Area page to learn more.

As many of you know, if you email me, you get a personal response. That seems so rare these days, so I want to keep that same person-to-person channel open. I am capping the number of members to keep it a close knit group where you will feel free to comment and ask questions about my analysis, articles, set-ups, etc. Very exciting stuff, and you should be part of it.

The official launch date will be announced some time in early February, and when we go live there will be a 15 day totally free trial period to check it out.

But, for now, I am packing and tomorrow I am off. Have a great finish to the week, and may next week be prosperous!

Cory Mitchell, CMT

VantagePointTrading.com

Probabilities: What are the odds probabilities in trading are calculated wrong? Part 1

By: Cory Mitchell, CMT

Probabilities explain the chance of something happening. Probabilities in trading are often discussed, but humans have an abysmal capacity to understand and calculate probabilities. Our minds are just not hard-wired for it. We love to assign probabilities though, and since few understand some basic tenets of assigning probabilities, the probability assigned to an event is often at minimum grossly inaccurate or so wrong that the probability assigned becomes a matter of pure chance whether it will deemed right (and occasionally it will be).

Are there more six-letter words in the English language where the 5th letter is an n, or more six-letter words in the English language that end in ing?

Our issues with probability are compounded by many factors, but one overwhelming factor I believe is Availability Bias. Availability Bias is when we draw conclusions based on the information most readily available to us–which is often inaccurate. Based on this we often draw quick conclusions instead of thinking something through. As in life, Availability Bias in trading is prevalent.

So are there more six-letter words that have a fifth letter n, or that end in ing? Most say there are more words that end in ing, simple because they can instantly think of some words ending in ing, and thinking of a word with a fifth letter n seems more difficult (so it is not attempted).  The answer is there are more words that have n as their fifth letter.

You don’t need to be an English teacher to know that, it is actually an easy probability inference based on the options presented. All six-letter words ending in ing will also have n as the fifth letter. Therefore, without any knowledge at all, we can know that since n as the fifth encompasses all of the ending in ing, they have at least the same amount of words…and any additional word(s) that have a fifth letter n will make it our winner. The second option is much more specific, than the first, and therefore the second option has a lower probability than the first (option two has fewer words).

We are bad at probabilities and at looking closely at what is right in front of us.

Probabilities in Trading

The Availability Bias in trading also affects us in another way, which can be attributed to the media and their incessant pursuit of trying to explain and give reasons for past price action.

Which of the following is more probable?

• That stock XYZ will go up in 2012.

or

• That stock XYZ will go up in 2012 because it is bought by a larger company, causing the stock to jump 23%.

By explaining everything and trying to give reasons humans fall into a precarious probability trap. When details are given–almost any explanation whatsoever–we tend to believe the scenario is more likely*. Is it? Once again we basically have the n and ing question, but now more directly related to trading (did you fall for it again?). The first option encompasses the second option, and all other possibilities which will make the stock rise. The first option has a much higher probability of occurring, than the very specific second option. Yet, people are more likely to act on the second option, even though the odds of the stock increasing have not been improved by the possibility of the second option occurring.

Yet, we like to believe in and focus on details. Instead of realizing that a stock simply going up is much more probable than a specific way which may cause it to go up, we generally attribute each reason the stock could go up as an addition to the probability the stock will go up. No so. The stock simply going up encompasses all possible scenarios that could make the stock go up, giving reasons in an attempt to improve the probability of a stock going higher (because of this, and this and this and this and this) does nothing, and is an inaccurate use of probabilities.

Now, as traders we do give reasons for our trades and our analysis–I know I do. But we must understand that the more reasons we give, does not increase the odds of something moving in our direction. So how does that jive with the fact we each develop certain indicators and methods (hopefully) which when present do seem to increase our odds of being on the right side of the market?

