The article touches on a few important facts that are often overlooked when everything seems to be going smoothly.

There’s nothing wrong with things going smoothly of course, but people should be aware of what could be building behind the scenes during these times, rather than waiting until it’s too late. Enjoy the article.

Individual Investors Have Jumped Into Another Fire
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.

Get Your FREE 8-Lesson "Conquer the Crash Collection" Now! You’ll get valuable lessons on what to do with your pension plan, what to do if you run a business, how to handle calling in loans and paying off debt and so much more. Learn more and get your free 8 lessons here.

Robert Prechter, Chartered Market Technician, is the founder and CEO of Elliott Wave International, author of Wall Street best-sellers Conquer the Crash and Elliott Wave Principle and editor of The Elliott Wave Theorist monthly market letter since 1979.

I’ve included a chart below with a few Elliott Wave interpretations identified on the chart.

Keep in mind that these are my interpretations only. To keep up to date on a more regular basis and receive expert Elliott Wave forecasting, I highly suggest to consider a premium service like the Elliott Wave Financial Forecast Service.

If instead you want to learn more on your own for now, that’s great. There’s nothing wrong with that also. In fact, I always encourage any type of learning. I have a lot of free articles and resources on my site to help you out. You can find some here: Elliott Wave Information and Resources or do a quick search on this site using my search box located in the top right of any web page on the site.

There’s also a great introductory set of free video lessons on Elliott Wave accessible in the right column.

Looking at the chart below, you can see that I added a few labels as I mentioned above.

I’ve added what looks to me to be a clear minute 5 wave decline identified by circle i, ii, iii, iv and iv and within the minute iii wave, a minuette 5 wave decline identified by (i)(ii)(iii)(iv)(v).

The appearance of five waves display the direction of the trend to one larger degree. This clear chart pattern increases the potential for a major trend reversal to be in place for Gold. For this to hold true, prices should now rise, not necessarily in a straight line of course, but should rise no further then the recent highs set last week. If the prior highs do hold, then yesterdays low should be considered a 1 of many more lows to come in the months ahead.

I must be thinking in sync with other people today because I just finished adding a page to the main site section on technical analysis called Identifying Support and Resistance Levels.

Learning to use Fibonacci while performing your Technical analysis will provide you with another great tool at your disposal.

Once you read through the ebook, you’ll be able to help identify potential turning points, which many times just so happen to coincide with the support and resistance levels you’ll recognize on your charts.

Free 42-Page eBook: Find Trading Opportunities With Fibonacci

Elliott Wave International has just released a free 42-Page eBook, How You Can Identify Turning Points Using Fibonacci. Created from the $129 two-volume set of the same name, it’s available free until November 30, 2009. Learn more.

Greetings reader,

You may be missing trading opportunities staring you in the face. The charts you look at every day could reveal high-confidence trade setups and market turning points. You can learn how, today.
 

Elliott Wave International (EWI), the world’s largest market forecasting firm, has just released a free eBook, How You Can
Identify Turning Points Using Fibonacci.

It features 42 chart-filled pages of actionable Fibonacci techniques that you can add to your trading arsenal right away. You’ll never look at charts the same way again!

Created from the $129 two-volume set of the same name, this valuable eBook is offered free until December 7, 2009  

Don’t miss out on this rare opportunity to change the way you trade forever.

Go here to download your free eBook.

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 around the world.

The recent posts about the banking sector will hopefully stir some interest in those of you reading and just maybe save you some of your hard earned money over the long haul.

Getting to know the process that foes on behind the scenes between the banks and the FDIC will help you understand what has happened, and what could still happen.

Here’s another great guest post on the topic along with access to their current free Bank Safety Report, which is available for a limited time.

The FDIC Anesthesia Is Wearing Off
November 20, 2009

By Robert Prechter

The following article is an excerpt from Robert Prechter’s Elliott Wave Theorist. For more information from Robert Prechter on bank safety, download his free report, Discover the Top 100 Safest U.S. Banks.

