Category Archives: Elliott Wave International Articles

Why the Japanese Yen’s Bull Run REALLY Ended

Monetary “Yentervention” did not cause the currency’s depreciation — it only COINCIDED with it

By Elliott Wave International

Talk about “star” wars.

“Asia’s biggest action star” Donnie Yen was just cast in the next installment of the never-ending Star Wars movie franchise. Mr. Yen, in case you aren’t aware, is known as “the strongest man in the entire universe.” (Huffington Post)

It wasn’t that long ago you could say a similar thing about the Japanese yen. Count three years back, to 2012, and the yen looked like the strongest monetary unit in the financial universe, standing at an all-time record high against the mighty U.S. dollar, the world’s “reserve” currency.

Flash ahead to now (circa September 2015), and the yen is down 30% whilst clinging to its lowest level against the dollar in 12 years.

So, what changed?

Well, that depends on whom you ask. According to the mainstream pundits, one main “force” has drained the yen of its superstar status: the almighty “Light S-ABE-R.” Or, in non-geek terms, Japan’s Prime Minister Shinzo Abe, who’s been shaping the country’s monetary policy. See:

“Abenomics Propels Yen’s Weakness” (Financial Times)

And: “Japan Bulls Rest Hopes for Yen Weakening on Abenomics” (Bloomberg)

There’s just one flaw in that logic:

The yen’s record-shattering bull run ended in late 2011 — more than a year before Abe took office in January 2013!

What’s more, Abe did not implement his “three arrows of fiscal stimulus, quantitative easing, and deregulation” — the factors widely held “responsible” for the yen’s weakness — until later in his term as Japan’s Prime Minister.

Now, let’s go back to the very beginning, to late 2011, and examine the yen’s broader trend through the lens of Elliott wave analysis. Here, we come to our November 2011 Global Market Perspective (GMP), where our Senior Currency Strategist, Jim Martens, identified a historic, decades-long Elliott wave “ending diagonal” pattern on the yen’s price chart.

As its name implies, an ending diagonal is found at the termination points of larger wave patterns, indicating exhaustion of the larger trend. When an ending diagonal … well, ends, the prices reverse and carry to the pattern’s origin — or even further.

The terminal nature of ending diagonals fortified the November 2011 Global Market Perspective’s bearish yen/bullish U.S. dollar forecast:

“USDJPY has been falling since June 2007 in a thrust from a [4th-wave] triangle that would end an impulsive decline lasting at least 40 years. The thrust [lower] has been unfolding as an ending diagonal, and as such, an abrupt turn [higher — towards weaker yen and stronger dollar –] should come as no surprise.”

The rally indeed took off the 2011 low, yet took a while to warm up. But, by January 2013 — coinciding with Prime Minister’s Abe taking the office — Global Market Perspective confirmed a long-term reversal was now underway:

“The recent advance in USDJPY since September [2012] is typical of third waves. There will undoubtedly be pauses along the way but next year or so [i.e., in 2014] should easily see USDJPY in the 124.16 area.”

This final chart captures the full extent of the USDJPY’s three-year long, 30%-plus uptrend:

Bottom line: Abe’s monetary “Yentervention” did not cause the yen’s depreciation; it coincided with a terminating Elliott wave ending diagonal pattern on the USDJPY’s price chart, which called for an upward reversal (towards weaker yen and stronger dollar).

True story.

You’ve just seen how invaluable Elliott wave analysis can be in clarifying long-term trend changes before they occur — and regardless of the political and economic factors.

Now, you can see how equally useful our technical analysis model is in anticipating near-term trend changes in EURUSD, Chinese yuan, and more — 100% FREE!

Right now, our free-membership Club EWI is featuring an exclusive new interview with EWI’s Senior Currency Strategist, Jim Martens.

In this compelling one-on-one ElliottWaveTV interview, Jim walks you through multiple labeled price charts of the world’s leading currency pairs — including the USDJPY.

You’ll watch Jim focus on the recent USDJPY “nosedive” towards a stronger yen and give you specific price levels which, if breached, would tell you if the yen is to get even stronger.

