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S&P 500 Weekly Long Term View Consumer Sentiment Smart/Dumb Money

S&P 500 Gann Analysis $VIX/$VXO Warnings The Money System is a Confidence Trick

2012 201

August 2011 Issue : BETA-August Vol. : 2011-Pilots

Trading the Standard Deviations

Gann,, Market Geometry,, Gann Market Geometry DNA & The Nature of DNA & The Nature of the Universe the Universe

, ,

The First Week of August S&P 500 Elliott Wave TA U.S. Dollar Index Gold & Silver

Market Death crosses

You Are Here YoAug Are Here u 12th, 2011

Welcome

Economic & Technical Analysis for the Active Trader

Wellcome tto ourr 4tth IIssue We come o ou 4 h ssue

The first week of August broke through several longterm resistance and has traders and investors reevaluating their analysis and strategies. Look for one of our Feature Articles: 'The First Week in August', to compare with previous years and see how the market(s) made out. Our Need To Know Technical Analysis looks at a long term weekly view of the S&P 500, as well as a Gann analysis and a zoomed in Elliott Wave count of our current down. We try and give you an overall picture of where we presently are and where we are most likely headed. The All Seeing Eye looks at several market and economic indicators. Sentiment, Smart Money, OEX Open Interest and a long term view of the TRIN are analyzed for some clues as to what may be next to come. We see what Gold, Silver and the U.S. Dollar Index are up to in The Vault. Volatility is studied in Risk, examining the $VIX and $VXO for warnings of moves to come. Traders Mentor discusses some uses for deviation bands in trading. Along with our Cover Story we have three other Featured Articles this issue for you to consider. Each has something interesting to say and we believe they will add to your insights as a trader.

TRIGGER$ Media Publications For all inquiries, comments and contact please feel free to email us at: triggers@GordonTLong.com Main contributor : Gordon T. Long Market Research & Analytics Publisher & Editor : GoldenPhi Analytical Summaries: GoldenPhi See page 34 for a complete list of our contributors.

Contents

4 16 25 34

2012,, 2012 Gann, Market Geometry,

Coverr Sttory Cove S ory

Economic & Technical Analysis for the Active Trader

Gann, Market Geometry, DNA & tthe Natture off DNA & he Na ure o tthe Uniiverse he Un verse

T he Allll Seeiing Eye T he A See ng Eye

Consumer Sentiment Smart Money / Dumb Money OEX Open Interest (puts/calls) TRIN

On Markett & Economiic Indiicattors On Marke & Econom c Ind ca ors

S&P 500 Weekly Long Term View S&P 500 Gann Analysis S&P 500 Zoomed In Elliott Wave

Need To Know Technical Analysis

TRIGGER

19 31

The Vault
Gold Silver U.S. Dollar Index

Currencies & Metals

R IS K RISK

$VIX Warnings $VXO Warnings

Asssessment A sessment

Traders Menttor Traders Men or

Trading the Standard Deviations

Techniicall Anallysiis & Techn ca Ana ys s & Tradiing Sttrattegy Educattiion Trad ng S ra egy Educa on

Open Forums
Letters to the editor Readers Comments Discussions

1. Welcome to the 4th Issue 2. Contents 3. Techni-Fundamentalism 7. Methodology 30. Disclaimer 35. Main Contributor / Source / GTL

22 Markett Deatth Crosses 22 Marke Dea h Crosses 27 Fiirstt Week off Augustt 27 F rs Week o Augus

T he oney ys e 13 TonffMonce ttSycskem iis a 13 C hn iMe ney Sriicttem s a Co id ence r k d

Featured Articles atu A ti es

Techni Fundamentalism

Economic & Technical Analysis for the Active Trader

TechniFundamentalism echni F ndamenta ism

TRIGGER$ publications combine both Technical Analysis and Fundamental Analysis together offering unique (and often correct) perspectives on the Global Markets. The backbone of this research is done by Gordon T. Long, Market Research & Analytics which is subscribed to by Professional Managers, Private Funds, Traders and Analysts worldwide. Every month Market Research & Analytics publishes three reports totalling more then 380 pages of detailed Technical Analysis and in depth Fundamentals. If you dont find our publication detailed enough, we recommend you consider theirs in addition to this one. For the rest of us, TRIGGER$ offers a distilled version of the 380 pages in a readable format for use in your daily due diligence. Read and understand what the professionals are reading without having to be a Professional Analyst or Technician. Successfully navigating todays markets requires information from a broad variety of sources. Triggers examines it all. From Macro Geo Political to daily events yearly cycles to break out points on a minute chart: we look at and analyze as much of the information as possible, pulling out the relevant and giving you what you need to know to make the right decisions on a daily basis. An initial or beginning publication occurs every month, both in a printable pdf as well as online. From there, the online version is updated daily with current events, charts, news and any relevant information pertaining to trading. The completed version of the publication isnt actually done until the last day of updates which occurs right up until the publication of the next issue. As well as the Traditional Methods commonly used, Market Research & Analytics has developed proprietary analytics for both Technical and Fundamental Analysis and has designed a methodology to combine the two whereby the synthesis delivers a truly unique and forward thinking analysis that gives cutting edge insight. TechniFundamentalism