Perhaps the single greatest reason for the unbridled expansion of credit over the past 50 years is the existence of the Federal Deposit Insurance Corporation, another government-sponsored enterprise created by Congress. The coming rush of bank failures is an outcome made inevitable the very day that Congress created the FDIC. The reason is that the creation of the FDIC allowed savers to believe that their deposits at banks are “insured” against loss.

But the FDIC is not really an insurance company. No enterprise, absent fraud, could possibly insure all the banking deposits in a nation. Nor does the FDIC do so, despite its claims. The FDIC is like AIG, the company that sold too many credit-default swaps. It contracted for more insurance than it could pay upon. Because depositors believe the sticker on the door of the bank, they have abdicated their responsibility to make sure that their banks’ officers handle their deposits prudently. This abdication allowed banks to lend with impunity for decades until they became saturated with unpayable debts.

Today, most banks are insolvent, and the FDIC is broke. This condition is deflationary for three reasons: (1) Banks are coming to realize that the FDIC cannot bail them out in a systemic crisis, so they have become highly conservative in their lending policies, as described above. (2) The main way that the FDIC gets its money is to dun marginally healthy banks for more “premiums” (meaning transfer payments) to bail out their disastrously run competitors. The more money the FDIC sucks out of marginally healthy banks, the less money those banks have on hand to lend, which is deflationary. (3) The banks that have to cough up all this money will become more impoverished at the margin, so banks that otherwise might have survived a credit crunch will be thrown even closer to the brink of failure. This is another deflationary risk.

A friend of mine whose family owns a bank told me that the FDIC recently raised its 6-month assessment from $17,000 to $600,000. In the FDIC’s latest announcement, it is considering requiring banks to pre-pay three years’ worth of “premiums,” i.e. triple the normal annual fee in a single year. It will be a miracle if the money lasts through 2010. When these funds are gone, the FDIC will have two more options: to issue its own bonds and pressure banks to buy them; and to tap its “credit line” of up to half a trillion dollars with the U.S. Treasury. It’s the same old solution: take on more new debt to back up failing old debt. More debt will not cure the debt crisis.

Meanwhile, the FDIC is contributing to the deflationary trend. It has “tightened rules on required capital levels,” which forces banks’ loan ratios to fall; and it has “extended its extra monitoring of new banks from the first three years of operation to seven years” (AJC, 11/19), meaning that banks will now have to wait four additional years before they can go crazy with loans.

For more information from Robert Prechter on bank safety, download his free report, Discover the Top 100 Safest U.S. Banks. You’ll learn how to find a safe bank, the critical difference between lending and banking,
tips on international banking, and more.

Robert Prechter, Chartered Market Technician, is the world’s foremost expert on and proponent of the deflationary scenario. Prechter is the founder and CEO of Elliott Wave International, author of Wall Street best-sellers Conquer the Crash and Elliott Wave Principle and editor of The Elliott Wave Theorist monthly market letter since 1979.

The article below has some information on Bank safety from the authors perspective and gives some information about the condition of the FDIC.

For further reading and information, along with a special report with a listing of potentially the safest banks around, take advantage of access to your free report indicated in the article.

Is Your Bank Safe? More than 130 banks will have failed by the end of 2009.

What if your bank fails? Did you know you could be left in the lurch for days, weeks, even months before you get your money back from the FDIC? What happens if the FDIC can’t cover your funds? How do you find a safe bank to protect your deposits right now?

Find answers to these questions and more in the original "Safe Banks" report from Elliott Wave International. Learn more and download your free report now..

Greetings reader,

Please read the following Bloomberg news item carefully. It has a direct impact on the safety of your money.

Sept. 24 (Bloomberg) — In May, the FDIC said it was projecting $70 billion of losses during the next five years due to bank failures. The agency said it expects most of those collapses to occur in 2009 and 2010.

The FDIC’s problem is that it didn’t collect enough revenue over the years to cover today’s losses. The blame lies partly with Congress. Until the law was changed in 2006, the FDIC was barred from charging premiums to banks that it classified as well-capitalized and well-managed. Consequently, the vast majority of banks weren’t paying anything for deposit insurance.

