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Erik McCurdy
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Erik is the senior market technician for Prometheus Market Insight and has been performing chart analysis since 1995. The software program that he developed to monitor long-term stock market trends has correctly identified 92% of the cyclical turning points in the S&P 500 index since 1940. His... More
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  • Technical Analysis Discussion Blog for September 2010 29 comments
    Sep 7, 2010 9:55 AM
    A place to discuss the markets from a technical analysis (TA) perspective.  Any market, any indicator, any internal, any signal.  It's all fair game.  Feel free to post your questions as well; one of us should be able to provide an educated answer.
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  • Erik McCurdy
    , contributor
    Comments (318) | Send Message
     
    Author’s reply » Reposting from the August blog...

     

    The CCI is one piece of a big, interesting puzzle. As with oil, the monthly chart displays a secular uptrend that experienced a violent correction during the financial crisis in 2008.

     

    CCI:
    prometheusmi.com/p...

     

    Oil:
    prometheusmi.com/p...

     

    While the CCI has moved above resistance in the 50% retracement area following the 2008 correction, oil looks relatively toppy, so the jury remains out for the moment with regard to long-term direction.

     

    You see similar secular moves with gold and my Gold Currency Index (GCI), although the international currency of choice is now testing all-time highs:

     

    Gold:
    prometheusmi.com/p...

     

    GCI:
    prometheusmi.com/p...

     

    Obviously, one of the primary drivers of these secular bulls has been the aggressive policy of monetary inflation undertaken by central banks of the world since the current structural bear market in equities began in 2000. But to see the whole picture, you also have to look at debt levels, M0 through M3, the velocity of money, the money multiplier, etc. There is a massive conflict underway between the forces of deflation (excessive debt) and inflation (central bank printing presses). Central banks can inject as much liquidity as they want, but they simply cannot force monetary inflation to translate into price (asset) inflation as long as the velocity of money remains dead in the water. The nearly uninterrupted rise in gold over the past nine years is telling us that inflationary pressures are continuing to build, but the global deleveraging process has only just begun, and that is driving deflation. My own analysis suggests that inflation will become the much bigger problem at some point, but predicting the timing of the turn is difficult given the complexity of the forces at work. Until then, as a chartist, I will continue to listen to the messages of the various markets and do my best to agree with them.
    7 Sep 2010, 01:52 PM Reply Like
  • Erik McCurdy
    , contributor
    Comments (318) | Send Message
     
    Author’s reply » Chart links did not copy properly from the August post...

     

    CCI:
    www.prometheusmi.com/p...

     

    Oil:
    www.prometheusmi.com/p...

     

    Gold:
    www.prometheusmi.com/p...

     

    GCI:
    www.prometheusmi.com/p...
    7 Sep 2010, 02:28 PM Reply Like
  • Erik McCurdy
    , contributor
    Comments (318) | Send Message
     
    Author’s reply » There are many smart people on either side of the deflation versus inflation debate. For example, John Williams (www.ShadowStats.com) and Jim Sinclair (www.jsmineset.com) both believe that hyperinflation is right around the corner. On the other hand, economists Van Hoisington and Lacy Hunt (www.hoisingtonmgt.com) see deflation as the primary risk for the foreseeable future (I reprinted their second quarter report in my July 15 daily commentary: www.prometheusmi.com/p...), and fund manager John Hussman (www.hussmanfunds.com) doesn't see meaningful inflationary risk for several years.

     

    It is an interesting debate, and I don't think anyone knows precisely how this is all going to play out. Again, the forces on either side of this conflict are epic in scale, so we will likely experience extreme volatility and multiple dislocations during the course of this decade before some semblance of balance and order is returned to the system.
    7 Sep 2010, 02:11 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7517) | Send Message
     
    Erik,

     

    As long as this series works out for you, I have some other concepts I'm considering. So, for those who might be expecting me to launch a competing technical instablog series, I don't see the point. Competition is a good thing, but I'd rather consolidate views into one space on a subject like this so I have no intentions of drawing eyeballs away from your fine work.