So, here’s what you need to know:

  • This 6-minute Club EWI interview with Jim Martens is absolutely FREE to all Club members
  • Besides USDJPY, Jim also shows you the “exciting” road ahead in the EURUSD and China’s yuan.

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This article was syndicated by Elliott Wave International and was originally published under the headline Why the Japanese Yen’s Bull Run REALLY Ended. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Forex: Elliott wave analysis helps me cut to the chase

Fresh insights from Elliott Wave International’s Senior Currency Strategist, Jim Martens

By Elliott Wave International

Jim Martens is one of the few forex Elliott wave instructors in the world and a long-time editor of Elliott Wave International’s forex-focused Currency Pro Service. A sought-after speaker, Jim has been applying Elliott waves since the mid-1980s, including two years at the George Soros-affiliated hedge fund, Nexus Capital, Ltd.

Below is an excerpt from his latest interview. To read the full interview — and get Jim’s latest big-picture forecast for EURUSD, tips on how to learn Elliott fast, and practical ideas on how to treat your forex trading as a business — complete your free Club EWI profile. It only takes 30 seconds.

*********

Jim, thanks for joining us today. The U.S. dollar recently hit its highest level in many weeks. Were you surprised by that?

Jim Martens: The strength in the U.S. Dollar Index came as no surprise. And that’s not just me bragging. We track its Elliott wave patterns daily, even intraday. Since the dollar’s peak back in March of this year, the decline has taken a decidedly corrective Elliott wave look: The price action has been choppy, overlapping, and generally lacking direction, as you see on the circled portion of the chart below. Any time you see that on a price chart, that’s your first clue that the market must be taking a “breather” before the larger trend resumes. In this case, the larger trend has been higher, so when the dollar popped back up recently, to us it meant that the correction must be over.

For Elliott wave fans among your readers, it looks like the correction since March took the shape of a pattern called a “double zigzag,” labeled in circled green “abc”-“abc” on this chart:

As you can see, we have labeled the entire correction as a wave 4 within a basic 5-wave Elliott wave pattern called an “impulse,” with wave 5 most likely starting now. So, the USDX has higher to go — much higher, in fact, because by the looks of the Elliott wave pattern underway, the latest dollar strength is only the start of the move. We are expecting the Dollar Index to move well above 100.

And, because the U.S. Dollar Index moves inversely to the euro-dollar, looking at a EURUSD chart, we are expecting significant weakness in this key forex pair… [EURUSD chart with a forecast follows — Ed.]

(To read the full interview, complete your free Club EWI profile. It only takes 30 seconds. You’ll learn: Jim’s latest big-picture forecast for EURUSD, tips on how to learn Elliott fast, and practical ideas on how to treat your forex trading as a business.

Already a Club EWI member, access the full report now >>


This article was syndicated by Elliott Wave International and was originally published under the headline Forex: “Elliott wave analysis helps me cut to the chase.”. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

The 2 Most Important Keys to Successful Trading

Examples from Whole Foods Market (WFM) and Reynolds American, Inc (RAI) show you what to do (or not) to trade successfully with Elliott.

By Elliott Wave International

After 20 years of experience applying Elliott wave analysis in real markets, our Senior Analyst Jeffrey Kennedy says that it remains the only tool that will tell him — down to the tick, to the pip, even to the penny – when his forecast is no longer viable.

That, according to Kennedy, are two most important keys to successful trading:

  1. “Know where you are wrong,” and
  2. “Don’t pick tops and bottoms”

See the logic behind Kennedy’s wisdom by reviewing these two timeless lessons from his Trader’s Classroom service: Whole Foods Market, Inc. (WFM) and Reynolds American, Inc. (RAI). Then, see how you can get more free lessons during Kennedy’s popular Trader Education Week, going on now!


WFM’s forecast was right and RAI’s was wrong. While price evidence was compelling for both issues, the forecast in WFM was in the direction of the trend and RAI’s incorporated top picking. Here’s what happened:

Price evidence called for new highs in Whole Foods Market, Inc. on May 1. We had a clearly defined uptrend, a three wave move in the direction opposite the primary trend, and the move to the downside was contained within parallel lines:

Additionally, we had a double closed-key reversal when the low was made, as well as some bullish divergence on the smaller timeframes. Price evidence was very strong that this market would continue to new all-time highs, so my outlook was bullish.

