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Blog Category Archives: Finances
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The other major Forex index is the US Dollar against Japanese Yen (USD/JPY). Comments related to EUR/USD also apply to USD/JPY. Figure 17.26 shows a monthly chart of USD/JPY from 1975 to December 28, 2015.
17-26Figure 17.26 Charts courtesy of netdania.com
We can see that the USD has been substantially depreciating against JPY from 1975 to 1995. This trend was mainly the consequence of removing the USD gold backing by the Fed. After that, USD/JPY was practically trending sideway until Q4, 2012. Mr. Abe became the prime minister of Japan in 2012. He is trying with full power to depreciate JPY against the dollar (to make the dollar go higher) with unprecedented QE plans. The up trending wave from October 2012 to December 28, 2015, is partly the result of the BoJ QE program, and partly because of the rate hike anticipation by the Fed.
Forex is the exchange for trading currencies. The EUR/USD index shows the evolution of the Euro against the US Dollar. When the EUR/USD goes up, the Euro appreciates against the USD, and when it goes down, the USD appreciates against the Euro. When you open a Long position on EUR/USD, you bet that the Euro will appreciate. With a Short position, you bet that the Euro depreciates and the USD appreciates.
Figure 17.25 shows a monthly chart of EUR/USD from 1991 to December 28, 2015. On its left side, the Euro relentlessly depreciates against the USD until Q3 2000. Then after a double bottom of W-type in 2000 and 2001, the Euro started a rally until 2008 to reach an exchange rate of $1.60 for 1 Euro. Since then, the EUR/USD wave evolves within a down trending channel. In December 2015, the wave was sitting on a support line. Should the Fed announce another rate hike in 2016 or after, the wave could break through the support line. This event is however quite unlikely because such decision would have adverse effects on the trend of the US financial markets and the ability of the US governments to service their debt.
The EUR/USD trend prediction and timing will be included in the MPS TradeAlerts newsletter.
For further details regarding the state of the US Economy and Finances, please refer to the section “The Fed”.
The Light Sweet Crude Oil Index called XOILX in TC2000 tracks the price of oil. Figure 17.22 shows a monthly chart of XOILX for the period from 2003 to December 28, 2015.
In the early phase of the chart, the price of oil was in the range of $25. After that, the XOILX rallied to some $80 in Q3 2006. After bottoming in Q1 2007, oil rallied to an all-time high of 146.65 on July 11, 2008. The correction since then has taken the form of a zigzag A, B, and C. Like CRY0, subwave A ended in Q1 2009 and subwave B, either in Q2 2011 or Q2 2014. The subwave C then begun and is going to develop a five-wave motive pattern, downward. Detailed Money printing Strategy analyzes of CRY0 also apply here.
On top of the deflationary pressure that pushes the price of oil down, the technology innovations are always helping to discover new types of energy at economical and affordable production prices. The environmental and climate change is another factor that will force the price of oil to fall. Ultimately, the technological innovations will enable the replacement of fossil energy by the renewable and clean energy of sun, wind, and sea.
Utilization of oil will progressively decrease, and therefore, its price should go further down, maybe to the area of $12. Around the year 2050, oil may mainly be used by the developing countries who cannot afford the capital investments for the production of renewable energies. The developed countries will progressively consider oil as an obsolete source of energy, to end with the same fate as for coal.
The commodities are tracked through the Commodity Research Index, called CRY0 in TC2000. Here we analyze the status of CRY0, Gold, and Crude Oil. Figure 17.20 shows a monthly chart of CRY0 from mid-1991 to December 28, 2015.
CRY0 tracks quite well the market phases of inflation and deflation. When it trends upward, it signals phases of inflation and when downward, deflation. Likewise, when it goes up, it signals a prevailing economic demand side and when down, a weak demand and a strong supply side. Deflation is the consequence of vanishing wealth due to recession or depression in the economy and finances.
