December 18, 2009
By Robert Prechter, CMT

The following article is an excerpt from Robert Prechter’s Elliott Wave Theorist.

First they bought into the “stocks for the long run” case and got killed. Then they jumped on the commodity bandwagon and got killed. Many investors are buying back into these very same markets, but others are running to what they perceive as safe “yields” in the municipal bond market. So far this year, individual investors have “poured a record $55 billion” (Bloomberg, 11/12) into muni bond funds, with the pace running $2b. per week in August and September; many other investors are buying munis outright. These must be the people who tell us that they can’t live without “yield” and also cannot imagine their city, county or state government going bust. But as Conquer the Crash warned and as The Elliott Wave Theorist has reiterated, the muni bond market is heading for disaster.

Municipalities have borrowed more than they can repay, they have pension liabilities that they cannot meet (up to a trillion dollars’ worth, according to Moody’s), and tax receipts are falling. The only reason that states haven’t failed yet is the so-called “stimulus package,” which took money from savers, investors and taxpayers—thereby impoverishing the people who live in the various states—and gave it to state governments to spend so they would not have to cease their profligate spending. But political pressures will eventually cut off this gravy train. In the 2010-2017 period, the muni bond market will become awash in defaults. The leap in optimism since March, which has shown up in every financial market, has fueled a retreat in muni bond yields to their lowest level since 1967 and narrowed the spread between muni bond yields and Treasuries.

This rush to buy municipal bonds is occurring right on the cusp of a dramatic decline in their values. While many individuals are loading up right at the peak so they can participate in the next major market disaster, smarter investors, such as insurance companies Allstate and Guardian Life, are getting out. Subscribers to our services, we trust, own not a single municipal IOU. Our recommendation for investors is 100 percent safety, and such a program does not include muni bonds. If you are a recent subscriber, please read the second half of Conquer the Crash as a manual on how to get your finances safe.

By Robert Folsom

A well-known business magazine recently published a story with this headline:

Stocks: The “Loss” Decade
A disastrous ten years for the stock market ends in just a month. Will the turning of a new decade change investors’ luck?

One sentence from the story itself tells you most of what you need to know: “The ten years since Y2K are on track to produce the worst total returns for investors since the 1930s.”

Of course, no one should really be surprised by a story that says the stock indexes did poorly over the past decade. That’s not news. The facts in the article more or less repeat what our own Elliott Wave Financial Forecast reported last March, complete with this chart:

It’s safe to say that this business magazine article is the first of many the media will run before the year’s end, as part of their “decade wrap-up” stories. And like this story, most or all those like will share the same basic assumption: stock investors did poorly because the stock indexes did poorly.

And that assumption, dear reader, is erroneous. The truth is far uglier.

Here’s what I mean. If you want to know how real stock investors really behave, the major stock indexes are the wrong place to look. Published results from firms like Dalbar and Vanguard consistently show that, over the past 25 years, individual investors and mutual fund shareholders have had average returns that are half (at best) of the annual returns of the broader stock market.

So, for example, in 20 years from Jan. 1, 1989 through Dec. 31, 2008, the S&P 500 showed a 8.35% gain (Dalbar). Over that same period, equity investors showed a 1.87% gain. And if you include the 2.89% inflation rate in those years, investors show a 1.02% loss.

You can shift to a timeframe which excludes the bear market that started in 2007, but it doesn’t change the basic story. From January 1984 though December 2002, the Dalbar data shows that equity investors earned an annual average of 2.6%, vs. the S&P 500’s 12.2% annual average. The annual inflation rate for period was 3.14%.

What’s more, similar studies and surveys also show that most investors are overconfident in the decisions they make. Put another way, they don’t even know that they are their own worst enemy.

It can be different for you. Market prices move in recognizable patterns: Those patterns can also reveal specific price levels that help confirm the direction of the trend, or identify the time to step aside. Respecting the price, pattern and trend is the first step toward discipline, instead of yielding to emotions.

Robert Folsom is a financial writer and editor for Elliott Wave International. He has covered politics, popular culture, economics and the financial markets for two decades, via print, radio and the Internet. Robert earned his degree in political science from Columbia University in 1985.

Pascal’s Triangle is a logically ordered description of the outcome of a series of completely random events. So what does that have to do with the stock market or the price of beans, or anything else?

Well, I don’t know for sure but I had lots of fun researching this article about Fibonacci and Pascals Triangle and writing about it.

It is a bit of a slog to get through it but that’s what happens when you start seeing things that apply order to seemingly random events.

INO TV is free (4 videos).

