• Sony BRAVIA KDL-32EX301 32? LCD TV
• Samsung LN22B650 22-Inch 720p LCD HDTV
• Samsung LN40B750 40-Inch 1080p 240 Hz LCD HDTV with Charcoal Grey Touch of Color
• Samsung LNS2651D 26-Inch LCD HDTV
• Vizio 19? Class 720p 60Hz LED LCD HDTV

• Sony BRAVIA KDL-32EX301 32? LCD TV
• Samsung LN22B650 22-Inch 720p LCD HDTV
• Samsung LN40B750 40-Inch 1080p 240 Hz LCD HDTV with Charcoal Grey Touch of Color
• Samsung LNS2651D 26-Inch LCD HDTV
• Vizio 19? Class 720p 60Hz LED LCD HDTV
• Panasonic Lumix DMC-GF3 12 MP Micro 4/3 Compact System

• Sony BRAVIA KDL-32EX301 32? LCD TV
• Samsung LN22B650 22-Inch 720p LCD HDTV
• Samsung LN40B750 40-Inch 1080p 240 Hz LCD HDTV with Charcoal Grey Touch of Color
• Samsung LNS2651D 26-Inch LCD HDTV
• Vizio 19? Class 720p 60Hz LED LCD HDTV

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

By Elliott Wave International

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!

(Video) Bob Prechter Explains 'Triple Top' Forming in U.S. Stock Market

This excerpt from the special video issue of the August Elliott Wave Theorist brings you Bob Prechter’s analysis of the triple top that has been forming in the U.S. stock market over the past 12 years. Watch as Bob himself explains what this pattern means for you and the markets.

You can get even more analysis – including an 84-yearstudy of stock values – that will help you gain perspectiveabout the recent market moves with Elliott Wave International’s FREEreport, “Reality Check: Studying the Past to BringClarity to the Future.”

You’ll get a glimpse into the in-depth analysis Robert Prechter presents each month in his Elliott Wave Theorist with 3 excerpts from his most recent issues.

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Five Fatal Flaws of Trading

January 13, 2012

By Elliott Wave International

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 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 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 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 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 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 weather 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.

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The European Debt Crisis and Your Investments

A look back on 18 months of analysis and reports on the European Credit Crisis
January 10, 2012

By Elliott Wave International

The Credit Crisis Spreads -- December 2010

The credit crisis is escalating as expected. Back in January 2010, when ratings agency Moody's bestowed "investment grade" status on a widely followed index of sovereign bonds, The European Financial Forecast argued that a renewed Primary-degree decline would in fact aim the credit crisis directly at this critical new realm.

Our case for the looming sovereign debt debacle rested primarily on two pieces of evidence: (1) Primary wave 3 (circled) had begun in Europe's peripheral markets, and (2) premiums for credit-default swaps on European sovereigns (think of an insurance policy against a national default) were already signaling the next phase of the crisis by surpassing their 2008-09 price extremes.

The February 2010 issue of EFF published a chart showing rising Greek, Spanish and Italian swaps and offered this description of how Europe's credit crunch would escalate: "The theme during Primary wave 1 (circled) was default at the individual, corporate and quasi-government level. The theme for Primary wave 3 (circled) will be default at the sovereign level."

Today, the credit crunch is clearly angling itself away from mere corporations and toward whole countries. On November 15, Bloomberg announced the escalation with this headline:

Companies Safer Than Sovereigns as
Crisis Cracks 'Old Order'
-- Bloomberg, November 15, 2010

London credit strategist Greg Venizelos tells Bloomberg that the "old order" was the one where investors believed large sovereign nations to be better credit risks than corporate borrowers.

However, debt is being repriced, he says, and today "corporates are now better credit quality than sovereigns in the periphery." Indeed, swaps on Italian government bonds are more expensive than 75% of the Italian companies contained in the iTraxx Europe Index of European corporations. In Spain, traders deem Spanish sovereign debt to be riskier than all six Spanish companies in the index.

Even in the supposedly safe core European country of France, 5-year swaps tied to French government bonds climbed to an all-time high of 105 basis points in November. At that level, more than half of the 25 French companies in the iTraxx index trade tighter than the French sovereign, according to Bloomberg.

The chart above shows another way to view the escalation of the credit crisis. By plotting the difference, or "spread," between swaps on European corporations versus those on European sovereigns, the rising line shows derivative traders' increasing fear over sovereign default relative to corporate borrowers.

So, yes, the old order of safer sovereigns is over. But notice, too, that the debt crisis began escalating when the continent's peripheral markets started topping way back in October 2009. The billion-euro question is, "Who is next?" The media is clearly focusing on Portugal, as 5-year credit default swaps tied to Portuguese bonds are setting all-time records. But charts show that so too are swaps tied to Spanish and Italian bonds.

Five-year swaps on Belgian debt also reached an all-time high last month. Either one of these countries could be next. Maybe they'll all go down together, but in the larger scheme of things, it doesn't matter. The most important thing to observe is that even core European countries like France and Germany exhibit spiking default insurance premiums, too. These countries are the largest contributors to the �440 billion Facility, the same one that backstops the rest of Europe.

The June 2010 European Financial Forecast said unequivocally that before the storm is over, "at least one, but more likely several, G8 nations will capsize." We stand by our forecast.

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