Gold Still In Bear Cycle?

GOLD- Well, not a merry Christmas for Gold buyers just yet. We have said in our TMTF forecast service to watch 1190 as KEY support and 1241 would also need to be taken out on a closing basis before we could confirm a new uptrend in Gold and the end to the 5 wave bear cycle. Not quite yet, and in fact in my stock service we have avoided Gold stocks entirely even with the recent temptations to get long because Gold to us is key. If we are not over 1241 then we are not buyers of Gold equities, plain and simple. With 5000 stocks to choose from, why not stick with the sectors that are in the stronger uptrends and avoid those mired in the mud like Gold? For example you could be looking at Security stocks given all the cyber attacks worldwide that are only getting worse. Gold is money as we all know, but a downtrend is a downtrend. Trust what you see, not what you think for best results.

So right now the problem is we just gave up the 1190 support and the 30 week MA line on the weekly chart is your guide for key resistance to take out. We remain in the sidelines until its taken out. The chart below shows the blue line with the 30 week Moving average resistance, and you can use this same chart for the uptrend in the SP 500 which we have used recently for our subscribers as well. Don’t suffer from history bias and the hay days of Gold stocks and Gold, which ended in 2011…wait for the next Hay days to arrive, watch the 30 week moving average line before acting.

tmtf gold 1223

The SP 500 meanwhile is in wave 3 up from 1973 38% shallow wave 2 lows. That was a quick correction and the waves now are likely to be faster and shorter as we are in Primary wave 5 of this bull cycle, the last stages of the Bull if I’m right. 2131-2138 is your bogey ahead for first Fibonacci pivot resistance on the way to the 2181 target I had out over a month or so ago.

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What Now For The US Markets?

The markets have been in a rough and tumble recent period here with a 3.5% decline last week along with a further drop to the 1982 lows so far on Monday.  What is likely ahead?

Dave Banister- Chief Strategist-

The SP 500 probably just completed the initial wave down of an ABC Correction from the 2079 highs.  We are counting this correction as a “Wave 2” of a full 5 wave sequence up from 1820 lows in October.  Essentially, Oil is the reason being used by the media for the correction but that is just the convenient headline excuse of the day.  Instead, what we will likely see is a Santa rally “B” wave ahead and then another leg down in January to complete this larger ABC move.

Elliott Wave theory is very hard to use to accurately forecast movements ahead of time, but we try our best to project, analyze, and then adjust as needed. Our best estimate is the 38% fibonacci retracement of the 259 point rally completed at 1982 today.  A “B Wave” rally up from here is normal and a C wave down to the 1920 area would complete a 61% retracement of that Wave 1 259 point rally.

tmtf sp 500 1215



Following the completion of a standard ABC Correction we should have a Wave 3 Bullish wave in early 2015 that will challenge the highs of 2079 and likely overtake them.  We do not like to get too far ahead of ourselves with the forecasts but we expect the excuse for that rally will be low energy prices and a strong consumer going into 2015.  Some of the obvious rally names for January will be energy stocks, but will need to be carefully selected.  Gold needs to get past 1241 on a closing basis before we get too bullish on those names, but we have them on watch as well.

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Limitations of the Elliott Wave

A large number of investors rely on Elliott wave theory as part of their market trend analysis to help them make good decisions, and it is a very good, very accurate tool. But it is merely one tool, and as with anything, it is unwise to become over reliant on any single tool or