Here are the titles, authors, and descriptions:

Daily Market Studies
Dan Gramza
Watch as Dan Gramza gives daily analysis, set-ups, and insight into the current market conditions. Updated every morning, Dan’s commentary shows you exactly what’s happening in the most active and volatile markets including Stock Indexes, Forex, Grains, Precious Metals, and more. Dan is the President of Gramza Capital Management, Inc. and DMG Advisors, LLC. He is a trader, consultant to domestic and international clients, and an advisor to the St. Croix hedge funds.

CME FX Product Trading
Derek Sammann
Derek Sammann discusses the development, market focus, product availability, and beneficial aspects of trading foreign exchange products in the current market conditions. Watch as Derek explains the development, liquidity, and product adaptation of the CME Group’s FX products culminating in the recent release of E-micro contracts for the self-directed trader. Derek is the Managing Director of FX Products at the CME Group and has over 15 years of experience in the global FX markets.

Gramza Special Monthly Video Report
Dan Gramza
In this special video report, Dan Gramza covers proprietary trading strategies by reviewing market moves in the previous month. Learn specific price levels for placing entry, exit, and risk management stops while examining current opportunities. Dan is the President of Gramza Capital Management, Inc. and DMG Advisors, LLC. He is a trader, consultant to domestic and international clients, and an advisor to the St. Croix hedge funds.

Crude Oil and Energy Update
Joseph Raia
Watch as Joseph Raia, managing director of energy and metals for the CME Group, speaks about crude oil, natural gas, and world energy markets. Raia has spent more than 22 years in the energy and transportation sectors and has held various positions in oil
transportation and trading.

A year and a half ago we decided to track the results of our MarketClub “Trade Triangle” technology in six different markets. The markets we decided to trade were corn (CBOT_C), wheat (CBOT_W), soybeans (CBOT_ZS), crude oil (NYMEX_CL), gold (XAUUSDO) and finally the dollar index (NYBOT_DX). We picked these markets at random, not because we could see into the future, but because these markets historically have had prolonged and therefore profitable moves in the past. Most big markets have one or two moves every year. Our “Trade Triangle” technology allows you to catch these moves and stay on top of the market. Watch the video.

I have truly been surprised and amazed that we have had such big returns, especially in the last two quarters. When I helped co-create MarketClub, I knew we had something great… but even these results would astound anyone.

In Q3 of ‘08 we had a phenomenal return and one that I did not think we would see again. However, in Q4 of ‘08, not only did we exceed the Q3 results but we did it in different markets which is quite remarkable. This underscores our fundamental belief that investors/traders should be diversified into several different markets.

In Q4 of ‘08, the results we had in corn were significantly less them in Q3. Non-the less, they were positive. Our Q4 results in the wheat market were almost double that of our previous quarter’s earnings. Soybeans on the other hand proved to be very positive, but not as positive as Q3 which was our best quarter ever for that commodity. The star of the show, or I should say the quarter, was crude oil. Crude oil produced an astounding gain of 40,040 per contract in the quarter. This return was practically double our Q3 results and by far our best returns of any market in this quarter. You may want to watch our Q3 movie and see what we were saying about crude oil at that time.

Gold proved to be just that, golden, as the yellow metal produced another stellar return in the quarter. Lastly, the dollar index showed it’s best returns in 6 quarters.

Q4 of ‘08 turned out to be a record quarter producing 78,142 in gains before commissions. This was our best quarter ever and quite frankly it was more than we had expected.

The return on capital for the last six quarters was 624%. The number of positive quarters (for all six markets) was 34 out of 36, that’s a 94.44%positive streak. Losing quarters for the six commodities totaled to just 5.5%. (Special note: We are trading six markets and six quarters gives us a universe of 36 individual quarterly results to judge our results by.)

In the 6 quarters we have traded the six commodities listed above, we have never seen a losing quarter dollar wise or quarter wise (no pun intended).

Certainly there is no guarantee what Q1 of ‘09 will bring. Certainly the markets we are in have a tendency to move, therefore they should present opportunities to make good returns in the future.

Take a look at this short video that I have prepared to show you the results. I will go through some of the actual signals that we dynamically generated with our “Trade Triangle” technology. The “Trade Triangles” are just one tool of our MarketClub service.

You may also want to look at our earlier Q3 video and check out our past signals. We use the same formula and same approach each quarter for the markets we are tracking.

Enjoy the videos. If you have any questions about our results, please give us a call. As many of you know, brokers love us because we are not brokers, we simply provide educational material to help traders improve their trading.

Every success in trading in 2009,

Adam Hewison
President, INO.com
Co-creator, MarketClub

By Jeffrey Kennedy, Senior Commodities Analyst
Wed, 03 Sep 2008 15:30:00 ET

A common question from EWI subscribers is: “On an unlabeled price chart, how do you identify the start of the Wave pattern?”

