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Do you invest in precious metals? Should you?
Only you can answer the first question; we’ve written this letter to help you with the second.
April 23, 2009
By Mark Galasiewski
The following is excerpted from Elliott Wave International’s Global Market Perspective. The full 120-page publication, which features forecasts for every major world market, is available free until April 30. Visit Elliott Wave International to download it free.
Conventional wisdom says that central banks can influence or even direct financial markets and the macroeconomy. The very existence of Elliott waves challenges such assumptions. For if markets responded to every central bank directive, how could Elliott waves exist? Parallel trend channels, Fibonacci price relationships, the similarity of form between waves of different sizes and time periods—none of that would be possible. Central bank decisions would have to coincide perfectly with turning points in Elliott waves, and we know that just doesn’t happen. But even without using waves, we can expose the conventional wisdom for the fallacy that it is.
Take, for example, this assertion in a recent article in a U.K. economic weekly: “Part of the aim of central banks in driving down interest rates is to encourage a greater risk appetite among investors.’ Two key assumptions underlie that statement: a) central banks determine interest rates; and b) lower interest rates can increase society’s appetite for risk.
To see how the first assumption is false, let’s take a look at the daily chart of Australian interest rate data. It duplicates a study that Elliott Wave International has often done with U.S. interest rate data. It shows how movements in the cash target rate set by Australia’s central bank, the Reserve Bank of Australia (RBA), appear to follow those in 3-month Australian Treasury Bills. After decisive moves up in T-bills from 2006 to early 2008, for example, the RBA faithfully raised its target. T-bills have since led the RBA during the financial crisis of the past year. In fact, the record indicates that the RBA almost always follows T-bills over time.
Remember when America elected its first black president? The country was in a state of hope. Obama had one of, it not the, strongest job approval ratings of any elected US President in history at 69% (Gallup poll, Jan 26, 2009). Obamamania swept the country, as Americans saw hope for their economy in their first black president.
If you are a proponent of Socionomics you would have voted for the presidential candidate you liked LEAST. Why?
The stock market is a barometer of social mood, and its movements follow predictable patterns, or waves. The US had just finished a series of waves up, and was beginning a large corrective trend down when Obama became president. Social mood had just turned, and despite a surge of popularity, no one, not even the charismatic Barak Obama, could change the direction of social mood.
From a popularity perspective, it did not matter who moved into the White House when George Bush moved out. Whoever got the job was in for a thankless and seemingly luckless time. Because social mood moves in waves, and is not moved by news or presidents but by its own intrinsic wave structure which must be borne out.
Once each year or so, our friends at Elliott Wave International do something unheard-of in the world of financial analysis – they give it away for free!
But it always ends soon after it starts, so your time to get more than 100 pages of free analysis and forecasts on every major world market is running out.
This time they’ve upped the ante.
For the first time ever, EWI is giving away one month of its most popular global analysis publication, a 120-page “little black book” of investment insights called Global Market Perspective, which includes EWI’s three regional publications:
- The U.S. Elliott Wave Financial Forecast ($19/month value)
- The European Elliott Wave Financial Forecast ($29/month value)
April 2, 2009
By Nico Issac
In case you hadn’t noticed: Over the past year of financial turmoil, the ’safe haven’ premium of precious metals has offered about as much support as a rubber ducky in a tsunami. Despite a string of powerful rallies, silver and gold remain well below their March 2008 peaks.
It goes without saying that the greatest opportunities in precious metals were not had by those who played the ‘disaster hedge’ card; but rather by those who timed the trends as they developed, regardless of the fundamental backdrop.
Bob Prechter is in the latter group. Amidst the buzz and whirl of the most bullish backdrop in precious metals’ recent history, gold and silver prices soared to new, all-time highs and calls for a ‘New Gold Rush’ and ‘$30 Silver’ flooded the mainstream airwaves. Yet Bob alerted subscribers to an approaching top in the March 14, 2008 Elliott Wave Theorist.