2012

Cover Story

Economic & Technical Analysis for the Active Trader

Gann, Market Geometry, G , Ma r k t G e et y DNA & The Nature of D & T h Na eo the Universe the Univ rse
sophistication of what the Mayans accomplished. The concerns regarding the calendar have largely to do with time cycles. In the past, history shows major events 'coincidentally' occurring in sync with the end of certain Mayan time cycles. Not only is a cycle coming to an end that has shown to coincide with major events in the past, but the whole Mayan calendar itself, some claim, comes to an end in 2012. What is interesting about these time cycles is not just that they appear to have some correlation with events in history. What makes them interesting is the vast spans of time they encompass and the number of events that seem to coincide. What makes this so remarkable is that the Mayans themselves are only a small blip on their own calendar, and the events that seem to related to the time cycles occur long before and after the Mayans existed. As mentioned, the calendar appears to 'end' in 2012. Some view this as a very ominous sign. Others claim that it doesn't actually end, but that it just starts over again. The reader should do their own research on the Mayan calendar and determine for themselves what is and isn't. Right now we can see some relationship with 2012 and the markets via time cycles. Both Gann and Market Geometry are closely related to, and deal with, time cycles.
(cont.pg.5)

In case you haven't heard, there are some who are saying that the end of the world as we know it will take place in 2012. (Wasn't that supposed to have happened in 2000 with Y2K?) All kinds of apocalyptic events are to occur, with the current weather and natural disasters foreshadowing what we can expect to see in even greater degrees as the end of 2012 draws nearer. What exactly does that have to do with trading and investing? We bring it up because if the reader has not yet heard of any 2012 doomsday stories or theories, it's only a matter of time. While doing some market research, we came across an interesting theory as to what is occurring, what effects it may have and how it has some relationship and significance with/to the markets. Finding the whole theory completely fascinating and better yet, even plausible we thought it would make for some interesting reading given the current times. To quickly get you up to speed, the majority of all the 'hoopla' surrounding 2012 has to do with the Mayan calendar. We recommend the reader do their own research on the Mayan calendar to get an understanding of what it is all about and truly appreciate it for what it is. A whole separate article would need to be devoted to fully get across the magnificence and

The Mayan Calandar

Cover Story
Economic & Technical Analysis for the Active Trader

2012, Gann, Market Geometry, DNA & the Nature of the Universe (cont.)

Now what about DNA and 'the Nature of the Universe"? How do these relate to trading and Mayan calendars? At this point we should mention our source for the following information and ideas, as they are largely put together and offered by him for all to ponder. You can find interesting (and far out?) reading on his site and we would recommend the reader explore more of what he has to say. A warning however, some of the reading will most likely push your comfort zone. The source we are referring to is David Wilcock. He has some interesting theories about the universe / reality we live in and uses cutting edge science (example: string and quantum theory) to offer support for what he believes is going on around us. He believes in the "Wave Theory" of energy and the Universe. To prove this he offers up some interesting experiments done with DNA. The point is to examine the possibility that DNA can be transformed by field (energy wave) changes. Research undertaken by Dr Tszyan Kanchzhen has shown that this can happen. In his research Kanchzhen took a duck which was used as a biofield source and transmitted its genetic information via microwaves to a chicken which had eggs in its womb. When the eggs hatched, the emergent infants were describes as duckhens, for they exhibited webbing between their toes and a strange looking head which more resembled that of a duck than a chick. Out of 500 eggs of which 480 hatched, 80% had a flat duck shaped head, 90% had a shift in the position of the eyes and 25% had webbing between the toes. http://www.rexresearch.com/kanchzhen
/kanchzhen.htm

and his work with DNA wave transformation which also closely reflect the findings of Kanchzhen. In Gariaevs experiment a laser beam was shone on a salamander carrying its genetic code in a further beam to some freshly laid frogs eggs. Once hatched, the eggs produced baby salamanders. A whole species metamorphosis had taken place in just one generation. David suggests his theory and the given experiments put a damper on Darwins Theory and it relates better with what has occurred. While the theory of evolution is nice, it doesn't coincide with the fossil record, where instead of the gradual changes over time you'd expect to see as species 'mutate' or 'evolve', you in fact have certain periods of time (short) where some species seem to disappear and new ones replace them. The theory is that it is waves of energy that hit the earth from time to time (in cycles) and activate or change the DNA on the planet. This is what David Wilcock is saying 2012 is all about. The earth will travel and align with the Galactic Centre of the Universe, and it is the energy waves from this that will potentially 'activate' the DNA on the planet. Before you blow all this away as just 'interesting' it gets better for us traders. David