methodology. At the root, Elliott wave theory revolves around the idea that by and large, people tend to react to stimuli in the same, predictable ways, and that by identifying the stimuli (either specifically or in broad categories), it then becomes possible to predict market movements. Its namesake, Ralph Nelson Elliott, developed the theory and the analytic tools that surround it in the 1930’s, proposing that market prices unfold in accordance with specific patterns. Although the theory has an enormous number of practitioners, and although it is used as part of the analytic methodology of a number of the most successful fund managers in the business, it is not without its critics and drawbacks. Of those criticisms, there are three primary ones, and they must be understood before deciding if this particular analytic tool is right for you. The first of the three objections is simply that the theory contradicts the Efficient Market Hypothesis. The counter argument goes that if Elliott’s theory were true and correct then all investors wise to the “trick” would act on it, and in doing so, destroy the very waves they had measured and discovered. The second is simply an observation that wave principle in general is too vague to be of specific use since it cannot consistently identify when a wave begins or ends, and that forecasts using this methodology are prone to subjective revision. Finally, there are some who believe that the principle is “too dated” to be of use, or even applicable in today’s markets. That technological, governmental, regulatory, economic and social changes have all occurred since the theory was first put forward, but that the theory itself remains unchanged and thus, unable to adapt to its new environment, or serve as a reliable predictor. Despite these objections, it should again be noted that many of the top performing fund managers use the theory as part of their own analysis, and it is hard to argue with their success. Whichever side of the fence you’re on regarding the methodology, one thing remains clear. It is unwise to place absolute faith or reliance in any single method, but as part of a larger set of analytic tools, and despite the various criticisms leveled against it, it is impossible to deny its record of success. What we do at is add additional technical analysis tools to our Elliott Wave views to keep ourselves in check. We also tend not to try to label every single squiggle or wave pattern as they occur. Taking a more big picture approach in our opinion works better than getting bogged down in the short term wave counts and details. Often, using a weekly chart can be of help in identifying obvious patterns, which is what I call “zooming out”. We also look at sentiment indicators such as the investment advisor surveys, or what we see on the cover of major media publications for example. In addition, we use Fibonacci analysis of prior wave patterns to help identify the most likely foreward scenarios. If we feel that a view we have is getting off track, instead of staying stubborn we will quickly analyze other potential wave counts to see if perhaps we were off the tracks, and then quickly re-adjust and get back up on the rails. We are also not fans of having multiple alternate counts, as that only serves to confuse the investor. Taking one quick example, the first Primary Elliott Wave of this Bull Market from 2009 was 704 points. Our opinion then was that Primary wave 3 which we have beginning at 1074 would have to be 704 points multiplied by a Fibonacci 1.618% factor as most likely. From that calculation we can work backwards in our other wave patterns to identify where we are at. Elliott Wave Theory in our opinion was a working blueprint, but not a bible either. You can take the basics of Elliott Wave Theory and then add in a few more elements to improve your results.

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Keys to Investor Success – Elliott Wave Theory

Elliott Wave Theory – Plenty of people will freely offer you advice on how to spend or invest your money. “Buy low and sell high,” they’ll tell you, “that’s really all there is to it!” And while there is a core truth to the statement, the real secret is in knowing how to spot the highs and lows, and thus, when to do your buying and selling. Sadly, that’s the part of the equation that most of the advice givers you’ll run across are content to leave you in the dark about.

The reality is that no matter how many times you are told differently, there is no ‘magic bullet.’ There is no plan, no series of steps you can follow that will, with absolute certainty, bring you wealth. If you happen across anyone who says otherwise, you can rely on the fact that he or she has an agenda, and that at least part of that agenda involves convincing you to open your wallet.

In the place of a surefire way to make profits, what is there? Where can you turn, and what kinds of things should you be looking for?

The answers to those questions aren’t as glamorous sounding as the promises made by those who just want to take your money, but they are much more effective. Things like careful, meticulous research. Market trend analysis. Paying close attention to extrinsic factors that could impact whatever industry you’re planning to invest in, and of course, Elliott wave theory. If you’ve never heard of the Elliott wave, you owe it to yourself to learn more about it.

Postulated by Ralph Nelson Elliott in the late 1930’s, it is essentially a psychological approach to investing that identifies specific stimuli that large groups tend to respond to in the same way. By identifying these stimuli, it then becomes possible to predict which direction the market will likely move, and as he outlined in his book “The Wave Principle,” market prices tend to unfold in specific patterns or ‘waves.’
The fact that many of the most successful Wall Street investors and portfolio managers use this type of trend analysis in their own decision making process should be compelling evidence that you should consider doing the same. No, it’s not perfect, and it is certainly not a guarantee, but it provides a strong framework of probability that, when combined with other research and analysis, can lead to consistently good decisions, and at the end of the day, that’s what investing is all about. Consistently good decision making.