At the beginning of the chart, CRY0 was rather in a correction mode until a double bottom W-type trend reversal in Q4 2001. Then it rallied until Q2 2008. The commodities crashed and lost more than 50% of its value from Q3 2008 to Q1 2009, in a short period of some nine months. This loss was caused by the crash of financial markets during subwave C of DJ-30. Owing to the US QE plans, the commodity prices were re-inflated from Q1 2009 to Q2 2011 after injection of a massive amount of money in the financial markets by the Fed. Since Q2 2011, the CRY0 develops within a steep down trending channel. The wave has meanwhile broken the horizontal support lines at 201, but also the bottom price of the W-type trend reversal at 184.
The CRY0 pattern conveys a scary signal. In principle, when the stock markets are close to all-time highs, the CRY0 is also expected to be close to all-time high. However, this is not the case in Q4 2015.
From the Money Printing Strategy wave analysis viewpoint, CRY0 seems to develop a zigzag pattern. The subwave A started from the all-time high of 2008 to end in Q1 of 2009. Then the subwave B brought the CRY0 upward until Q2 2011. The subwave C then started. It is going to subdivide into five motive sub-subwaves. Sub-subwave 1 ended in Q2 2012 and sub-subwave 2, in Q2 2014. The sub-subwave 3 began in Q2 2014. Most likely, it is going to be extended. Therefore, the sub-sub-subwave 1 of sub-subwave 3 ended in Q2 2015, and the sub-sub-subwave 2 in Q3 2015. Therefore, the final leg down is the sub-sub-sub-subwave 1 of sub-sub-wave 1 of sub-sub-wave 3. Consequently, the CRY0 has still a long period of correction ahead before the sub-subwave 5 of the subwave C is completed.
Why CRY0 conveys a scary signal? The reason is that when the DJ-30 starts its plunge until 2019, a colossal amount of wealth, invested in financial markets, vanishes and the bubbles pop up. The loss of wealth compresses the demand side of the economic balance. This results in an increase in the buying power of money. Consequently, the price of goods and services falls. This will be the effect of the screaming deflationary signal of CRY0.
A plunge in the price of commodities will hurt mostly the developing countries whose economies are heavily dependent on the export of their raw natural resources.
For further details concerning the deflation, please refer to Chapter 13.
The CRY0 trend prediction and timing will be included in the MPS TradeAlerts newsletter.
For further details regarding the state of the US Economy and Finances, please refer to the section “The Fed”.
FREE REGISTRATION Register now to get the daily TradeAlert newsletter and other high-value posts in a timely manner in your inbox for free. You can cancel your risk-free registration at anytime. Status of the S&P-500 Index S&P-500 index represents the evolution of 500 highest capitalization companies trading in the US NYSE and NASDAQ exchanges. S&P-500 … Continue reading Status of S&P-500 Index until October 4, 2017
FREE REGISTRATION Register now to get the daily TradeAlert newsletter and other high-value posts in a timely manner in your inbox for free. You can cancel your risk-free registration at anytime. Status of French CAC-40 Index CAC-40 represents the French stock market index, which comprises the 40 highest capitalization companies traded on the floor of … Continue reading Status of French CAC-40 Index until September 22, 2017
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The US Dollar Index measure the value of the dollar against a basket of other currencies. In TC2000, the index is called DXY0. When the DXY0 goes up, the Dollar goes up and other currencies tend to go down, and vice versa.
Figure 17.24 shows a monthly chart of DXY0 from mid-1991 to December 28, 2015. We can see that after a decline from 1994 to mid-1995, DXY0 rallied until Q3, 2001. However and after a M-type double tops trend reversal in Q1 2002, it started to trend down until Q1 2008. After that, it trended sideway until Q3 2014. The final rally is the consequence of anticipation of a rate hike by the Fed.