‘The wave count [in silver] is nearly satisfied, though ideally it should end after one more new high. If this analysis is accurate, and silver does peak and begin a bear market, gold is likely to go down with it.’
The main meetings for the G20 Summit are today, Thursday. So far we have seen organized protests bringing disparate groups together from trade unions, aid agencies, religious groups and environmental organizations. The common cry from the protesters is that the globalized free market clearly has not worked to relieve poverty, and has bought the worlds economy to near collapse, devastating the environment.
They surely have a point, and until the beginning of March one could also have argued that the trillions of dollars so far spent and injected into the economy globally have not reversed the crisis.
To see what’s really happening I turn to an analysis of the DJIA. This is because the DJIA is a barometer of social mood and an analysis of the trends in the stock markets can be useful in predicting the future, both economically and socially. So what’s going on here?
In the 1930s, Ralph Nelson Elliott, a corporate accountant by profession, studied price movements in the financial markets and observed that certain patterns repeat themselves. He offered proof of his discovery by making astonishingly accurate stock market forecasts. What appears random and unrelated, Elliott said, will actually trace out a recognizable pattern once you learn what to look for. Elliott called his discovery “The Elliott Wave Principle,” and its implications were huge. He had identified the common link that drives the trends in human affairs, from financial markets to fashion, from politics to popular culture.
Robert Prechter, Jr., president of Elliott Wave International, resurrected the Wave Principle from near obscurity in 1976 when he discovered the complete body of R.N. Elliott’s work in the New York Library. Robert Prechter, Jr. and A.J. Frost published Elliott Wave Principle in 1978. The book received enthusiastic reviews and became a Wall Street bestseller. In Elliott Wave Principle, Prechter and Frost’s forecast called for a roaring bull market in the 1980s, to be followed by a record bear market. Needless to say, knowledge of the Wave Principle among private and professional investors grew dramatically in the 1980s.
When investors and traders first discover the Elliott Wave Principle, there are several reactions:
Top news in the US this morning is Obama’s response to the carmakers slowness to restructure. Americas mood is turning, from hope that the Government can bailout the economy, to distaste and anger at the behavior of those receiving Government money.
Last month there was the scandal of Wells Fargo accepting bailout money then throwing a lavish party with Sheyl Crow entertaining and guests receiving Tiffany gift bags. Then there was the AIG bonuses scandal, for none other than their Financial Services Division who got the giant into the mess in the first place. Now it’s the carmakers turn.
When this financial crisis reached high enough for the slow cumbersome Government to become involved, the public mood was different. The public reasoned the banking and financial system needed help or we would all sink together, and bailouts were seen in a more positive light. Now the mood has changed.
We have been in a downwards cycle for a while now, and this cycle is made up of three main parts. The Elliott Wave Principle has three waves down, with A being down, B an upwards retracement and C the main wave downwards. Each part of this sequence has its own personality.
So far the American Government has pledged $9.7 Trillion (Bloomberg.com) to $11.5 Trillion (bizzia.com), depending on where you read it. It’s more than the US spent on WWII (adjusted for inflation). And so far, the bailout requests just keep on coming.
Is it working? Is the economy recovering? Surely with that large a transfer of money from taxpayers to big business there should be an end to the bad news? Have the layoffs abated? Have the foreclosures slowed?
Why is this massive bailout not working? Why can the Fed not prevent deflation and depression? For a comprehensive answer to these questions you will need to read Robert Prechter’s book Conquer the Crash, chapter 13 titled ‘Can the Fed Stop Deflation?’
The US is in a downward deflationary spiral that is going to get worse before it finds a bottom. To understand why this is so you need to understand the Elliot Wave Principle. Human behavior and the economy move in waves, at its most basic three waves up and two waves down. Currently the US is on a downward leg. Each portion of the wave cycle has its own characteristics, and the current wave cycle calls for backlash characteristics.
If you go to Google news you can read about the growing public anger at these massive bailouts. If you read the comments below the articles, you get an idea of the depth of anger people are developing towards government attempts to restart the economy.