     

    I just wanted to make that little public statement so there wouldn't be any confusion. Keep up the great work! I'll be checking in regularly.
    7 Sep 2010, 04:43 PM Reply Like
  • Erik McCurdy
    , contributor
    Comments (318) | Send Message
     
    Author’s reply » Thanks, Mark, although I would be happy to contribute on any similar technical blog should you still decide to start one up. My view is the more discussion the better.
    15 Sep 2010, 11:54 AM Reply Like
  • tinshins
    , contributor
    Comments (84) | Send Message
     
    I'm in the camp of deflation now, and inflation later.
    7 Sep 2010, 05:11 PM Reply Like
  • tinshins
    , contributor
    Comments (84) | Send Message
     
    Listen to this interview ...

     

    www.financialsense.com...
    7 Sep 2010, 05:13 PM Reply Like
  • JeffLeach1986
    , contributor
    Comments (229) | Send Message
     
    Stagflation?
    8 Sep 2010, 07:15 AM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7517) | Send Message
     
    Tin Shins - That was very interesting, but I'm not so sure we are heading back to the days of debtor prisons or indentured servitude contracts. If we do, things are going to be even worse than I had imagined. Some of her views make a lot of sense in the context of our current state of the economy and government misinformation.
    8 Sep 2010, 12:21 PM Reply Like
  • skeptic_tf
    , contributor
    Comments (45) | Send Message
     
    hello erik, signed up for your service, your methods look very interesting. Enjoyed reading the articles, especially the one on physics. I am a little confused on some of the rules for a short sale. The one that says not valid in a cyclical bull less than x.x years. The start of the last upturn was march09, so what determines that we are no longer still in that cycle. trying to be non-specific on purpose, don't know if you want to discuss that on these pages.
    Did you see the brk down in MCD? That is one of my criteria for the next round to get underway in earnest. I know a one day sell off does not a turn make, but it was a nice one, big gap down. Just as expected things are slowing for them in europe, due to the dollar I'm sure, as well as europes economy. They still could go on to a new high, I would be surprised if it goes above 80, but as you say there are no certainties. The final smaller degree 5th does not look complete, in terms of EW, but I see that quite often in many markets. The final leg often looks like a three and not a five. Any ways keep up the good work. I know you don't like to mention specific stocks, and I am not reccomending anybody short MCD, shorting strength is not wise. I am using it as an indicator of when to short they spy.

     

    sk
    10 Sep 2010, 09:09 PM Reply Like
  • Erik McCurdy
    , contributor
    Comments (318) | Send Message
     
    Author’s reply » Hi skeptic,

     

    If you would like to discuss the details of our cyclical trend trading system, please send me an e-mail at erik@prometheusmi.com and I'd be happy to go over them with you.

     

    As for the overall stock market, it remains in a "make or break" window, although a close well above this congestion resistance in the 1,120 to 1,130 range on the S&P 500 would substantially reduce the likelihood of a long-term breakdown in September. However, we would certainly not be out of the woods if that short-term breakout were to occur, as leading indicators continue to signal a significant risk of return to economic contraction during the third or fourth quarter. It is a very interesting time for chart watchers such as myself.
    15 Sep 2010, 12:03 PM Reply Like
  • tinshins
    , contributor
    Comments (84) | Send Message
     
    Erik.

     

    Can you locate any historical charts of the 30-year bond from about 1946 till the present ?
    12 Sep 2010, 02:28 PM Reply Like
  • Erik McCurdy
    , contributor
    Comments (318) | Send Message
     
    Author’s reply » I have seen them, but don't know of a good source offhand. I have the data to create such a chart myself and may have some time this weekend to do so. What type of trends are you looking for specifically?
    15 Sep 2010, 12:05 PM Reply Like
  • tinshins
    , contributor
    Comments (84) | Send Message
     
    Thanks.
    15 Sep 2010, 12:15 PM Reply Like
  • skeptic_tf
    , contributor
    Comments (45) | Send Message
     