DXY0 trends generally in the opposite direction of commodities. When DXY0 goes up, the commodities tend to go down and vice versa. The fluctuation of the Dollar index has a significant impact on the US economy and labor market. A high value of the index means that the price of imported goods and services falls. This situation impacts the US trade balance drastically because not only the price of imported products and services declines but at the same time the price of products and services for export becomes more expensive for other countries. Consequently, a higher value of the dollar index may lead to delocalization of companies and industries. In the long run, this may adversely affect the unemployment rate. The lower value of DXY0 provokes the opposite effects.
Since many years now, a hot currency war is in progress among various countries. This war is done with the ammunitions of low-interest rates, low banking capital requirements, and QE programs. This war feeds a vicious circle and forces other countries to devalue their currency in turn and indefinitely, until the trust in fiat currencies vanishes and the bank notes become worth the intrinsic value of the printed-paper.
Therefore, it is clear that an appreciation of dollar leads to delocalization of companies. The US economy being sluggish, a high value of DXY0 adversely affects the growth rate of the US GDP. Consequently, a hike in interest rate should be undesirable for the US economy that may provoke the crash of the stock and bond markets. Does the Fed know the effect and consequences of a rate hike? Yes for sure, but it may get forced to, because of the prevailing forces of the free market. Otherwise, by refusing to hike the rates, they convey a signal that the economy is sluggish, which in turn may adversely affect the financial markets.
By the way, the ECB and BoJ are fighting with full power to depreciate their currencies against the US dollar and other currencies, precisely to propel their exporting sector. Can the US economy withstand the pressure of an overvalued currency in the long run? To be seen.
The DXY0 trend prediction and timing will be included in the MPS TradeAlerts newsletter.
For further details regarding the state of the US Economy and Finances, please refer to the section “The Fed”.
To analyze the state of the US real estate, we use the TC2000 MG440 Real estate index. Figure 17.23 shows a monthly chart of the US housing index from 1988 to December 28, 2015. After a correction in 1990, the real estate started a prolonged rally until Q1 2007 to make an all-time high on February 8, 2007, with a price of 821.87. With the financial market deflation and depression of 2008, the Real Estate bottomed with a price of 148.28 on March 6, 2009. This represents a loss of 82% from the top. As a reminder, DJ-30 also bottomed on March 6, 2009. Since then, the real estate was re-inflated through the Fed successive QE programs. On December 28, 2015, the wave is sitting on the resistance trend line of the down trending channel. This level is also the Fibonacci retracement level with a loss of 38.2% from the all-time high. The correction from 2007 has taken the zigzag pattern. The subwave A ended in Q1, 2009 and the subwave B, most likely on 28 January 2015. Like CRY0 and oil, the subwave C will take the pattern of a five-wave motive, trending downward. For 2015, the chart shows a small degree down trending wave 1 and 2. The down trending resistance line being confirmed by two different means, the wave may rather have difficulty to break through it, upward.
The real estate prices should find bottom when the wave touches the down trending support line. Most likely, it would find support in the price area of Q4, 1990.
The Real Estate index trend prediction and timing will be included in the MPS TradeAlerts newsletter.
Gold and silver are two of the commodities that have long been used as real money throughout the history. The history of gold is explained in detail in Chapter 13. Here we would like to check the chart of gold called XGLD in TC2000.
Figure 17.21 shows a monthly chart of gold from 1993 to December 28, 2015. In the early phases of the chart, gold was in a bear market. After that, it developed a double bottom W-type trend reversal on August 25, 1999, with a bottom price of 251.70 and then on February 20, 2001, with a low of 252.60. After the second bottom, it rallied until September 6, 2011, to reach an all-time high price of 1920.80. Since September 2011, it is developing within a down trending channel. Gold should find support in the area of Fibonacci retracement line of 61.8% or some 880 points. After that, gold and silver should rally while other commodities continue their plunge, because of the full tilt deflation and depression in the financial markets. Alternative support levels for Gold are the Fibonacci retracement lines of 76.4% at 640, which represents more severe losses.