That’s a good question, and is exactly the kind that Senior Commodities Analyst Jeffrey Kennedy loves to answer. His passion is teaching, and every month Jeffrey’s Monthly Futures Junctures presents a lesson in technical analysis via his “Trader’s Classroom.” This excerpt, first published in October 2005 (hence the low wheat prices!) and edited for brevity, comes from an old favorite: “How Do You Know If You Have the Right Wave Count?”

More often than not, while patterns are developing, we are faced with questions like these: It looks like a five-wave advance, but is it wave A, 1 or 3? Here’s a three-wave move, but is it wave A, B or X?

How can we tell when we have a correct labeling? The useful answer to this question is that prices will move in the manner they should, or they won’t. For example, within a five-wave move, if wave three doesn’t travel the farthest in the shortest amount of time, then odds are that the labeling is incorrect. Yes, sometimes first waves extend and so do fifth waves (especially in commodities), but most typically, prices in third waves travel the farthest in the shortest amount of time. Ultimately the personality of price action will confirm your wave count.

Each Elliott wave has a distinct personality, and personality supports labeling. As an example, second waves are most often deep and typically end on low volume. So if you have a situation where prices have retraced a .382 multiple of the previous move and volume is high, odds favor the correct labeling as A-B-C and not 1-2-3. Why? Because what you believe to be wave 2 doesn’t have the personality of a corrective wave 2.

Here’s a shortcut list of the personalities you should be looking for:

Impulse waves always subdivide into five distinct waves, and they have an energetic personality that likes to cover a lot of ground in a short time. That means that prices travel far in a short period of time and that the angle or slope of an impulse wave is steep.

Corrective wave patterns have a sluggish personality, the opposite of impulse waves. Corrective waves are slow-moving affairs that seemingly take days and weeks to end, and, during that time, price tends not to change much. Also, corrective wave patterns tend to contain numerous overlapping waves, which appear as choppy or sloppy price action.

For an example of how you can apply this “wave personality” approach in real time, let’s look at two Daily Wheat Charts, reprinted from the August and September issues of Monthly Futures Junctures. Chart 1 from August shows that I was extremely bearish on price action at that time, expecting a massive selloff in wave three-of-three.

During the first few weeks of September, though, prices traded lackadaisically. Normally, this kind of sideways price action would have bolstered the bearish labeling, because it’s typical of a corrective wave pattern that’s fighting against the larger trend. However, given my overriding one-two, one-two labeling, we really should have been seeing the kind of price action that wave count called for: sharp, steep selling in wave three-of-three.

It was precisely because I noticed that the personality of the price action didn’t agree with the labeling that I decided to rework my wave count.

You can see the result in Chart 2, which calls for a much different outcome from Chart 1. In fact, the labeling in Chart 2 called for a bottom to form soon, followed by a sizable rally. Even though the moderate new low I was expecting did not materialize, the sizable advance did: Wheat has since rallied as high as 353.

That’s how I use personality types to figure out whether my wave labels are correct. Keeping the big picture of energetic impulse wave patterns and sluggish corrective wave patterns in mind helps to match price action with the appropriate wave or wave pattern. How will you know if you have the right wave count? Become a matchmaker by paying more attention to wave personality types.

Trader’s Classroom features every month in Monthly Futures Junctures, and by becoming a subscriber, you get instant access to both volumes I and II of the Trader’s Classroom Collections. Thats over two years of Trader’s Classroom insights, free, just for subscribing. Learn more right here.

Cattle Network

Source: Darrel Good, Extension Economist, University of Illinois

Two broad fundamental factors appear to be influencing corn and soybean prices as the growing season reaches the last stages. One of those factors is the potential size of the 2008 U.S. harvest and the other is the level of energy prices. Crop size is important for obvious reasons and energy prices are important in determining the value of crops for biofuels production. That link is especially important for ethanol and corn prices.

The USDA will release a new production forecast for corn and soybeans on September 12. There appears to be a fairly wide range of expectations for the size of the new forecasts, which will primarily reflect a reassessment of yield potential. The dry end to the growing season in some important production areas has some leaning toward smaller yield forecasts. Improving weather in southern growing areas and relatively high crop condition ratings suggest to others that yield forecasts might hold steady or increase.

As of August 24, just ahead of the survey period for the September yield forecasts, the USDA reported that 64 percent of the corn crop and 61 percent of the soybean crop were rated in good or excellent condition. If those ratings held through the end of the growing season, past relationships between crop condition ratings and the trend-adjusted U.S. average yield would point to 2008 average yields of 154.4 bushels for corn and 43.5 bushels for soybeans. Such a corn yield would be 0.6 bushels below the August forecast, but the soybean yield would be 3.0 bushels above the August forecast. Over the past 35 years, the largest increase in the U.S. average soybean yield forecast in September was 2.2 bushels in 2006. That year, the actual U.S. yield was 3.1 bushels above the August forecast.