Of course, we now know it means nothing when the FDIC or any other regulator labels a bank “well-capitalized.” Most banks that failed during this crisis were considered well-capitalized just before their failure.

By the end of 2009, more than 130 banks will have failed. Most depositors will have little clue their bank was even at risk. Worse yet, the string-pullers in Washington are doing everything in their power to hide information about the safety of your bank from you.

So far, the FDIC has had enough money to cover insured depositors. But that money is quickly running out.

Just last week, the FDIC voted to mandate early payment of insurance premiums to help cover at-risk banks. Here’s what the Associated Press reported on Thursday, Nov. 12:

WASHINGTON (AP) — U.S. banks will prepay about $45 billion in premiums to replenish a federal deposit insurance fund now in the red, under a plan adopted Thursday by federal regulators.

The Federal Deposit Insurance Corp. board voted to mandate the early payments of premiums for 2010 through 2012. Amid the struggling economy and rising loan defaults, 120 banks have failed so far this year, costing the insurance fund more than $28 billion.

Worse yet, three more banks failed the very next day, Friday, Nov. 13.

This is a very real problem and a direct threat to your money. It’s more important now than ever to personally ensure the safety of your bank. The free 10-page "Safe Banks" report from our friends at Elliott Wave International can help.

Inside EWI’s revealing free report, you’ll discover:

• The 100 Safest U.S. Banks (2 for each state)
• Where your money goes after you make a deposit
• How your fractional-reserve bank works
• What risks you might be taking by relying on the FDIC’s guarantee

Please protect your money. Download the free 10-page "Safe Banks" report now.

Learn more and download the "Safe Banks" report now.

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 around the world.

But is this really the case?

For many years I have seen people, and done so myself, “follow the herd mentality”. When it comes to Gold, that would be when people panic, Gold should soar.

The free ebook below will help you see things in a different way. Instead of being sucked up in the momentum and draft of the herd, you may just be able to take a step back next time and see what’s causing the move first.

The following article is provided courtesy of Elliott Wave International (EWI). For more insights that challenge conventional financial wisdom, download EWI’s free 118-page Independent Investor eBook.

Large banks and more recently pension funds have suddenly become infatuated with gold.  They chant the mantras that gold bugs have known for years: gold is a store of value; owning gold is financial insurance; an ounce of gold will always buy a good suit.  The idea is that if the economy continues to weaken and share prices decline, a strategic allocation of the precious metal will hedge and offset some of the losses in the financial sector.

On the surface it seems to make sense and it’s hard to argue with the logic.  Even so, logic can sometimes get twisted, whereas facts cannot.  The evidence is found in the chart we describe as “All the Same Market.” Gold, stocks, currencies (versus the dollar), oil, grains, meats, softs, all decline in a deflationary environment.  As liquidity dries up and credit contracts, people, businesses, and institutions sell everything to get dollars.  Cash is once again king.  This is bearish for gold.

Looked at another way:  as the dollar advances from its lows, things denominated in dollars lose value against the dollar.  As long as the dollar remains the global senior currency, assets will depreciate:  not just stocks and commodities but residential and commercial property, works of art, collectible cars, pretty much everything.  Of course, this outlook presumes a deflationary environment and that’s been our view for quite some time.  But that’s another conversation.  The topic here is stocks down/gold up – or not.

The long-time editor of the Elliott Wave Financial Forecast Short Term Update, Steven Hochberg summed it up succinctly in a recent issue:

“The other important aspect to a dollar bottom is the implication to all the other markets that have been moving opposite to this senior currency. The start of a major dollar rally should roughly coincide with a turn down in stocks, commodities, oil and the precious metals. So there are likely to be important trend reversals across nearly all major markets.”

Don’t fall into the trap of group-think.  If investing was that easy we’d all have (insert your own private fantasy).

————-

For more information, download Robert Prechter’s free Independent Investor eBook. The 118-page resource teaches investors to think independently by challenging conventional financial market assumptions.

The move so far this morning is what should be expected for “Hump Day”. That is, rising up to the top, climaxing, and then “rolling over” the hump.