Another example given to prove his theory was experiments done by Dr Peter Gariaev

CoverStory
Economic & Technical Analysis for the Active Trader

2012, Gann, Market Geometry, DNA & the Nature of the Universe (cont.)

These 'energy waves' originate from all places. They are tied in to Gann and others who use planetary time cycles. You should also now see how it relates to 2012, DNA and the Mayan calendar. The Wave Theory could very well be the nature of the universe. At the very least, it's nice to see a theory about 2012 that doesn't predict the end of the world. For what it is worth, we should say that we are not expecting a good showing from the markets in 2012. Right now it appears as if we will be back in a full force Bear market that we believe originated in 2000. Take it as coincidence or galactic alignment...

has a web page that is a must read for those trying to understand the markets.
CHAPTER 19: GEOMETRIC TIME AND THE WILCOCK CONSTANT http://divinecosmos.com/starthere/booksfree online/18theshiftoftheages/75theshiftoftheages chapter19geometrictimeandthewilcockconstant

Here is the first line from the web page: In this chapter, we see the work of Bradley Cowan revealing hidden structures in time that can be harnessed, understood and mapped out to predict the behavior of the stock market. Also discussed is Gann, time cycles and market geometry. Of course there is also other information the reader is going to have to read through and take with a grain of salt. As we have said, it will push your comfort zone. However the information regarding the markets and market geometry etc is right on the money. An explanation of why this occurs goes back to Davids thoughts on Wave Theory. If you place sand on a thin metal plate then vibrate it, the various frequencies used to create the vibration will cause geometric shapes to form in the sand. This is a common high school science experiment. As the frequencies change the geometric shapes in the sand, so too do the energy waves that hit the planet cause the geometry of the markets. Interestingly enough, we find yet again evidence (?) that nature and the markets appear to be more closely integrated than most would believe. While there may be some controversy surrounding 2012, namely that the alignment may have occurred back in the '90s, this doesn't discount the rest of the information: the DNA experiments and Darwin, wave / vibration energy and geometric forms etc. As always we encourage the reader to explore from here. We suggest that understanding 'trading' goes beyond the price time chart. GoldenPhi END

Methodology

Economic & Technical Analysis for the Active Trader

Methodollogy & Techni-Fundamentall Analysiis Me hodo ogy & Tec u n dam e n t na s

TRIGGER$, in collaberation with "Gordon T. Long Market Research & Analytics", have thier own unique approach to TechniFundamental Analysis. The material found in TRIGGER$ is the conclusions of a multiperspective methodology boiled down to its final essence. This methodology includes the following analytical approach: Time Frame short term Duration less than 90 days Approach Technical Analysis Key Tools Elliott Wave Principal, WD Gann, JD Hurst, Bradley Model, Proprietary Mandelbrot Fractal Gen. GlobalMacro Analysis Tipping Ponts Pivots Financial Metrics

intermediate longer term

12 months 18 months +

Risk Analysis Fundamental Analysis

The GlobalMacro Analysis which is so prevalent in our articles and on our Tipping Points site, plays the critical role of bridging our highly analytic Technical Analysis with our detailed Fundamental Analysis. We have found that in the short term the markets are driven by emotion and sentiment. In the longer term, they are driven by financial fundamentals. As Warren Buffett is often quoted as saying: In the short term the market is a slot machine but in the long term it is a weighing machine. We have found that the transition shows a lagging correlation between changes in the Global Macro, followed by Corporate Earnings, then followed by the sell side analyst community estimates. If you are looking for more detail than is provided in TRIGGER$, consider looking at our primary inspiration: "Gordon T. Long Research & Analytics". We do our best to summarize this information and deliver it in an easy to read format. This by its very nature doesn't allow us to include all the very detailed analysis that takes place in order to deliver us its conclusions. All information and conclusions delivered in TRIGGER$ articles are a product of the methodology outlined above.