Another way to form expectations about the September yield forecasts using the crop condition ratings is the change in condition ratings since the survey period for the August forecast. The percentage of the crops rated good or excellent since that time has dropped two percentage points for both crops. Such a decline points to a 1.3 bushel decline in the corn yield forecast, to 153.7 bushels, and a 0.4 bushel decline in the soybean yield forecast, to 40.1 bushels. Those calculated changes could be adjusted by the crop condition ratings released on September 2. Beyond the September yield forecasts, the location and amount of rainfall in early September will likely be more important for soybean yields than for corn yields. If the estimates of harvested acreage and the forecasts of consumption during the 2008-09 marketing year remain unchanged, the lower yield forecasts based on the change in crop condition ratings during August would point to year ending stocks of 1.03 billion bushels for corn and 106 million bushels for soybeans.

Prices for crude oil and the resulting price of unleaded gasoline have implications for the price of ethanol and the price ethanol producers can pay for corn. As a guide, the maximum economic value of ethanol is the price of unleaded gasoline, adjusted for the difference in energy content, plus the blender’s tax credit. That credit is currently at $.51 per gallon, but is scheduled to decline to $.45 in 2009. The current price of wholesale unleaded gasoline of about $2.70 per gallon makes ethanol worth about $2.26 per gallon with a $.45 blenders tax credit. Assuming that the price of corn and distillers grain move together and that the non corn cost of making ethanol is about $2.60 per bushel, the breakeven price of corn for ethanol producers is about $5.00 per bushel.

Factors beyond crop size and energy prices could be important for corn and soybean prices. The ultimate size of the world wheat crop, prospects for South American soybean production, world economic conditions, and perhaps the value of the U.S. dollar will influence export demand. The profitability of the U.S. livestock industry will influence domestic feed demand. The year over year decline in domestic soybean meal consumption since April and the sizeable year over year decline in the domestic soybean crush in July indicate some weakening of feed demand, although part of the decline is likely the result of larger supplies of distillers grains.

Current prospects for supply, consumption, and stocks suggest that corn and soybean prices will remain relatively high, but will likely trade in a wide range for an extended period. That volatility will likely increase even further with the start of the 2009 planting season.

If you’re not yet trading with the trend, No worries, this video lesson will help.

It’s been proven that it doesn’t matter if you’re day, swing, or position trading the key is to trade with the trend. Trend trading has been utilized for many years by professionals, intermediates, and novice traders alike who follow the trend with success. But why do they trade the trend and how do they find the trend?

The hardest part…Finding the Trend! The easiest part…Trading the Trend! Take a few minutes and look at this streaming video lesson titled, “Why to Trade the Trend and How to Find the Trend” at the MarketClub Traders’ blog. If the video is not the first entry then scroll down a bit.

Futures ALERT is a MarketClub related advisory service that made 16 total trades in September. Here are the results:

$16,623.50 profits
$2,666.50 losses

NET: $16,357.00

Oct Results:
$6762.50 profit (Stopped out of Copper for a $6762.50 profit) $0.00 losses

6 Open trades that can STILL be profitable. Agricultural, metals, futures options, currencies, hards, and softs are ALL covered.

Here’s what other Futures ALERT members are saying…

Futures ALERT has helped me understand how to trade and why to trade some markets vs others. After 6 months of following the recommendations I’m up over 35,000 in my futures account…and so far I’m already in the money on the October trades…THANKS!
–Steve R. New Hampshire

Using the service I’ve been able to pin point my entries and exits to stay profitable. I’ve been a member for just over a year with no end in sight.
–Diane P. Alberta CA.

Take a 30 day trial here and track the trades to see if Futures ALERT is all it’s cracked up to be!

Gold, Crude Oil, the Dollar Index … how did MarketClub do in Q3?

Last quarter was by most accounts one of the most volatile on record.

The DOW hit record highs and then plunges 10% in just 21 days. Crude oil soars to over $84.00 a barrel and Gold trades at levels it hasn’t seen in a quarter century.

Inflation, the credit crunch, the sub-prime disaster, record high prices for oil and if that was not enough, the fed cuts 50 basis points!!! All of these amazing events were all part of the trading fabric that made up the third quarter.

Looking back over the quarter one word best describes the markets …volatility!

O.K. so how did the new “Trade Triangle” approach do trading Gold, Crude Oil, and the Dollar Index?

All the buy and sell signals were generated using MarketClub’s “Trade Triangle” technology. The results are all positive for each market and show just how well you can do when you filter your trades using MarketClub’s triangle methodology.

Having a proven approach and a solid game plan to trade with gives MarketClub members a tremendous advantage over other traders and investors.

Here’s the new 10 minute video.

The video shows you step by step, signal by signal and illustrates how well you can do in the most difficult quarter in 12 years.