Sunday, April 24, 2011

Market Journal: Coming of Age

By Joe Russo, Elliott Wave Technology | April 23, 2011

Buy & Hold Update: 

April 15 – Elliott Wave Technology (GRA): The passive buy & hold for the long-haul strategy has unequivocally failed post 2000. Despite this fact there appears to be no shortage of pundits suggesting that the bear market bottom in 2009 marked a generational low. (Think 1932, 1974, or 1987)  Thus, if one resets their perception of a buy & hold time clock to begin at the 2009 low, then they’d be correct in stating that buying and holding from the 2009 bottom has worked well to date.  (25-months and counting)  Nowhere close to anything that can be defined as “the long-haul”, have they supposed that a “new” long-haul has got to start somewhere, eagerly latching onto the 2009 bottom as that starting point.   In contrast, we are more inclined to embrace the notion that the generational highs achieved in 2000 and 2007 will more likely than not require a substantially longer period to resolve, rebalance, and correct their enormous overshoots.   Considering that many if not all of the systemic maladies that collapsed the financial system remain cancerously embedded within the halls of its corrupt institutions, it is prudent to be prepared for the possibility of additional unwinding in the years ahead.  Despite such prudence, it is clearly unwise to fade or fight the all powerful institutional cartel comprised of high-powered lobby-groups, government, Wall Street, and the central banks that fund them.   Though abhorring the level of indefensible corruption still resident throughout the financial sphere, our Guardian Revere Advisory shall pursue its inherent directives and remain objectively aligned with the Primary/Cycle degrees of trend for as long as those trends may last.  Our long standing credo at the GRA remains the same, don’t be fooled again.




Wave Watch:

April 12 – Elliott Wave Technology (IMF):  For ardent wave watchers, the biggest challenge to our Interim Monthly Forecasting efforts remains the accurate reconciliation of Elliott’s degrees of trend at the last four major pivots.  The first is the pivot high in 2000 followed by the 2002 low, the 2007 high, and the fourth pivot being the 2009 low.  We are currently rising sharply toward a fifth pivot.   The one thing that we have been most certain of is that the bull market rally off the 2009 bottom is NOT a “TWO-Wave” at any degree, meaning that those waiting for a killer THREE-WAVE DOWN will continue to bankrupt their trading accounts holding to such misguidance.  Given the speed and amplitude resident within the last four (and now fifth) pivots, the two best terminal labels for the 2009 low remain “A” waves of either Primary or Cycle degree.  Simply stated, the 8-9 years from the 2000 crest is much too short a time span to comprise all-of the SuperCycle IV wave.  In our view, that much anticipated generational low in equity values will arrive only upon the terminal of SuperCycle IV.  At present, we do not believe the markets have put in their SuperCycle lows.  Beyond the proverbial coin toss, the only thing that will assist in reconciling these rather large fast-moving pivots is the future course of price action over the coming years.  The current bull market thrust toward pivot five will be the most deceptive as it may be an extremely bearish “B” wave at Primary/Cycle degree, or it may be ascending toward terminating a kinder and gentler “A” wave at Primary degree.  With each passing month we shall patiently wait for the price action to slowly reveal itself as to which of Elliott’s degreed terminals is behind us, and which is yet to come.   Right now, the only answer remains within the coin toss mentioned above.  




Intermediate-Term Chart of the Week:

April 19 – Elliott Wave Technology (Position Traders Perspective):  Flirting once again with historic multi-decade lows, position traders have no choice but to factor in the eroding value of the world reserve currency into their strategic trading plans.  Thus far, the ever-weakening fiat dollar has worked wonders in keeping equity values on their near vertical ascent from the abyss in 2009.  In our view, there shall come a point within the purposeful fiat erosion where the inflationary effects will begin to stifle corporate earnings.  Right now we appear to be moving through a sweet spot whereby earnings are improving surprisingly well despite the dollar coming very close to crossing the line of being far too inflationary for its own good, and the good of the transnational corporations who benefit from the competitive currency translations.  Despite the dismal long-term fundamentals inherent in the currency, we are anticipating the inevitable onset of a technical rally.