    Hey erik. Been watching the yen for clues and what a clue we got. It may be intervention, or not, they may not want to admit they have no control. Or as is often the case the actions of the participants shows up in the technicals. Here are 2 charts on the yen, weekly and daily, both show completed wedges, in two vastly different time frames. I don't know if you use EW at all but I do know you appreciate the power of wedges, and the daily is confirmed by the price action. It took 12 days to form, and normally it takes 1/3 to 2/3 that time to retrace to origin. It did it in one day! That may just speak to the much larger wedge on the weely. I give credit to finviz for their charts,
    s676.photobucket.com/a.../

     

    Take a look, I think the yen has just kicked off on a new trend, long term to the downside, and it has the potential to be swift. Wish I could figure a way to play it, no yen etf. I should help the dollar though, IMO.
    15 Sep 2010, 09:03 PM Reply Like
  • skeptic_tf
    , contributor
    Comments (45) | Send Message
     
    Better ad this disclaimer, I am long UUP, and short SPY, til my stops are hit anyway.
    15 Sep 2010, 09:06 PM Reply Like
  • skeptic_tf
    , contributor
    Comments (45) | Send Message
     
    I ran a search for yen etfs 2 days ago when I saw the wedges, and didnt find any, just did, just my luck! Gonna look at em now, i would expect a rally now, tho, for a bit. GLA
    15 Sep 2010, 09:31 PM Reply Like
  • tinshins
    , contributor
    Comments (84) | Send Message
     
    If the Yen strengthens despite the BOJ, can this cause inflationary cascades in other markets ?
    16 Sep 2010, 04:57 PM Reply Like
  • skeptic_tf
    , contributor
    Comments (45) | Send Message
     
    I f the yen strengthens, japanese goods would become more expensive here. Toyotas, and electronics, I don't know what else. Much of the stuff we buy is now made in china, by american companies, or in partnership with. China is the new Japan. Prechters boys called the top in the yen, I just saw that on another site, where it was posted for all to see. I don't get yen analyses from them. The point is it was seen in the technicals, before it happened, true wedges, especially at the tag end of A move, can cause violent reversals. I saw one a few years ago in the aussie against the dollar, I think. I dont have an fx acct and would never. And they didnt have the currency etf's then. It fell hard for quite some time, big move. Final wedges are not always common, wedges can be in c waves and at the end of any wave, and they can be leading wave 1's. And what looks like a wedge today, may morph into something else, so they can be tuff. Erik posted one last month that was in the S&P, it was a C wave and so far has retraced most of it's length.But when you see the likes of what happened in the yen, it is usually a trend reversal. The degree of trend is the only question, short term, medium or long. And it could be at the end of a 3rd, which would mean 1 more higher high. But that shouldn't take long to play out, few weeks at best. All formations are drawn by the charts due to collective crowd emotion. And there is often news that pushes it over the edge. Think of it as: some knew this was gonna happen, inside info, and were shorting it early, those that didnt were convinced it was gonna break out to the upside. The bulls (misinformed) buy it at the lower trend line, those in the know, or with suspiscions, sell and short at the upperline. The pattern forms and some recognize it and pile in big time at the top. The last down-up pair can be volatile as some (this happens to me, ya gootta let it form) sell early then realize it needs one more cycle, and get out. Like any pattern, trade management is key. I am quite sure the japanese govt has there own technical advisors, and they waited for this moment, to get the best bang for their buck......er, yen that is, LOL. I see it all the time on CNBC tv, the talking heads are pounding the table right at crucial technical points. This is not a mistake, they are either trying to change what they know is happening, or they are trying to get the public to take the other side of a trade. A certain person their makes a living doing that. Get the public to buy when you wanna sell a large position keeps the price up while they unload. Happens every day. Ever notice a stock upgraded after a long run, and within a few days it sells off.
    16 Sep 2010, 08:21 PM Reply Like
  • tinshins
    , contributor
    Comments (84) | Send Message
     