At one degree higher, the period from February 2001 to August 2011 becomes the subwave 1 and after that, until the forthcoming bottom, the subwave 2. As you may guess, the subwave 3 upward is anticipated to be extended, followed by the subwaves 4 and 5. The subwave 5 may be extended as well. Therefore, gold will enjoy a long period of bull market after finding support, presumably in the area of 880 or 640.
The gold trend prediction and timing will be included in the MPS TradeAlerts newsletter.
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Trading and investing are the processes of buying and selling financial assets for an anticipated profit. Before describing this process in detail, it is worthwhile asking a certain number of fundamental questions for a good understanding of the concepts associated with trading and investing.
What is the ultimate purpose of investing and trading? The answer is to make money, period. How do we make money? We do it by buying low and selling high or by Shorting, meaning selling high and covering (buying) low. How do we know when the market is low so that we could buy or cover, and high, so that we could sell or Short? These are excellent questions. How do we know the right timing for buying and selling the financial instruments? The main purpose of Money Printing Strategy is to answer these questions as specifically as possible.
The cause of making money is not the price we pay to buy something but the delta (difference) between the price we sell and the price we buy. Do we agree on this? It is essential to understand that the delta matters, not the buying or selling price alone. For example, when someone says, “the price is low,” he expresses an extremely bogus statement. To be more accurate, that person must also say the predicted selling price to enable the assessment of the associated delta. Now we know that the deal could potentially be profitable. Even this statement is quite bogus. How profitable is it? We still don’t know how long it will take to sell the item for a potential profit. The profit won’t be the same if it takes one month to sell the item or five years. We know that the invested money could alternatively bring interests if deposited in a “safe” bank account. Now, even if we know the buying price, the selling price, and the duration, the deal would still bear some uncertainty because we don’t yet know the level of risk. In other words, what could happen if the deal brings losses and if so, how much?
The main objective here is to understand that if we want to make profitable trades, we need to know (1) the buying price, (2) the selling price, (3) the duration, and finally, (4) the potential losses.
Now this statement is complete and accurate. Anyone can independently calculate the deal Reward-Risk Ratio and subsequently may decide to take or leave it.
Any advice that would recommend you a financial investment with a statement in which at least one of the previous four elements is missing, should be treated with skepticism. Let’s be logical. Would you buy a car, if you know that it is not finished and ready to drive? For example, if the tires, steering, breaks, engine, or the fuel tank was missing? Well, regarding trading, if you are unable to calculate the Reward-Risk Ratio of a proposed investment, it is like buying a car, which is not ready for driving.
You may now implicitly guess the main goal: There are good brokers and excellent financial advisors out there who know precisely what to recommend to their customers. However, some advisors may misuse the lack of knowledge of their clients and may propose deals that are profitable for themselves, not for their clients. Do you personally know a professional of such kind?
Personally, I feel shocked each time I hear from renowned financial experts when they answer the question “where the market is going for the next month?” by “I don’t know,” and immediately adding, “no one knows the answer.” The Money Printing Strategy experts do know the answer quite often. Sometimes the Money Printing Strategy doesn’t know the answer due to unclear or conflicting signals. In this case, the Money Printing Strategy would recommend to staying away until the signal is clear enough.
When some experts say, “you invest now and in ten years the markets will be up,” this is a naïve and irrelevant answer. You could possibly get such answers for free from a good friend who has never invested in the financial markets. With such kind of answers, you can be quite sure that those experts are making money through commissions they get from your business, not by trading or investing for themselves. Furthermore, by following their customary advice to “invest now,” you can be quite sure that the probability of getting a good value for the Reward Risk Ratio of trade on that specific date, would usually be poor.
There is a good reason behind why “they don’t know” and why they say “no one knows the answer”. This is because they are using the fundamental analyzes for their predictions. While fundamental analyzes have the potential for now and then to predict the future market trends, they are unable to predict the date or price of the market trend reversals with enough accuracy to enable profitable trades in the long run. The main reason is that fundamental analyzes may take into account dozens of different qualitative parameters that cannot each be objectively quantified.