At different points in both time and price and market will have many factors acting on it. At times these factors will largely favor bulls and at other times largely favor the bears, at other times there may be a stale-mate. It is the factors present in the market, not in our heads, that matter. If a trader or analyst sees the major overriding factors that impact the market, he/she will be good (never perfect though) at determining the direction of market. On the other hand, someone who just tries to find reasons for what they want (the market dropped today so I need to come up with a reason why), will never increase their odds of success no matter how many reasons they come up with it.

This may seem simple, but when it comes to probabilities in trading, this error is committed all the time. A trade goes against us and we start to consider reasons why it should start to move back in our favor. When we do this we play a very different game than we think we are playing. We have inadvertently skipped to option 2 in the above scenarios. We are no longer looking at the factors shaping the market (ultimately determined by price and time) and instead have switched to specific reasons for our belief, reasons which have a smaller chance of being right (yet the random nature of the markets will occasionally still reward us: see my article on Random Reinforcement).

For further reading on why creating reasons for moves is utterly useless see The Stock Market is Not Physics, a four part series.

Consider the Probabilities of the Following Scenario…

The probabilities in trading will be a continuing series, as we explore other common misuses of probabilities.

I welcome your comments or objections.

Here is a question to ponder until the next article, feel free to comment. Look at only the probabilities, and not value judgments etc.

• A man likes two women, and is going to ask both of them out. For each woman there is a 50% chance she will say YES and a 50% chance she will say NO (like flipping a coin). Neither woman knows of the other, and the answer of one woman in no way affects the answer of the other woman. Our man wants to know what the odds are he will get only one date? Since it could lead to complications, he also wants to know what the odds are he will get at least one date?
• He then decides that maybe he will see how it goes with the first woman, before he asks out the second one. If the first woman says YES, what are odds the second woman will also say YES?

Regards,

Cory Mitchell, CMT

Read Part 2 here: Probabilities Part 2: Scoring the Probabilities in Trading

*Giving a reason is also linked to people being more obliging. In an experiment conducted by Harvard social psychologist Ellen Langer, Langer asked people waiting in line to use a copier, “Excuse me, I have five pages. May I use the Xerox machine?” About 60% said YES.

To a different test group she said: “Excuse me, I have five pages. May I use the Xerox machine because I have to make some copies?” About 93% said YES.

Any reasons seems to be a good reason to most people. This should not be the case in trading….or anywhere for that matter.

Five Fatal Flaws of Trading

January 13, 2012

By Elliott Wave International

Close to ninety percent of all traders lose money. The remaining ten percent somehow manage to either break even or even turn a profit — and more importantly, do it consistently. How do they do that?

That’s an age-old question. While there is no magic formula, EWI Senior Instructor Jeffrey Kennedy has identified five fundamental flaws that, in his opinion, stop most traders from being consistently successful. We don’t claim to have found The Holy Grail of trading here, but sometimes a single idea can change a person’s life. Maybe you’ll find one in Jeffrey’s take on trading. We sincerely hope so.

The following is an excerpt from Jeffrey Kennedy’s Trader’s Classroom Collection, Volume 4. Learn how to get 14 more actionable trading lessons — FREE — below.

Why Do Traders Lose?

If you’ve been trading for a long time, you no doubt have felt that a monstrous, invisible hand sometimes reaches into your trading account and takes out money. It doesn’t seem to matter how many books you buy, how many seminars you attend or how many hours you spend analyzing price charts, you just can’t seem to prevent that invisible hand from depleting your trading account funds.

Which brings us to the question: Why do traders lose? Or maybe we should ask, “How do you stop the Hand?” Whether you are a seasoned professional or just thinking about opening your first trading account, the ability to stop the Hand is proportional to how well you understand and overcome the Five Fatal Flaws of trading. For each fatal flaw represents a finger on the invisible hand that wreaks havoc with your trading account.