The “hump” of course being today, Wednesday, midweek.

Taking a look at the chart below, you can see that today’s move so far is less than enthusiastic.

You can see by looking at today’s candle that the market was higher earlier today, and has since pulled back from those highs. Sound familiar? Here’s what I mentioned to watch for on my post 2 days ago here S&P 500 Update 11-09-2009:

Looking at the updated chart below, the next area of possible resistance, and the area to help form the possible double top, would be near 1100. I feel this also is now providing a strong “round number” attraction since we are so close. So even if the market moved lower tomorrow morning, I would expect a pop to this area first before the reversal.

While this didn’t happen yesterday, it appears to be happening today. So far this morning, the candlestick shown is representing a nicely formed Shooting Star, which is typically a Bearish formation for anyone using Candlesticks in their analysis. In addition, notice the weak volume that has occurred during the current uptrend.

This doesn’t mean the top is necessarily in, by itself. It does show a lack of follow through as the price level only briefly breached the most recent highs of 1101.36 reached on October 21, 2009. This morning’s high registered just above that at 1105.37, albeit briefly.

Following up from my previous posts : S&P 500 Update 11-09-2009 which mentioned to be on the lookout for the Head and Shoulders Pattern which has failed, and then went on to mention the next pattern to watch for would be a potential Double Top:

With this mornings brief move above the recent highs, the Double Top pattern still has potential to occur. Brief moves, or even one or two day moves up through prior highs by relatively small amounts do not eliminate the possibility from a Double Top occurring. They should only make you aware that the potential exists for the trend to continue higher.

We’ll have to pay close attention to see if today’s “hump” proves to be more than just a mid-week occurrence and possibly develops into one of a larger picture to be observed on the S&P 500 chart in the days/weeks to come.

Where do you think the S&P 500 is going from here?

On my last post I mentioned to be on the lookout for a possible Head and Shoulders pattern in the stock market forming, specifically the S&P 500. Today’s large move higher put’s the odds of this pattern happening at risk.

I mentioned in the previous post that volume appeared low for any significant move higher and today’s move had a little more volume than the last few sessions, but nothing to write home about. It still seems suspect, but if the market wants to move higher, none of us are big enough to slow it down as a whole.

For the head and shoulders pattern to still work, the S&P 500 will have to start moving lower sometime tomorrow morning and not look back. If it doesn’t, the next pattern to be on the lookout for would be a Double Top.

Looking at the updated chart below, the next area of possible resistance, and the area to help form the possible double top, would be near 1100. I feel this also is now providing a strong “round number” attraction since we are so close. So even if the market moved lower tomorrow morning, I would expect a pop to this area first before the reversal.

The other thing to keep in mind is that if you use any form of Elliott Wave analysis, the move higher today burst up through the bottom of the previous 1st wave lower near 1073 which is also nicely coincides with the 61.8% Fibonacci retracement level as seen on the chart above.

I’m not positive right now, but I believe this move up through the prior 1st wave down is one of the rules that cannot be broken for a downtrend confirmation to be in effect. I will check my Elliott Wave Principle book and add my findings to the next post. (I’m writing this BEFORE I read my Elliott Wave Paid Subscription service as I cannot and will not provide other peoples copyrighted analysis. When I write any analysis on my site it is my own, based on what I have learned myself. See below for more information to learn about Elliott Wave analysis and their expert forecasting services.)

The other possibility I see is that a triangle is forming. Usually triangles form before a final thrust to the end of a larger degree trend but I have seen on occasion a triangle form at the top itself. There are also several different types of possible triangles to be aware of. I will try and research more over the weekend and add an updated post of further possibilities.

So basically we will have to look for a move lower almost immediately tomorrow first, if not then a possible double top. If we move higher and close above 100, then the odds will increase that higher levels are in store before a major top is in place.

Important update: There’s still time to join EWI’s FreeWeek! Our friends over at Elliott Wave International are offering Robert Prechter’s latest monthly market letter, The Elliott Wave Theorist, for free along with the firm’s most popular U.S. analysis and forecasting publications. You can now download, print and read dozens of chart-filled pages of current analysis for U.S. stocks, the economy, precious metals, bonds, U.S. dollar and more — and it’s all free for one week only. This opportunity ends Nov. 11. Learn more about FreeWeek, and get your free reports here.