8
Economic & Technical Analysis for the Active Trader

The All Seeing Eye

On Market & Economic Indicators

Consumer Sentiiment C o n u m e r S e n t e Smart Money // Dumb Money S a t Mo n y D u b M OEX Open IInterest (puts//calllls) O O p e n rest p u s c s)

TRIIN T R N

Market and Economic Indicators continue to tell the same story. While it's the job of the Main Stream Media (MSM) to keep you spending and investing, keep you hopeful and interested in the markets, we here at TRIGGER$ are only concerned with the reality of the situation both for ourselves as well as our readers. Unfortunately, as this and previous issues have shown, we continue to see many negative influences on the markets. While the MSM would like you to think we have been in a recovery since the 2008 fall, our perspective says we are still in a Bear market that started in 2000. We have given many reasons and examples why this is, to demonstrate yet another, consider the recent Trend of the chart below and when it started. (Negative as of Periods of recession and market instability are consistent with falling and low University of Michigan Consumer Sentiment numbers. The chart below shows the correlations. Present numbers and trend suggest we are due for more hurt.

Consumer Sentiment Consumer t en

We can see a large drop in 9091, 0001 and again in 0708. All three were associated with recessions and turned out to be big Sell signals for the market.

chart 1

9
Economic & Technical Analysis for the Active Trader

Consumer Sentiment cont.

Deteriorating Confidence De ri rati Con n

Consumer Confidence slumped in July to the worst level since March 2009, according to a widely followed survey produced by the University of Michigan and Thomson Reuters. Some of the decline in July may be have been related to the unresolved debt ceiling debate (at that time), as well as the second month of weak jobs growth, economist say. The chart below takes a stab at linking confidence and spending, with the red figure measuring the 12month change in personal consumption expenditure (adjusted for prices).

chart 2

10
Economic & Technical Analysis for the Active Trader

Smart Money / Dumb Money Confidence Sm a M n e D b n C de n e

chart 3

We continue to have a protracted period of Divergence with the Smart Money Index. This suggests the Smart Money does not believe the rally from 2009 is real. They have insufficient confidence in its underpinnings to put capital at risk. The best assessment is that the market is being driven by Federal Reserve buying, Momentum Traders and Trading Programs. This is a chart of an unhealthy and artificial market. This month it has become apparent to all as both the Smart Money and Emotional Traders withdraw from the markets.

11
Economic & Technical Analysis for the Active Trader

OEX Open Interest (Puts//Calls) OEX Op n Inte s

We can see a similar topping process unfolding as we did in 2007.

chart 4

Prior to 2007 we can see several instances where high levels of OEX Open Interest (puts/calls) only seems to have had a mild effect causing a pause in the trend but not fully reversing it. Many issues need to be taken in to account, and no one indicator will be the 'Holy Grail' of market direction. As this and prior issues of TRIGGER$ have shown, there are many factors being taken in to consideration and we believe at this time many are lining up to say that we are now having a 'topping process' of some magnitude and not just a pause in the trend. The TRIN to the right demonstrates one of the reasons we think that there is still more up to come. We are looking for a pullback in the short term with more lift following to continue our rounded topping pattern.

12
Economic & Technical Analysis for the Active Trader

Although a pullback is indicated here with more room for down to go in the TRIN (until it reaches the lower channel for support), the longer term movements show it to be part of a larger pattern a long term decay pattern suggesting the rally (from '09 '10) is not necessarily over.

TRIN T I

chart 5

The TRIN is a comparison of the volume being traded for advancing and declining stocks. It is one of three 'market internals' with the TICKS and TIKI being the other two. The TRIN shows where the volume is within the market. If there is more volume for the advancing stocks, the TRIN will be below 1, and if there is more volume for the declining stocks, the TRIN will be above 1. As the TRIN can be displayed as a bar/line chart, it can be interpreted like a price bar chart, using concepts such as support and resistance and trend lines. In our chart given above, you can see the scale of the TRIN has been reversed, where the scale gets lower as you go up (on the left hand side) and it (TRIN scale) increases as you go down (opposite of what normally is expected). This has been done so that the moves of the TRIN correlate directly with the moves of the NASDAQ. If the scale were flipped and shown as normally is done (lowest to highest) then the TRIN would have an inverse relationship to the chart. We have flipped the TRIN for easier association.