Fatal Flaw of Trading No. 1 — Lack of Methodology
If you aim to be a consistently successful trader, then you must have a defined trading methodology, which is simply a clear and concise way of looking at markets. Guessing or going by gut instinct won’t work over the long run. If you don’t have a defined trading methodology, then you don’t have a way to know what constitutes a buy or sell signal. Moreover, you can’t even consistently correctly identify the trend.

How to overcome this fatal flaw? Answer: Write down your methodology. Define in writing what your analytical tools are and, more importantly, how you use them. It doesn’t matter whether you use the Wave Principle, Point and Figure charts, Stochastics, RSI or a combination of all of the above. What does matter is that you actually take the effort to define it (i.e., what constitutes a buy, a sell, your trailing stop and instructions on exiting a position). And the best hint I can give you regarding developing a defined trading methodology is this: If you can’t fit it on the back of a business card, it’s probably too complicated.

Fatal Flaw of Trading No. 2 — Lack of Discipline
When you have clearly outlined and identified your trading methodology, then you must have the discipline to follow your system. A Lack of Discipline in this regard is the second fatal flaw. If the way you view a price chart or evaluate a potential trade setup is different from how you did it a month ago, then you have either not identified your methodology or you lack the discipline to follow the methodology you have identified. The formula for success is to consistently apply a proven methodology. So the best advice I can give you to overcome a lack of discipline is to define a trading methodology that works best for you and follow it religiously.

Fatal Flaw of Trading No. 3 — Unrealistic Expectations
Between you and me, nothing makes me angrier than those commercials that say something like, “…$5,000 properly positioned in Natural Gas can give you returns of over $40,000…” Advertisements like this are a disservice to the financial industry as a whole and end up costing uneducated investors a lot more than $5,000. In addition, they help to create the third fatal flaw: Unrealistic Expectations.

Yes, it is possible to experience above-average returns trading your own account. However, it’s difficult to do it without taking on above-average risk. So what is a realistic return to shoot for in your first year as a trader — 50%, 100%, 200%? Whoa, let’s rein in those unrealistic expectations. In my opinion, the goal for every trader their first year out should be not to lose money. In other words, shoot for a 0% return your first year. If you can manage that, then in year two, try to beat the Dow or the S&P. These goals may not be flashy but they are realistic, and if you can learn to live with them — and achieve them — you will fend off the Hand.

Fatal Flaw of Trading No. 4 — Lack of Patience
The fourth finger of the invisible hand that robs your trading account is Lack of Patience. I forget where, but I once read that markets trend only 20% of the time, and, from my experience, I would say that this is an accurate statement. So think about it, the other 80% of the time the markets are not trending in one clear direction.

That may explain why I believe that for any given time frame, there are only two or three really good trading opportunities. For example, if you’re a long-term trader, there are typically only two or three compelling tradable moves in a market during any given year. Similarly, if you are a short-term trader, there are only two or three high-quality trade setups in a given week.

All too often, because trading is inherently exciting (and anything involving money usually is exciting), it’s easy to feel like you’re missing the party if you don’t trade a lot. As a result, you start taking trade setups of lesser and lesser quality and begin to over-trade.

How do you overcome this lack of patience? The advice I have found to be most valuable is to remind yourself that every week, there is another trade-of-the-year. In other words, don’t worry about missing an opportunity today, because there will be another one tomorrow, next week and next month…I promise.

I remember a line from a movie (either Sergeant York with Gary Cooper or The Patriot with Mel Gibson) in which one character gives advice to another on how to shoot a rifle: “Aim small, miss small.” I offer the same advice in this new context. To aim small requires patience. So be patient, and you’ll miss small.

Fatal Flaw of Trading No. 5 — Lack of Money Management
The final fatal flaw to overcome as a trader is a Lack of Money Management, and this topic deserves more than just a few paragraphs, because money management encompasses risk/reward analysis, probability of success and failure, protective stops and so much more. Even so, I would like to address the subject of money management with a focus on risk as a function of portfolio size.