    Thanks, so you think this bull market in the Yen is nearly over then ? I find it interesting that the Yen was at a secular lows in the late 70's & early 80's. Just when USTB's were set to embark on their secular bull run ...
    16 Sep 2010, 09:54 PM Reply Like
  • skeptic_tf
    , contributor
    Comments (45) | Send Message
     
    Tin, here's the link I found at waveaholics, to the EWI site talking about the usd/jpy, which was going down and reversed up. My charts are for the JPY futures (traded against a basket of currencies as I understand, 2 different animals somewhat. I say that because the USD futures pulled back against thier basket, while against the yen it is up big. True ending wedges, that is in a large degree 5th of a 5th, are long term trend changers, most wedges will retrace to their origin, while a 5 of 5 should retrace the entire move. In the jpy daily, if we dont make one more new high, it will be a 5th wave of what looks like a c-wave. Look at the chart again, I gave the areas it shoould trade to over time. IF that C wave works out to be part of a larger wedge on the weekly, then it goes even lower. Retracements tend to go back to previous 4th waves and or B wave extremes or areas, thats how I got the targets. Elliot wave is just one tool, but once you understand it you see that most TA is derived from it. Most dont know that. People talk about areas of consolidation as turning points, and these areas are usually b waves or 4th waves, which tend to be triangles or sideways corrections. Some traders use a volume looking histogram (which works well also) that sits on the side of a chart, especially in short term trading, these highlight the areas where price spends the most time, again areas of consolidation. Here is the link
    www.elliottwave.com/fr...
    They dont talk about the weekly charts, they either didn't see what I did, or they dont want to give away a longterm play. It was a good call and they are using it as a promo. I spotted it cause the same thing showed in the nikkei 225, a wedge in what looks like a 5th wave position, and of course as the yen dropped the nikkei rallied. Take a look. I then looked at the JPY and saw the same, and the usd/jpy cause I am long UUP. I saw this like EWI, before the move, I just didnt look hard enuff for a vehicle, and already long dollar. Sorry to get so long winded, but this stuff really geeks me up, LOL. So to answer your question this is a turning point in the yen, and even if we make a new high in a month or so, it will turn then and retrace to the same areas I mentioned, just a matter of time. At this point I would say JPY is at 1.17 and it will hit 1.06-1.10 area within several months, unless this pullback is a 4th wave and we need a 5th, but that just delays things another month or so, as erik would say it is highly probable. Beyoond that depends on the weekly wedge, it would need to break that lower line, and then would catapult lower from there. Take a look at CMG chart, and I am telling no one to trade anything, this is my analyses and I could be wrong, that is always a given. Good example of a beutiful ending wedge, it was a 5th of a 3rd wave, and is now in a final 5th up. The wedge started on may 6, to june 16, then coreected in a simple zig-zag, and now the final wave up. Watch it over the coming months, as this final leg up unfolds it should trade back to the area of the zig zag, around 127, bounce there and then to the next 4th wave triangle area around 84. It may happen soon, or need another few weeks to complete the up. Not saying it will happen, just a good probability and how I would plan out a short trade. Once you understand wave stucture you can see your eventual targets. CMG is a fairly new comer, growth stock, so I could be all wet here, I prefer older stocks with a history. Many, most really, stocks don't show clear wave structure, so when I find one that does, I watch it.
    I just read most of the article from EW, and they said exactly what I did, the BOJ must have a TA analyst on the payroll. They invented TA, the japanese, thousands of years ago, so I would expect it.
    17 Sep 2010, 01:01 AM Reply Like
  • skeptic_tf
    , contributor
    Comments (45) | Send Message
     
    Wanted to ad this. It may sound like I am touting prechters site. I am not. I have been a paid subscriber for over 3 yrs, and am honestly thinking about dropping them. Wave theory is great, and works when it is clear and you trade it with proper trade management. Prechter makes more bad calls than he does good, or his team does, I have seen them break their own rules too many times, trying to make the market conform to their long term scenario, and that can be hazardous to your wallet. I started following eriks work, and know just enough about cycles to know that I need to learn more about them, thus adding another tool to the box.
    17 Sep 2010, 08:12 AM Reply Like
  • tinshins
    , contributor
    Comments (84) | Send Message
     