Feature Article: The Money System is a confidence Trick

13

The Money System is a Confidence Trick

By Arian Forrest Nevin, J.D.
http://nationaleconomy.net/themoneysystemisaconfidencetrick/

Economic & Technical Analysis for the Active Trader

Banks loan us money they create out of nothing. Not only is this a scam, but it is outlawed by the Constitution, although our government allows this criminal activity. This activity is at the heart of our unsound money system, which is the direct cause of our nation`s current economic collapse. To reverse our economic decline we must have a sound and constitutional money system. I thought that, as a scientific man, I ought to know something about economics. So I studied the money system for two years and could make nothing of it. Then, one day, the truth dawned on me. What I was studying was not a system, but a confidence trick. The conclusion that the money system is a confidence trick comes from the father of nuclear fission Nobel Prize winning chemist Frederick Soddy. A confidence trick is a scam, a racket, a rip off, a con. What makes the money system a confidence trick? Put most simply, money is created for private profit by banks rather than created for the common good by the government. Only the government of a nation should create money. The confidence trick that is the money system takes two forms. First, rather than simply print money, the government, when it wants more money than it has obtained through taxation, issues bonds. The Federal Reserve then creates new money that did not exist before and uses this money to purchase the bonds. Then the populace, through taxation, is forced to pay the interest on these bonds. This is how the National Debt was created. Rather than impoverishing the populace by forcing them to pay interest on bonds, the government could simply create money instead of having the Federal Reserve create money to purchase government issued bonds.

"The

truth of the monetary system has long been withheld from the American people."
Second, banks devised a subtle way to counterfeit money. Banks invented a separate and distinct form of money other than cash. Banks invented a kind of money which exists solely as entries in their computers. Over 99% of money exists in this form. Anytime a check, credit card, debit card, or money order is used, electronic bank money is being used. Whenever someone gets a loan from a bank the bank is in fact creating entirely new electronic money that did not exist before. Through this subtle form of counterfeiting banks have been able to take control of the money system. This confidence trick is played not only by US banks but by all banks the world over. The money system is the world`s longest running and most successful confidence trick. Not only is allowing banks to create money and charge us interest a confidence trick, but it is also illegal! The Constitution explicitly gives the power to create money to Congress and to Congress alone. It does not authorize Congress to allow private corporations to create money. Article I, Section 8, Part 5 of the Constitution of the United States gives Congress the power, To coin money, regulate the value thereof, and of foreign coin. The Constitution is the highest law in the United States of America. No law passed by Congress can override the Constitution. It is illegal for banks to create money, and it is illegal for Congress to allow banks to create money. The only way banks could legally create money would be if an amendment to the Constitution authorizing money creation by banks were passed. There is no such amendment. Sadly the Constitution is not a self enforcing document, and if the people do not

(cont. pg.16)

Economic & Technical Analysis for the Active Trader

Feature Article: The Money System is a confidence Trick

14

The Money System is a Confidence Trick (cont.)

worthless debt and stock by the government at high prices from the banks. Banks were able to force this bill through because of the enormous power they wield from controlling the money system. The Secretary of the Treasury, Henry Paulson, is a banker. He is the former CEO of Goldman Sachs, and he conducts government policy in accord with the interests of banks and not of the American people. The truth of the monetary system has long been withheld from the American people. We have been kept in the dark by the twin commandments put into effect through the influence and power of banks: we shall not have an honest money system, and we shall not examine the money system except under their direction. An honest, constitutional money system is the one thing banks will not stand for. The workings of the money system and the economy are always discussed in mysterious terms. People feel that it is something too complicated for them to understand. In fact, only falsehoods and false principles need to be discussed in mysterious terms. Any person of average intelligence can understand how the money system works. However, banks do everything in their power to keep people from understanding how the money system works, because if the majority of Americans ever did understand, then there would soon be a great call for the abolition of the unsound and dishonest monetary system and a call for its replacement with an honest and constitutional one. Never on television, radio, in newspaper, or in
(cont. pg.17)

"The socalled bailout was nothing other than a massive transfer of purchasing power from the people to the banks and the acquisition of worthless debt and stock by the government"

force the government to follow its dictates the government is free to ignore the law without consequence. President Garfield stated, He who controls the money supply of a nation controls the nation. Is it any wonder that against the will of the great majority of Americans the banks and Wall Street were able to get the bailout bill passed? The socalled bailout was nothing other than a massive transfer of purchasing power from the people to the banks and the acquisition of

(printed in 1912)

15

Feature Article: The Money System is a confidence Trick

Economic & Technical Analysis for the Active Trader

The Money System is a Confidence Trick (cont)

magazines is the truth of the money system discussed. The people are to be kept in the darkand ignorant. Only on the internet and in a few books is the truth of the monetary system discussed. Those who literally create money can certainly afford to direct the discourse regarding the money system in a direction favorable to their interests. Economists prophesize nothing but economic doom and gloom for us upon the horizon. This is true so long as we have a dishonest money system. As soon as it is replaced with an honest money system the way will be open to much greater prosperity than ever before. The worldwide economic crisis we face today is caused directly by the dishonest and unsound money system. There can be no liberty without economic freedom. There can be no economic freedom without an honest money system. The people must demand an honest money system. We must put such pressure on the government that they have no alternative but to execute the will of the people. Either we continue to pay billions and trillions yearly to be kept artificially poor or we demand honest US constitutional money. The choice is clear. Arian Forrest Nevin, J.D. END

Note the two cartoons with this article. They are pulled from publications printed in 1912. Seems like they understood then, why don't we now?