Now the big boys (i.e., the professional traders) tend to limit their risk on any given position to 1% – 3% of their portfolio. If we apply this rule to ourselves, then for every $5,000 we have in our trading account, we can risk only $50 – $150 on any given trade. Stocks might be a little different, but a $50 stop in Corn, which is one point, is simply too tight a stop, especially when the 10-day average trading range in Corn recently has been more than 10 points. A more plausible stop might be five points or 10, in which case, depending on what percentage of your total portfolio you want to risk, you would need an account size between $15,000 and $50,000.

Simply put, I believe that many traders begin to trade either under-funded or without sufficient capital in their trading account to trade the markets they choose to trade. And that doesn’t even address the size that they trade (i.e., multiple contracts).

To overcome this fatal flaw, let me expand on the logic from the “aim small, miss small” movie line. If you have a small trading account, then trade small. You can accomplish this by trading fewer contracts, or trading e-mini contracts or even stocks. Bottom line, on your way to becoming a consistently successful trader, you must realize that one key is longevity. If your risk on any given position is relatively small, then you can whether the rough spots. Conversely, if you risk 25% of your portfolio on each trade, after four consecutive losers, you’re out all together.

Break the Hand’s Grip
Trading successfully is not easy. It’s hard work…damn hard. And if anyone leads you to believe otherwise, run the other way, and fast. But this hard work can be rewarding, above-average gains are possible and the sense of satisfaction one feels after a few nice trades is absolutely priceless. To get to that point, though, you must first break the fingers of the Hand that is holding you back and stealing money from your trading account. I can guarantee that if you attend to the five fatal flaws I’ve outlined, you won’t be caught red-handed stealing from your own account.

Get 14 Critical Lessons Every Trader Should Know Learn about managing your emotions, developing your trading methodology, and the importance of discipline in your trading decisions in The Best of Trader’s Classroom, a FREE 45-page eBook from Elliott Wave International. Since 1999, Jeffrey Kennedy has produced dozens of Trader’s Classroom lessons exclusively for his subscribers. Now you can get “the best of the best” in these 14 lessons that offer the most critical information every trader should know. Find out why traders fail, the three phases of a trader’s education, and how to make yourself a better trader with lessons on the Wave Principle, bar patterns, Fibonacci sequences, and more! Don’t miss your chance to improve your trading. Download your FREE eBook today!

This article was syndicated by Elliott Wave International and was originally published under the headline Five Fatal Flaws of Trading. 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.

There is an ascending triangle chart pattern on the AUD USD daily chart, which is very near resistance.

Source:  ForexYard on MT4

I have shown two potential drawings for the ascending triangle chart pattern, marked by the red lines. I prefer the smaller pattern which is highlighted by the blue box. Here is a potential entry, stop and profit target. Then I will go over things I like and don’t like about the pattern.

Entry, Stop, Profit Target for ascending triangle chart pattern

If trading for an upside breakout, the breakout will occur at 1.0390 (entry). This level has not been touched since early November, and given the close proximity to 1.04 a pop could occur on that alone if we get to 1.0390.

Stop near 1.0118 (trendline) or alternatively below the recent low at 1.0143. I prefer the trendline stop. Therefore risk is: 1.0390 – 1.0118 = 0.0272 (272 pips)

Profit target is: 1.0385 – 0.9662 (this is the high which has been tested multiple times minus the low where the pattern begins) = 0.0723 + 1.0390 (breakout price) =  1.1113 (profit target).

If we get a breakout soon, the potential reward is about 2.65X the risk. Decent, not fantastic. That said, after the breakout occurs stops can always be pulled in.

Keep in mind that just because we are currently near resistance, a downside breakout could also occur. In that case, everything is reversed. Our stop from above becomes the entry (1.0118), and our entry from above becomes the stop (1.0390). Profit target is the entry price minus 723 pips (0.9395).