    My thanks to you for your efforts. It seems I must study Elliot Wave Theory.
    17 Sep 2010, 12:05 PM Reply Like
  • skeptic_tf
    , contributor
    Comments (45) | Send Message
     
    Lots of good books out there, prechter the best, but some with some new ideas. I've learned a lot from them, but I have learned you gotta think for yourself. As an example, they started to call for the mkt top in august of last yr!!! Now granted , they could have been right. I had bought a bunch of small caps, and discount stocks, on the cheap in late 08 and early 09. Ford, I had 5000 shrs at around a buck, FINL, 3000 at around 1.75, CHS and several other retailers a 1000 shs a piece. I made a nice profit, but sold way to early in August 09, because of prechters views. If I had had an account with erik and his long term timing system I would have fared much better, extremely better, on those holdings. Prechter tends to call every top the top, and they have been doing this for the last 15 yrs or so. Just a warning. Learn the theory, and you can spot trades yourself. It becomes clear in fast moving mkts, in slow it is muddled, Short term trading can work well, but you still need to understand cycles, and that is eriks forte. And his long term method is unbeatable fom what I've seen.
    17 Sep 2010, 10:33 PM Reply Like
  • skeptic_tf
    , contributor
    Comments (45) | Send Message
     
    On cycles: Been keeping track of the candle count on S&P. From the closing high back in april, to the closing low on july 2 there were 49 candles. From the closing low of july to the closing high a few days ago, there were 50, hows that for a little market symmetry. I am always amazed at the mathematical relationships of the mkt structure.
    17 Sep 2010, 10:41 PM Reply Like
  • Erik McCurdy
    , contributor
    Comments (318) | Send Message
     
    Author’s reply » OT: Thumbs down attack

     

    Hi all, I noticed today that somebody went through my commenting history and gave the "thumbs down" to about my last 70 comments. I assume it was done by somebody who cares passionately about his or her comment ranking and is attempting to remain in the top 100 or 50 or whatever. Does this type of thing happen often? I'm still relatively new to SA and was just wondering. People are funny...
    27 Sep 2010, 04:34 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (7517) | Send Message
     
    It has happened to the "Renegades" several times. In the past we have been able, through a concerted effort to identify the troll and deal with them. Sometimes it just takes letting them know we know who they are and other times it may take other actions like emails to SA. We are currently getting hit again and several of us have taken some substantial hits (in the hundreds) overnight.

     

    The last time this happened it turned out to be one person with multiple SA identities who had access to several IPs. He gave himself something like 7 or 8 thumbs up consistently on all his comments and gave each of the top ten or twenty commenters as many thumbs down as he could with all his different SA identities. It looks like this could be something similar, but a little less sophisticated (since he only has 4 identities). But we all have a couple thousand comments or more out there so he could (theoretically) bring us all down if he wanted unless he/she is identified. If you notice anyone making absurd comments (and lots of them) and always getting 4 thumbs up consistently, no matter what they write, let me know.

     

    Thanks
    27 Sep 2010, 04:58 PM Reply Like
  • Erik McCurdy
    , contributor
    Comments (318) | Send Message
     
    Author’s reply » Thanks, Mark, that is interesting. I wasn't aware that sort of thing happened here at SA, but I suppose it happens pretty much everywhere on the net. I'm just not sure why someone would take an interest in attacking my score since I'm not even in the top 100.
    27 Sep 2010, 05:21 PM Reply Like
  • razorthin
    , contributor
    Comments (115) | Send Message
     
    This melt-up marathon (and $ melt-down) and my corresponding cognitive dissonance is wearing on me terribly, and I need some sane reading. Any chance in starting a TA blog for October?
    5 Oct 2010, 07:17 PM Reply Like
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