The bullish outlook in WFM required the April low of $81.39 to hold. The trend was clearly up from 2009 into 2013. From an Elliott Wave perspective we knew that this was a countertrend move with an A-B-C structure (a corrective wave pattern within a larger trending market). We had the wind at our back and were not “picking a top.” We simply looked at the price evidence in support of a further rally.

Conversely, the following example in Reynolds America, Inc. did not work out.

On March 22, I anticipated a move to the downside in Reynolds American, Inc. as a five-wave decline and the subsequent advance as a three-wave move. I was looking for a tradeable selloff to the downside in wave (C) or wave (3):

Unlike the successful WFM example, I was not trading with the trend. Instead, I was looking for a “top.”

Yet I was able to prevent a losing trade from becoming a devastating trade because I could use the Elliott Wave Principle to “know where I was wrong.”

This bearish wave pattern was viable only as long as prices held below the February high of $45.17.

Once prices exceeded critical resistance, I knew not to look to the downside — that my outlook was no longer viable:


Get more trading lessons from EWI’s Jeffrey Kennedy:

Announcing Trader Education Week

Join us for a FREE trading event that will teach you how to spot trading opportunities in your charts. Spend this week getting free trading lessons that you can apply to your trading immediately — from one of the world’s foremost market technicians, Jeffrey Kennedy.

Whether you are new to trading or have years of experience, you’ll benefit from Jeffrey’s easy-to-understand style and clear presentation. He’ll cover topics such as:

  • Patterns that lead to high-confidence trade setups
  • Momentum indicators to support your pattern analysis
  • Japanese candlestick patterns that alert you to a change of trend
  • How to manage your trades using protective stops

Register now for your FREE week of trading lessons

This article was syndicated by Elliott Wave International and was originally published under the headline The 2 Most Important Keys to Successful Trading. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Learn to Spot a Head & Shoulders Pattern in Your Charts (Video)

Learn to Spot a Head & Shoulders Pattern in Your Charts (Video)

A Trading Lesson from Elliott Wave International’s Jeffrey Kennedy

By Elliott Wave International

Senior Analyst Jeffrey Kennedy is the editor of our Elliott
Wave Junctures
trader education service and one of our
most popular instructors. Jeffrey’s primary analytical method
is the Elliott Wave Principle, but he also uses several other
technical tools to supplement his analysis.

You can apply these methods across any market
and any timeframe. Enjoy this lesson and
then find out how you can get additional trading lessons from
Elliott Wave International.


My primary tool as a technical analyst is, of course, the Wave Principle. Even so, I find great value in other forms of technical analysis, such as candlesticks and indicators. With this in mind, let’s review one of my favorite old-school chart patterns — Head-and-Shoulders.

Spotting a Head & Shoulders Pattern

This formation was popularized by Edwards and Magee in their seminal work Technical Analysis of Stock Trends. It is a reversal pattern and consists of a left shoulder, a head and a right shoulder.

A trendline drawn between the price extremes of the left shoulder and head and head and right shoulder is referred to as the neckline. The neckline is important for two reasons — the first being that a parallel of the neckline drawn against the extreme of the left shoulder can identify the extent of the formation of the right shoulder.

The second important aspect of the neckline is that it can provide a high probability target for the subsequent breakout. If prices decisively penetrate the neckline, the distance between that point and the head is often a reliable objective for the ensuing price move. Watch this 4-minute video where I explain more:



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Get Practical Tips from the Pros That
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In this free report, you will learn some of the most
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Wave International. Find out which technical indicators
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Get your technical indicators report now >>

This
article was syndicated by Elliott Wave International and
was originally published under the headline Learn to Spot a Head & Shoulders Pattern in Your Charts (Video).
EWI is the world’s largest market forecasting firm. Its staff
of full-time analysts led by Chartered Market Technician
Robert Prechter provides 24-hour-a-day market analysis to
institutional and private investors around the world.

Announcing Trader Education Week – a Free Event to Help You Learn to Spot Trading Opportunities

Dear Trader,

You have an opportunity to spend the next week learning how you can spot high-confidence trade setups in the charts you follow every day.