Agree / Disagree with this article or something else printed here in TRIGGER$? Send us your thoughts: triggers@gordontlong.com

16
Economic & Technical Analysis for the Active Trader

Need To Know Technical Analysis

S&P 500 Weekly Long Term Viiew S 50 We k y n m V ew S&P 500 Gann Anallysis S 50 G an A a ys S&P 500 Zoomed IIn Elllliiotte Wave S 50 Z o d n E tt W v e

The first week of August saw the S&P move from about 1,340 to 1,100 a 240 point drop which is about an 18% correction. This move broke through several longterm support areas and may not as of yet be finished. As the support areas were broken, short covering and other computer driven trading kicked in increasing the selling pressure even more. See our Feature Article "The First Week of August" (pg.29) for some historical perspective around this time of year. While the move did break through several support areas, changing the technical analysis perspective some, our overall rounded top formation is still very much in play. The following charts show where we are currently as well as the more probable moves to come.

S&P 500 Weeklly Long Ter m View 0 Week y ng Ter m V e

Here we look back as far as 1998 to see a potential Head & Shoulders pattern. Right Shoulder is demonstrating a rounded top formation. We would expect another touch of the red circle, indicating another lift prior to finishing the shoulder pattern. As we climbed up the inside left of the circle (ellipse), we would expect to come down along the inside of the right hand side of he circle.

chart 6

17
Economic & Technical Analysis for the Active Trader

S&P 500 Gann Analysiis S& P 500 a n n a s s

50% retrace level

lower red BOMAR

This is another perspective of the previous chart. While we do have a potential to lift from the present location (Gann Line and 36.8% retracement level), we are watching for another down move. Watching the lower red BOMAR line as well as the 50% retracement level as targets before next lift back up to Red Circle. We can see our current location as well as the target areas mentioned inside the small blue dashed circle on chart.

chart 7

At this point in time we are expecting a rounded top formation as given buy the red circle in the above chart. You can see how we followed it up the inside of the left hand side. We would expect another lift at some point to touch upper right inside of the circle and then move along the inside right of the circle and follow it down. The chart on the next page shows where we are looking to (at this time) for the bounce to the other side of the circle to appear. Should the circle fail to contain the next lift (lower probability at this time) we could expect another smaller wave up, similar to the first two waves we experienced inside the circle, with targets to the faint blue circle as well as potentially highs reached by the Head in 2007.

18
Economic & Technical Analysis for the Active Trader

S&P 500 - Zoomed In 50 o In Ellliotte Wave Counts - Lower Targets t e C ou n s r a gets

Right Shoulder

As of the time of this chart, 4 is not yet in little more to go

Here we zoom in to show the sell off from the 1st week in August. Our count says we potentially have more down yet to go. The 50% retrace & lower red BOMAR from the previous chart lines up with a 4.25 extension around the 10,000 level.
Target area around 10,000 before lift back up to touch the red circle (previous chart)

chart 8

We are expecting more from Wave 4 yet. Wave C of 4 is currently at a 1:1 with wave A. Watching for an extension of at least 1:1.382, or 1:1.50, most likely coinciding with a touch of the upper Red BOMAR before starting down in to wave 5. Wave 5 is expected to move down towards the 10,000 area, where we are then expecting another lift up to the inside of the red circle (previous chart, Gann analysis).

19
Economic & Technical Analysis for the Active Trader

Currenciies & Metalls Currenc es & Meta s

T he Vaullt eV ut
Golld Go d

G o l d G d S i l v e r S r U..S. Dollar IIndex U S ar d e

chart 9

Steady Trend Break Out through Top Channel Not a lot technically that we can do with this it is as it appears strong upward trend in Gold. However, rather than being a reflection on what gold is doing, we see this as a result of the weakening dollar. While Gold is due for a correction at any time, increasing economic troubles, debt and the continual debasing of the money supply can see more upward influence for gold in the longer term.

20
Economic & Technical Analysis for the Active Trader

Siillver S ver

chart 10

Silver too is do for a correction, which may have already begun since the spike in April. Watching for a break of the longterm support channels to confirm this or not. Note 50ma and 200ma are narrowing.

21
Economic & Technical Analysis for the Active Trader

U..S.. Dolllar Index U S D ar In e

chart 11

The US dollar has decisively broken through support levels. The dollar however is still above its long term neckline within a major Long Term Head and Shoulders topping formation pattern. When the neckline is broken we can expect the US dollar to plummet to below 40. However, in the Near Term we see moderate strengthening and I would expect to see near term support and a temporary rally to occur in the US dollar. A dollar rally will likely push down precious metals in a corrective / consolidation. The S&P 500 will also likely fall.