Intermediate-Term System Traders Market of the Week:

April 21 – Elliott Wave Technology (PTP-Systems Trader):  After taking some whipsaw heat on a short position established in Q4 of 2008, the discipline inherent in our trading systems quick admission in being wrong and reversing back to the long side of Gold in early 2009 is a perfect example of how an unbiased non-discretionary trading system should ideally engage the markets.  To toss a little icing on the cake, Gold hit a long standing price target of 1495 from the charting side of our forecasting work.  The 23K in month-to-date equity shown in the lower panel of our chart is nothing compared to the 580-pts of amassed profit at $100 per point.  Multiply that by 3-contracts at this level of engagement and you’ll find that open equity on this trade is just south of two-hundred grand.  Despite such numbers, we stay with the discipline embedded in the code, and we’ll take whatever profit the market delivers whenever the current trend shows a reasonably sustainable sign of reversing.  Until then, it’s a “buy and hold” until it’s a “Sell”.



Near Term Chart of the Week:

April 20 – Elliott Wave Technology (Near Term Outlook):  In addition to our standard charting and forecasting protocols, we regularly provide discretionary short-term trade set-ups within our Near Term Outlook.  This one happened to tag a short-term upside price target for Gold at 1508, which was good for 12-pts of upside.  We are also following a short trade for Gold with a defined stop.  Despite that short, two additional upside price targets remain in the 1500’s for the shiny metal.  Though one may not take each and every trade set-up identified, or any at all, the point values and price targets listed provide valuable information relative to other discretionary strategies one may be employing.



 Near-Term System Traders Market of the Week:

April 21 – Elliott Wave Technology (NTO Systems Trader):  After taking some whipsaw heat on a short position established in the summer of 2010, the discipline inherent in our trading systems quick admission in being wrong and reversing back to the long side of Oil that same fall is a perfect example of how an unbiased non-discretionary trading system should ideally engage the markets.  To toss a little icing on the cake, Crude Oil recently hit an upside price target of 109 from the charting side of our forecasting work.  The 5.6K in month-to-date equity shown in the lower panel of our chart is nothing compared to the 32-pts of amassed profit at $1000 per point.  Multiply that by the single contract traded at this level of engagement and you’ll find that open equity on this trade sits just south of 33K.  Despite such numbers, we stay with the discipline embedded in the code, and we’ll take whatever profit the market delivers whenever the current trend shows a reasonably sustainable sign of reversing.  Until then, it’s a “buy and hold” until it’s a “Sell”.  It’s that simple.



 E-mini Systems Trader Update:

April 21 – Elliott Wave Technology (DTP):  In a market cycle such as the current one whereby price has rallied in near vertical fashion with little or no meaningful interruption, the practice of “swing trading” is a completely lost cause – UNLESS – one is able engage the art of a countertrend trading discipline amidst much shorter timeframes.  By design, that’s precisely how our E-mini systems trader is built to engage.  Though we have had months of equal losses, this month is thus far racking up profits of $3,451 with another week remaining in April.



Coming of Age:

We had the opportunity to see the award winning documentary “Inside Job” over the weekend.  We highly recommend it.  Though it did not illuminate anything that we were not already aware of, the nature in which all of the various layers of high-level corruption were meticulously documented along with the known fact that nothing of substance has changed, is what inspired our closing rant.

Returning from the abyss courtesy of the most powerful cartel of institutional thieves in charge of legally protecting concentrated monopolies in the egregiously greedy and otherwise fraudulent endeavor of engineering individual bonuses and income streams on par with winning one’s state Lotto on a quarterly basis, the current bull market fabricated on their behalf at the expense of the commoner is beginning to reach a stage of maturity whereby it must soon prove its merit and worthiness.

In the months and years ahead we shall clearly see the precise level of grace and sustainability in which this miraculously engineered bull market matures from the financial sphere’s deserved state of total failure in 2008-2009.  Will it be able to stand on its own accord, or will it stumble, fall, or begin acting in an unpredictable, erratic, and dangerous fashion akin to the monster Frankenstein who was mythically created from similar distorted experiments within a realm that too was not intended to be reverse engineered on such levels. 

To say that we live in interesting times is flattering; to recognize that we continue to live in inconceivably unbelievable times would be far more fitting.

When investing or trading remember that you are fighting a constant war, and there is no room for sensitivity.  We have all been deliberately incented to dance with thieves, and we’ll be damned if any of them strip us of a single penny when it’s all said and done.  Quite the contrary, Elliott Wave Technology is on a quest to claim perpetual victory across the board in every timeframe.  We correct course quickly when wrong, because we only have only one gear, which is winning, and one adversary, which is price.
 

Trade Better/Invest Smarter
 Joe Russo
Publisher and Chief Technical Analyst
Elliott Wave Technology