Elliott Wave International (EWI) is hosting a free Trader Education Week, October 2-9. Register now and get instant access to free trading resources — plus you’ll receive more lessons as they’re unlocked each day of the event.

Jeffrey Kennedy, EWI analyst and one of the world’s foremost market technicians, has taught thousands how to improve their trading through his courses, subscription services and as an adjunct professor of technical analysis at Georgia Tech University. Now you have the opportunity to be a student in his online classroom, as he takes complex technical methods and tools and breaks them down so that you can apply them to your trading immediately.

Don’t miss this opportunity to learn how to spot trading opportunities in the markets you follow.

Register today and get your first 4 free trading resources immediately, plus we’ll alert you to valuable new resources unlocked every day beginning October 2.

Register for Trader Education Week — It’s FREE!

Regards,

Alan

About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world’s largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.

Part Three: The 3 Essential Parts of an Elliott Wave Trade [Book Excerpt Part 3 of 3]

Part Three: The 3 Essential Parts of an Elliott Wave Trade
Our last piece in this educational series excerpted from Visual Guide to Elliott Wave Trading

By Elliott Wave International

Would you like to improve your ability to trade — not only with a clear understanding of the Elliott Wave Principle, but also by learning how and when to act on your wave count?
According to Senior Analyst Jeffrey Kennedy, there are the three key components of a successful trade.

In this final lesson — adapted from the Visual Guide to Elliott Wave Trading, a No.1 Bestseller on Amazon — Kennedy explains his third step for a high-confidence trade setup in Caterpillar: Manage the Trade (You can read Parts 1 and 2 by clicking below):

  1. Analyze the price charts >>.
  2. Formulate a trading plan >>.
  3. Manage the trade.

————————-

The day following our analysis and entry, CAT fell sharply (see Figure 2.3). As a result, the value of the position increased substantially. In retrospect, it would have been prudent to exit the trade entirely or at least partially the day after the swift decline. However, since the original analysis called for a move below 108.39, I decided to hold the position.


During the next few days, CAT continued lower. On Friday, May 13, 2011, I exited the position for a 336.05 percent return (see Figure 2.4), selling the options that were originally purchased at 86 cents for $3.75 apiece.

The 3 Essential Parts of an Elliott Wave Trade [Book Excerpt Part 2 of 3]

Learn from trading lessons taken from the new book -Visual Guide to Elliott Wave Trading

By Elliott Wave International

Three steps may sound simple enough. Yet if you have any experience trading, you know that nothing about trading is easy. Education is imperative. So is preparation.

Senior Analyst Jeffrey Kennedy knows that it takes skill, discipline and courage to execute a successful trade. His new book, Visual Guide to Elliott Wave Trading (coauthored with Wayne Gorman), picks up where Frost and Prechter’s classic textbook Elliott Wave Principle leaves off: It gives you the perfect blend of traditional textbook analysis and real-world application.

According to Kennedy, there are three key components of a successful trade:

  • Analyze the price charts.
  • Formulate a trading plan.
  • Manage the trade.

In this excerpt (Part 2 of 3), Kennedy shows you how to make a trading plan based on an opportunity in Caterpillar (CAT). You can read part 1 Analyze the Price Charts here >>

Part Two: Formulate a Trading Plan


In Figure 2.2, I chose to trade this setup using options, specifically, by purchasing 110 puts on May 10, 2011, at 86 cents apiece. These options were scheduled to expire on May 20, 2011, so there were only eight trading days left on these puts. Considering that these options were to expire in just a matter of days, this kind of trade is extremely risky, and only the most seasoned and risk-aware trader should consider doing it.

Since the initial sell-off in CAT from 116.55 to 108.39 transpired in four days, here was my thinking at the time: If the next wave down proved to be wave (3), then I would see prices fall farther in a shorter period of time; if the upcoming decline proved to be a (C) wave, then the upcoming sell-off would most likely be shallower and take more time. Even if CAT were to unfold in wave (C) and take twice as long as the initial decline, it would still trade roughly at $104.81, the level at which waves (C) and (A) would be equal by options expiration.

