EUR/USD (Forex): How to Forecast Market Moves Before They Occur
Not every Elliott wave forecast works out. But the method's objectivity still trumps most discussions about "market fundamentals."

News stories move the markets -- that's what just about every investor believes. But can you predict what the market will do before the news is released? Let's look at a fresh example: the actio in the EUR/USD on November 4, when the Federal Reserve Bank announced its latest decision on the U.S. interest rates.

The New Carry Trade
How long the new "carry trade" funded by low U.S. interest rates may last?

As the recession has taken hold, short-term U.S. interest rates have been pushed down to .25% or lower. This encourages those who want to borrow to do so in U.S. dollars, which is exactly how the low Japanese interest rates of the past boom cycle encouraged borrowing in yen. But markets can move fast when they head down, and when a carry trade unwinds, few things move faster.

Illusion of Control: Central Banks and Interest Rates
A quick look at the right chart can make things crystal clear.

On October 6, the Reserve Bank of Australia surprised the global financial community with a .25% interest rate hike. Only 1 in 20 surveyed economists expected it. But if conventional economists would simply plot central banks’ decisions on a chart of bond yields, they would make a "shocking" discovery that could save them a lot of surprises...

The Fed Leaves Rates Unchanged: Now What?
Or, an even better question: So what?

What an interesting day of trading we saw in stocks on Wednesday (Sept. 23.) On the same day, we had: 1. A single event -- the Fed's interest rate announcement; 2. The stock market's bullish -- and -- bearish "reaction" to it, and 3. Several news stories explaining why stocks rallied -- and -- declined after the event. One question remains: Where will stocks go from here?

Illusion of Control: The Fed, Stock Market and Economy
People who say the Fed controls inflation and deflation miss this key point: social mood.

Optimism is Back. Should You Buy Stocks Now?
Consider an Elliott wave forecast before you take the plunge.

The DJIA has been moving sideways for most of August, but the talk of "a new bull market" is getting louder. The optimism is back! If you randomly poll 100 average investors and ask them whether it's bullish or bearish for stocks, 99 of them will probably answer "bullish." What would your answer be?

Interest Rates: Think Central Banks in Control? Think Again.
What do the Fed, European Central Bank and Reserve Bank of Australia have in common? Answer: They don't control interest rates.

If you believe that central banks' "potent directors" carefully watch economic indicators and deftly adjust interest rates accordingly, this will come as a shock: Central banks are no more in control of interest rates than they are of the weather. Three examples prove this point.

Some Thoughts on the Fractional Reserve Banking System
As Bernie Madoff starts his 150-year prison sentence, questions about safety of our financial system remain.

Here's an interesting question we've just received at EWI's Message Board: "Dear EWI, as the Madoff hoopla is going full blast today on TV, I would be interested to hear your thoughts on this question: Are today's banks in their vast majority also massive ponzi schemes?" Answering a question like that can be a simple matter of definitions -- so let's give it a shot...

Europe: Will a Record Fiscal "Injection" Save the Stock Market?
"You can’t tell the market what you will or won’t accept. It tells you."

The European Central Bank made a record "liquidity injection" into Europe's money markets this week. Will it help turn things around? Before you say yes, read this insightful comment by Robert Prechter, EWI's founder and president.

June 24 FOMC Meeting: Can the Fed Defeat the Bear?

t's Federal Open Market Committee time again. And, even before the June 24 meeting adjourned, word-parsers were dissecting the "minutes" like a high school biology student with a frog. In short: While everyone with a pulse guesses at the meaning of Bernanke-speak, ALL of them hope his words give the stock market something to celebrate.

Deflation: Now a European Problem, Too
Despite the Fed’s expansive balance sheet, it's not inflation U.S and Europe need to worry about.

The winds of deflation are blowing in Europe, and Jean-Claude Trichet, European Central Bank president, is at the helm of the economic ship, desperately hoping to avoid the shoals of policy error. Trichet does not need a GPS unit or navigational charts to see the rocks, because the wreck of the Federal Reserve lies just ahead and is plain enough to see. 

The Fed Does Not Lead the Bond Market, It FOLLOWS

U.S. Bond Market Stays One Step A-"Fed"

5 Markets Where the Wave Principle Forecasts Best -- and Why

Gold in particular follows the Wave Principle impeccably, at least in a world of fiat paper currencies. Gold is a wonderful reflector of the Wave Principle because unlike, say, pork bellies, it is traded by people around the globe, so the prime mover is the psychology of human beings at the most shared and basic level.

How to Trade Forex around Major News Releases
As the saying goes, you miss 100% of the shots you don't take.

Any experienced forex trader will tell you that trading currencies when a major economic report gets released can be treacherous. Probably the most infamous of all scheduled news releases -- infamous for its treachery, that is -- are the U.S. interest rate announcements by the Federal Reserve Bank. But market action on those days can also mean opportunity for a forex trader who is properly positioned BEFORE the announcement. Here are some thoughts on how to do that...

Is Bernanke Saying “Deflation Is Here”?

Wednesday’s $1 trillion announcement is the equivalent of Federal Reserve Chairman Bernanke standing on a soapbox, waiving the white flag of surrender and shouting, “deflation is here.”

Long Wal-Mart, Short Liberty
When the government taxes one citizen on behalf of another, we are all diminished.

At some point, the burden of the U.S. national debt burden may result in a forced restructuring to avoid default. This restructuring will be on terms dictated to us by our creditors…one of whom is a communist regime. I wonder how agreeable those terms will be.

"Deflation Will Catch Them All Off Guard"
"The next [Federal Reserve] chairman will have his own era."

On this day of Ben Bernanke's testimony in Washington, consider this quote from Bob Prechter's November 2005 Elliott Wave Theorist: "Like the entrenched belief in continued inflation, there is a widespread expectation of smooth sailing under Bernanke. With virtually everyone prepared for either good times or severe inflation, bad times and deflation will catch them all off guard." More…

Deflation: How Can It Be Stopped?
As the saying goes, you can lead the horse to water, but you can't make him drink.

There is one question that we at Elliott Wave International get over and over again: "You were correct with your predictions of deflation. But now that it's here, why can't the government do [fill in the blank] to stop it?" There are lots of articles out there – well-written articles written by qualified authors – arguing how the government can do this or that to stop deflation. But in our opinion, they ALL miss one key point: social mood. Here's why...

U.S. Dollar: The Curious Case of a Strengthening Currency
"The thirst for cash will be insatiable relative to all other assets."

The financial market is a mysterious beast. Take the U.S. dollar, for example. How many times in the past year have you heard opinions that, given the severe problems of the U.S. economy, the dollar should collapse? More than once, I bet. But have you looked at a USD chart lately? Well, take a look at this one. Subscribers saw it in the January 16 issue of EWI's Short Term Update – with some supporting commentary...