The main purpose of Reward-Risk Ratio is to determine the short time windows when the reward is maximal and the potential losses, minimal. As a consequence, you would open or close positions only during those specific windows. If an opportunity is missed out, then you would have to wait for the next time window. The Reward-Risk Ratio rejects recommendations of experts when they always say “buy now” for the simple reason that the weak ratios provide a “No-Go” signal for the criteria number 16 of the trading checklist. The goal is precisely to prevent the opening of risky positions. With this knowledge in hand, you could easily challenge the professionalism of trading or investing advisors. When watching the CNBC or Bloomberg, I often wish their hosts could initiate a conversation regarding the Reward-Risk Ratio or accurate timing for opening or closing trading positions…
Another argument often used by some financial advisors, traders, or investors to demonstrate their professionalism, consists of saying that they have been in this business for 20, 30, or sometimes even 40 years. While this argument may be objective, it is irrelevant what concerns the performance of the strategy they use. Using the S&P-500 as a fair reference of their past performance is bogus too. When the S&P-500 gains 10% over a year and the professional 15%, she or he is indeed beating the S&P-500 by 5% and her or his portfolio grows by 15%. However, when the S&P-500 loses 10% over a year and the professional 5%, she or he is again beating the S&P-500 by 5%, but the portfolio loses still 5%. True professionals demonstrate the performances of their strategy by providing objective and verifiable figures. Measurement of performances is done not by telling how long they are in this business rather by demonstrating the net gain per trade they have achieved since they started to trade. To calculate the net gain per trade figure, you need to know (1) the total number gaining trades, (2) the total number of losing trades, (3) the total number of trades, (4) the total amount of gains of gaining trades, and (5) the total amount of loss of losing trades. To calculate the net gains per trade, you subtract the total amount of loss of losing trades (of (5)) from the total amount of gains of gaining trades (of (4)) and you divide it by the total number of trades. The result represents the amount of net gain or loss of the strategy per trade. When a professional is unable of giving you any of the five figures, you may consider her or his statements as bogus. Again, would you buy a new car without a steering, fuel tank, break or tires?
True experts will tell you precisely, (1) the predicted pattern of the market for your interested financial instrument, (2) the date or price of the Support level, (3) the date or price of the Resistance level, (4) the position opening price, (5) the position closing price, (6) the potential duration of the trade, (7) the level of risk (loss), and finally, (8) the strategy to manage losses.
Money Printing Strategy provides a detailed description of the processes that leads to answer those questions for the Dow Jones in terms of (1) trends, (2) patterns, (3) prices and (4) dates and durations in chapter 12. Figure 12.3 summarizes and illustrates the outcome for the market trends until the end of 2019.
You will find the measurement of the MPS performances through MPS Performances by Using a Demo Account.
The Money Printing Strategy TradeAlerts (TA) services provide regular trading recommendations based on the Money Printing Strategy.
A major goal of the Money Printing Strategy is to increase your awareness to think for yourself independently and without the need for external advice.
FREE REGISTRATION Register now to get the daily TradeAlert newsletter and other high-value posts in a timely manner in your inbox for free. You can cancel your risk-free registration at anytime. Optimists versus Pessimists: What about Realists? The investing professionals nowadays tend easily to label one another as “Optimist” or “Pessimist.” What does it mean? … Continue reading Optimists versus Pessimists: What about Realists?
FREE REGISTRATION Register now to get the daily TradeAlert newsletter and other high-value posts in a timely manner in your inbox for free. You can cancel your risk-free registration at anytime. Money Printing Strategy: Introduction Money Printing Strategy is based on Technical Analyzes, the primary tool used for prediction of market trends. Like the Elliott … Continue reading Money Printing Strategy: Introduction