Again, it is important to understand that due to waning premium, an options trade should not be taken with the idea of holding the trade over a long period of time for a sizable move down. The idea was simply to catch a short-term move below the May 2011 low of 108.39 over three to five trading days.
Be sure to come back for part 3: Manage the Trade


The Ultimate Wave Trading Crash Course

Put yourself on the fast track to applying the Elliott Wave Principle successfully with a FREE one-week primer: The Ultimate Wave Trading Crash Course. Learn the basics with 5 FREE trading lessons from EWI Trading Instructor and Senior Analyst Jeffrey Kennedy — including insightful excerpts from his Amazon No. 1 Bestseller, Visual Guide to Elliott Wave Trading.

Learn more and start your crash course now >>

This article was syndicated by Elliott Wave International and was originally published under the headline The 3 Essential Parts of an Elliott Wave Trade [Book Excerpt Part 2 of 3]. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

The 3 Essential Parts of an Elliott Wave Trade [Book Excerpt Part 1 of 3]

The 3 Essential Parts of an Elliott Wave Trade
A NEW series of educational trading lessons from “Visual Guide to Elliott Wave Trading” — Part 1 of 3

By Elliott Wave International

When it comes to improving your wave-based analysis and technical
trades, three steps may sound simple enough. Yet if you have
any experience trading, you know that nothing about trading
is easy
.

Senior Analyst Jeffrey Kennedy knows that it takes skill,
discipline and courage to execute a successful trade. In the
new book he has coauthored with EWI’s Wayne Gorman (now a
No.1 Amazon Bestseller), Visual Guide to Elliott
Wave Trading
, he picks up where Frost and Prechter’s
classic textbook Elliott Wave Principle leaves off
to give you the perfect blend of traditional textbook analysis
and real-world application.

According to Kennedy, there are three key components of a successful trade:

  • Analyze the price charts.
  • Formulate a trading plan.
  • Manage the trade.

In this excerpt (Part 1 of 3), Kennedy examines a high-confidence trade setup in Caterpillar (CAT).

Part One: Analyze the Price Charts


When it comes to trade setups, it doesn’t get much easier than the price chart of CAT from April and May 2011. As you can see in Figure 2.1, prices fell in five waves from 116.55 to 108.39. This wave pattern was significant because impulse waves identify the direction of the larger trend. Thus, this five-wave decline in CAT implied further selling to come that would take prices below 108.39 in either wave (C) or wave (3).

The subsequent rally in CAT that developed in three waves supported this analysis. Countertrend price action typically consists of three waves, so I knew to expect another move down in CAT. Moreover, the three-wave advance in CAT traveled to 112.47 to retrace 50 percent of the previous sell-off. That 50 percent is a common retracement for corrective waves. Also nearby was 112.84, the price level at which wave C equaled a .618 multiple of wave A, which is a common Fibonacci relationship between waves C and A of corrective wave patterns.

The only question at this point was whether the move up from 108.39 should be labeled as wave (B) or wave (2). From a short-term trading perspective, this question was academic because, either way, the trade objective was a price move just under 108.39. A final observation about the corrective rally: The slope of wave C in this case was shallower than the slope of wave A. A shallow wave C slope, which demonstrates a decrease in momentum, is a harbinger that the larger trend is resuming. These shallower slopes within zigzags are so common that they are almost a qualifying characteristic of the pattern.

By applying the most basic Elliott wave analysis to the price chart of CAT, I could see five waves down and three waves up into Fibonacci and structural resistance at 112.47-112.84. That meant that odds strongly favored a sell-off below 108.39 from near current levels. So, the question at that point was how best to capitalize on this information.

Stay tuned for parts 2 and 3 of this lesson.


The Ultimate Wave Trading Crash Course

Put yourself on the fast track to applying the Elliott
Wave Principle successfully with a FREE one-week primer:
The Ultimate Wave Trading Crash Course.
Learn the basics with 5 FREE trading lessons from EWI
Trading Instructor and Senior Analyst Jeffrey Kennedy
— including insightful excerpts from his Amazon No.
1 Bestseller, Visual Guide to Elliott Wave Trading.

Learn more and start your crash course now >>

This article was syndicated by Elliott Wave International and was originally published under the headline The 3 Essential Parts of an Elliott Wave Trade . EWI is the

world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to

institutional and private investors around the world.