Other Factors

I like the ATR reading–it is very low. I have highlighted it for a reason. Volatility could remain low for some time, but eventually it will pick up. A breakout of a chart pattern may be what causes it (either up or down).

A breakout higher is not without resistance overhead. 1.07 has been batting down the price since August. Therefore, if a breakout higher does occur from the triangle watch this area closely. If the rate can break through that resistance area, the profit target is a good possibility. If it can’t get through there, well, then move the stop to at least break-even.

A downside breakout will also need to get through some support, namely at 0.9950 and 0.9650.

With each passing day our risk becomes a bit smaller as the price action (triangle) continues to converge.  The upside breakout price will not change, as the line is horizontal. The downside breakout price will move up (upside stop moves up) slightly each day as the line is sloping.

Cheers,

Cory Mitchell, CMT

Disclaimer: This is not a recommendation to buy to sell. Trading involves substantial risk, and is not suitable for everyone. Consult your own financial adviser before trading or investing. See Legal Disclaimer.

If you read Cory Mitchell’s recent article–Where is the Stock Market Going In 2012–you will have some idea of what he expects this year. The following article looks at a different angle: the disconnect between media and stock market performance.

New Year, New High Hopes for Stocks

January 11, 2012

By Elliott Wave International

You can probably relate: Every year, come January 1, I just can’t help but feel that “every little thing is gonna be all right,” as Bob Marley sang.

This year, the mainstream financial community is sharing the same sentiment. Here’s how EWI’s Steve Hochberg summarized it [emphasis added]:

At its conclusion, 2011 was marked by back-and-forth stock swings that resulted in essentially a flat market. My Bloomberg screen shows that the DJIA ended up 5.53% for the year, the S&P was flat…while the NASDAQ was down 1.80%. The broadest aggregate measure of stock market performance, the DJ Wilshire 5000, which includes nearly all stocks that trade, ended 2011 down 1%.

The Dow’s action masks a strongly negative stock market performance overseas. For instance, in U.S. dollar terms, the Euro Stoxx 50 Index was down nearly 20% in 2011, with the FTSE down almost 6%, the French CAC off almost 20% and the German DAX down over 17%. Asian markets were also hit hard. The S&P Asia 50 lost over 15%, the Nikkei declined 13%, the Hang Seng was off 20%, the Shanghai Composite ended 2011 down over 18%, while Australia was lower by 14%. All were down in euro terms, too.

But not to worry: a recent USA Today article notes that a “quick survey of New Year’s prognostications from investment strategists suggests stocks might deliver the double-digit gains that they have put up, on average, over the long term. A snapshot of 2012 year-end-price targets from five firms shows an average gain of 10.5% for stocks.”

Very optimistic, indeed!

Except, when have we heard that kind of talk before?

Hochberg continues:

The “10.5%” forecasted gains for the coming year is interesting because it is almost exactly the average forecasted gains for stocks for 2011, as the subheading in the following Barron’s cover story from December 2010 shows.

That’s right. A year ago, forecasts for stocks in 2011 were just as optimistic as they are now for 2012 — and largely for the same reasons: improving economy, recovering real estate and jobs markets, and a host of other “better fundamentals.”

From an Elliott wave perspective, the reason 2011 mainstream financial forecasts fell flat was simple: Stocks don’t follow the economy. It’s the other way around: The economy follows stocks.

What’s Really Ahead for 2012? There is a lot of optimism building around the stock market, but is it based on sound analysis or hope created by recent economic news reports? Elliott Wave International has released a free report to help you navigate the markets and prepare for what’s ahead. You’ll get hard facts, 25 eye-opening charts and 14 pages of straightforward commentary that will help you see the “big picture” so you can position yourself for the years to come.

Download The Most Important Investment Report You’ll Read for 2012 now.

This article was syndicated by Elliott Wave International and was originally published under the headline New Year, New High Hopes for Stocks. 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.