Economic & Technical Analysis for the Active Trader

Feature Article: Market Death Crosses

22

Market Death Crosses Ma ke D h s

When the 50 Daily Moving Average (DMA) crosses the 200 DMA it is confirmation of a trend reversal When the 50 DMA Crosses through and below the 200DMA it is a fairly reliable confirmation that an intermediate term downward trend has been established and is in place. This is known as a DEATH CROSS.

In last months issue we took a brief look at the SPY and a potential 50 DMA crossing under a 100 DMA "death cross". This month we look to more markets and a even more damning 50 DMA crossing under the 200 DMA "Death Cross". Finding the odd Death Cross, while not good for that particular market, does not necessarily mean that the overall markets in general are in trouble. However, the more markets that you do find with death crosses, the more indications and warnings you have that the worm is turning. In Asia, the Hong Kong Seng started showing signs at the end of 2010, beginning of 2011 that the trend was shifting. Death Cross occurs near the end of June 2011.

chart 12 (cont.pg.25)

Feature Article: Market Death Crosses

23

Economic & Technical Analysis for the Active Trader

U.S. Treasuries
Started falling off in February of 2011 End of June 2011 marks the Death Cross

chart 13

Bank Index
Banking Stocks began their weakness in early 2011. Middle of June 2011 sees the Death Cross.

chart 14

Economic & Technical Analysis for the Active Trader

Feature Article: Market Death Crosses

24

Japan
Japan has an obvious drop off in March of 2011 Two months later in May, we find the Death cross

chart 15

Brazil Commodities
Major commodities countries begin to weaken here we see April 2011 starts the weakness with the death cross occurring in the middle of June

chart 16

We have shown five different, major markets and their Death Crosses. Others that can be seen but not shown include the XFL (Financial Sector), SOX (Semiconductor Index), SSEC (Shanghai Exchange Index), $USD (U.S. Dollar)... and there are many more to be found if you go looking. These suggest that the Overall Market, as of this year, changed trend and we are now experiencing a confirmed Bear. The Death Crosses confirm a trend change, the number of significant markets they are found in suggests the Markets at Large are now headed lower. Gordon T. Long / GoldenPhi END

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Economic & Technical Analysis for the Active Trader

Assessment Assessment

RISK I

$VIIX Warniings Warn n s $VXO Warniings X arn n s

In Past Issues of TRIGGER$ we have been watching and warning of a pending, volatile move expected. This was ascertained by many factors, one of the main being the $VIX. On the larger time frame we were able to recognize the tightening/coiling of the market as it made shorter moves with smaller angles. On the shorter time frame we were already seeing expanding waves suggesting the coiling was over and overall expansion was soon to start. Combined these suggested an increase in volatility to come. $VIX Weekly We can see the long term wedge that has formed starting back in 2009. Inside the wedge, moves were getting shorter and steeper. Only a matter of time before we broke out.

$VIX Warnings W g

chart 17

$VIX Daily At the same time we observed the long term coiling of the market, we also started to see the opposite happening on the daily the moves were/are starting to expand. The expanding wedge shown on the daily chart to the right foreshadowed a pending breakout, or an increase in volatility.

chart 18

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Economic & Technical Analysis for the Active Trader

$VXO Warnings V

increasing volatility just starting

The Long Term Weekly $VXO shows similar patterns as the $VIX. Breakout of wedge occurring.

chart 19

$VXO Daily Exactly like the $VIX. Increasing wedge on daily leads to breakout on the weekly and foreshadows a spike in volatility. While volatility may calm down in the immediate short term, we expect a continued increase / rise in volatility overall. The wedge has just broken out from a low volatility position, continued rise is to be expected.
chart 20