You can also join Elliott Wave International’s FREE Club EWI and access the Basic Tutorial: 10 lessons on The Elliott Wave Principle and learn how to use this valuable tool in your own trading and investing.

The levels I mentioned in that post have been violated to the downside, with considerable volume and Advance/Decline Issues currently near 25%/75%.

I mentioned that “As the current position of the S&P 500 displayed on the daily chart above evolves, any considerable move, and close, back lower through yesterdays low of 1042.19 could easily be interpreted as 5 waves down from the recent market top.”

I then went and mentioned that “This would not be the same as the previous 3 lows on the chart which had 3 waves down. Instead, this would raise the odds that a next larger degree trend change was underway, down.”

Now what? Barring any overly optimistic bounce into the close today, any close at or below the current level would increase the odds that a major trend reversal in under way.

As a clear 5 wave pattern is unfolding to the downside, the next thing to consider is how far the current leg will continue. There are several different wave patterns that can evolve and there is no better time than now to learn more about Elliott Wave patterns by accessing your own Basic Tutorial: 10 lessons on The Elliott Wave Principle for free, and learn how to use this valuable tool in your own trading and investing.

Here’s a great Technical Analysis Handbook that will provide further information on using Elliott Wave Analysis to help you navigate the current market positioning:

Here’s an updated chart after the market close today showing the S&P 500 closing at 1036.19, below the prior trend line support level and below the recent low from 2 days ago.

After the market closed yesterday I heard comments that the move higher was the biggest one day advance in 3 months. Today, comments were just the opposite, even worse- “the decline was the biggest one day decline in over 6 months”. Where did all the optimism go after yesterday’s GDP report?

It seems every other day the news changes course and the market swings back and forth, not knowing which way it should continue.

The one thing that is certain from looking at the chart below is that the angle of ascent is slowly decreasing. Ever heard the term “roll over”?

Take a look at the four most recent lows I have identified on the chart below (L). Each consecutive low has been closer to the 50 day Moving Average line than its prior low, with the prior low bouncing off the line and the most recent low penetrating down through it before moving back above it today.

In addition, you can see that I have added a lower support line connecting these 4 recent lows, which should provide a good additional signal in the future if broken through down lower.

It’s fascinating to see that each of these 4 prior lows consisted of very similar patterns immediately prior to the lows. That being, each pattern from the high immediately prior to each low (H) has a clearly recognizable 3 wave pattern before ending at the low and reversing.

For those of you who don’t know, a 3 wave pattern is most often associated with a counter-trend move. Meaning, against the next larger degree trend. In this case, that trend has been up since March 2009.

How does this help us? Well, another type of wave pattern is a 5 wave pattern. The 5 wave pattern is not associated with a counter-trend move, instead it can be associated most often with a directional trend move.

Note: To learn more about identifying wave patterns and keep up with the current market position and future forecast, take a look at my page on the Elliott Wave Financial Forecast Service or watch the free videos accessible in the right column of this page under “Elliott Wave”.

As the current position of the S&P 500 displayed on the daily chart above evolves, any considerable move, and close, back lower through yesterdays low of 1042.19 could easily be interpreted as 5 waves down from the recent market top.

This would not be the same as the previous 3 lows on the chart which had 3 waves down. Instead, this would raise the odds that a next larger degree trend change was underway, down.

The ebook is 60 pages and contains great information about what happens during a Deflationary period, what to expect and how to prepare for and survive during these tough times.

Anyone following my site for a while now may remember that this free ebook was offered about a year ago, before the markets made their big moves lower. Now, the ebook is being offered again and the market seems to be at a major high again, ready to move lower.

The new article can be read here: Free Deflation Survival Guide to find out more details or you can
download your copy here:

This may be the perfect time to start thinking contrarian as many people are thinking about Inflation, when in fact Deflation is what they should be worried about.