We use Elliott Wave Theory in real time by looking at the larger patterns of the SP 500 index for example. We deploy Fibonacci math analysis to prior up and down legs in the markets to determine where we are in an Elliott Wave pattern. This helps us decide if to be aggressive when the markets correct, go short the market, or to do nothing for example. It also prevents us from making panic type decisions, whether that be in chasing a hot stock too higher or selling something too low before a reversal. We also can use Elliott Wave Theory to help us determine when to be aggressive in selling or buying, on either side of a trade.

For many, its not practical to employ Elliott Wave analysis with individual stocks and trading, but it can be done with experience. We instead use a combination of big picture views like weekly charts, Wave patterns within those weekly views, and then zoom in to shorter term technical to determine ultimate timing for entry and exit. This type of big picture view coupled with micro analysis of the charts gives us more clarity and better results.

One of our favorite patterns for example is the “ABC” pattern. Partially taken from Elliott Wave Theory, we mix in a few of our own ingredients to help with timing entries and exits. This is where you have an initial massive rally or the “A” wave pattern. Say a stock like TSLA goes from $30 to $180 per share, which it did. The B wave is what you wait for and using Fibonacci analysis and Elliott Wave Theory we can calculate a good entry point on the B wave correction. TSLA dropped from $180 to about $ 120, retracing roughly 38% (Fibonacci retracement) of the rally $30 to $180. The B wave bottomed out as everyone was negative on the stock and sentiment was bearish. That is when you get long for the “C” wave. The C wave is when the stock regains momentum, good news starts to unfold, and sentiment turns bullish. We can often calculate the B wave as it relates often to the A wave amplitude. Example is the TSLA “A” wave was 150 points, so the C wave will be about the same or more.

When TSLA recently ran up to about $270 per share, we were in uber bullish “C” wave mode, and we had run up $150 (Same as the A wave) from $120 to $270. That is when you know it’s a good time to start peeling off shares. Often though, the C wave will be 150-161% of the A wave, so TSLA may not have completed it’s run just yet.

Elliott Wave Theory

Knowing when to enter and exit a position whether your time frame is short, intermediate, or longer… can often be identified with good Elliott Wave Theory practices. Your results and your portfolio will appreciate it, just look at our ATP track record from April 1 2013 to March 3rd 2014 inclusive of all closed out swing positions. We incorporated Elliott Wave Theory into our stock picking starting last April and you can see the results:

ATP Elliott Wave Trading


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SP 500 Elliott Wave Forecast Unfolding As We Projected, What Is Next?

David A. Banister

Back on January 15th we wrote an article and also a elliott wave forecast for both the public and our subscribers showing a likely top at a maximum of 1868 on the SP 500. We said that Elliott Wave Major 3 of Primary Wave 3 would top no higher than that level. In fact, we can go back to September 4th 2013 and we projected a Major 3 high as 1822-1829. Turns out we were only about 1% off 4 months in advance of projecting that high, and once again we are on track here with Major 4 commencing from Major 3 highs.

Below is the Major 3 chart we sent out on September 12th in public articles and private reports

Elliott Wave Forecasts

We simply use Fibonacci analysis of wave patterns which are based on human behavioural tendencies that go back centuries. Elliott Wave Theory is often hard to put into practice, so sometimes it gets a bad name. However, a bad steak at a restaurant doesn’t mean you never have steak again right? The practitioner must hone his or her skills over time and work to improve accuracy.

Our view is pretty simple in that the Major wave 3 was 583 points going from 1267 to 1850, the double top.

Below is the chart we did on January 15th in advance of this top:

Elliott Wave Analysis

We now know in hindsight that we topped out at 1850. So what we want to do is simply take the 583 point rally of 1267 to 1850 (major 2 lows to Major 3 highs) and compute a retracement. We use 23.6%, 31.2%, and 38% Fibonacci figures to come up with estimates. Those come in at 1713 on the shallow end of a correction (wave 4) and 1628 on the lower end. (See chart below)

Elliott Wave Theory

Now, assuming we are on track… once this Major 3 completes we will see a Major wave 5 of Primary wave 3 taking us to all-time highs. This will then complete Primary wave 3 of this 5 primary wave bull cycle and then larger Primary wave 4 corrections will ensue from those highs. We will know we are wrong in our degrees of wave counts if we pierce the 1628 level on the downside. That would indicate Primary 3 topped out 1850 and we are in Primary 4, which is not our current view.

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