Feature Article: The First Week of August

27

Economic & Technical Analysis for the Active Trader

The First Week of August

The following quoted paragraphs are taken directly from a traders book. Given the first week of August the markets have had this year, we thought these quotes appropriate and thought provoking. The book in question is: "Breakthroughs in Technical Analysis, New Thinking from the World's Top Minds". The quoted paragraphs are taken from Chapter 6 "Unlocking Gann" by David E. Bowden. "The first week of August has often been a critical day in world history and so it has been a significant week for the stock market. On July 31st, 1914, the London and New York stock exchanges closed to avoid panic trading. That was almost the case again 2004, when an immediate security clampdown occurred in New York and Washington on August 2, 2004. The buildings affected were the New York Stock Exchange and Citigroup Center in New York as well as the World Bank and the International Monetary Fund in Washington. Britian declared war on Germany on Tuesday August 4, 1914. The United States dropped the first atomic bomb on Japan on August 6, 1945. (It had been schedualed to be dropped on August 3.) On August 1, 1941, President Roosevelt stopped the export of oil and aviation fuel from the United States to Japan. Japan had the choice of either changing its foreign policy or gaining access to the East Indies oil by force, On August 2 and 5, 1964, two U.S. destroyers were attacked in the Gulf of Tonkin, and in turn sank two North Vietnamese patrol boats leading the United States into the Vietnam War. To fully illustrate the scope of the pattern, I would need to trace early August events through the whole century and give you the time frames, but I think I've made my point. Here is the main thrust: Britian entered World War I on August 3, 1914. The United States originally planned to drop the first atomic bomb on August 3, 1945. Fortyfive years later, Iraq invaded Kuwait on August 3, 1990. I had already recognized the pattern by the time it repeated itself in 1990. When I saw the same cycle repeating in 2002, I could make the call for 2004 just as if it were reading it from a book. I knew what effect the war would have on the price of oil, because I had seen it all happen on the same day and in the same way in 1990. I hope I've made it clear that cycles do repeate and that the second time around, they give you an edge in the market. I believe there are times when forcasting the future is just as realistic as the reading the past, because the future is just a repetition of what has previsouly occurred. Hindsight becomes foresight if you use it often enough." David Bowden is referencing time cycles that appear to have occurred in the 1st week of August and then repeated again some years later, multiple times. The example is given to show numerous historical samplings of other bad 'first week of Augusts that have occurred. The examples cited above go back as far 1914. However we need only to look at some more recent years to see that, for whatever reason, the first week of August has had a dismal track record. On the following pages (pg.30 & 31) we have marked up some charts to show how the last few years have faired. Note the blue circles on the weekly charts, they are pointing out to us the 1st week in August.
(cont.pg.30)

Economic & Technical Analysis for the Active Trader

Feature Article: The First Week of August

28

The First Week of August (cont.)

S&P 500, 2003 2005

2003, 2004 & 2005 all have a negative 1st week of August S&P 500, 2006 2008

chart 21

'06 & '08 have a spike down & up, closing near even '07 a definite negative 1st week of August In our first chart up top, we can see the 1st weeks of August for 2003, 2004 and 2005. Even though the overall trend is Up for these years, the 1st week of August for each of them is decisively down. In the next chart we see the years from 2006 2008. '06 & '08 do not show the same overall negative 1st week as the previous chart, or as '07 on this chart does. However, you will note that the candlestick for each of these weeks, although they ended up Green (or positive) overall for the week, both exhibit a spike down during the 1st week of August.

chart 22

(cont.pg.31)

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Feature Article: The First Week of August

Economic & Technical Analysis for the Active Trader

The First Week of August (cont)

S&P 500, 2009 2011

'09 & '10 are first 1st weeks of August not to have a down in years, and of course this year we saw a drastic drop in the 1st week of August.

chart 23

Our last chart shows us the current and last two years. In 2009 we have the first real positive 1st week of August we have seen in years (no spike down). August of 2010 1st week is slightly positive, with the 2nd week getting the hit. Finally we can see just how drastic and volatile the 1st week of August has been for us compared to other moves in previous years. While this isn't enough information to justify a short every time August rolls around, it is something to keep in mind. We don't really know the reason(s) why this seems to occur and I'm sure you can find a variety of opinions on the subject. At the start of this article we quoted David Bowden who believes it has something to do with Cycles.... and who are we to argue? Given the number of times it seems to occur, we suggest that this is another demonstration of the markets not being completely random. We will leave it up to the reader to explore this more if they wish. There are many threories that try and explain it. Our objective was to take a look and see if there was any more past examples of a bad 1st week in August, how often did it / does it occur, and make our readers aware of the history. Goldenphi END

Do you believe the markets are a 'random walk'? Tell us why or why not. triggers@gordontlong.com

Disclaimer
Economic & Technical Analysis for the Active Trader

30

Discllaiimer sc a mer
TRIGGER$ publications are for Educational and Entertainment purposes only. This is not an advisory or recommendation to trade, invest or otherwise participate in the financial markets. The Editors, Main Contributors and Publishers of TRIGGER$ are not registered advisors nor do they give investment advice. The comments and analysis given are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While we believe our statements to be true, they always depend on the reliability of credible sources. Of course, TRIGGER$ recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that you are encouraged to confirm the facts on your own before making important investment commitments. OUR GOAL is to be one of many sources of information, part of your due diligence as you navigate the world markets. We endeavor to offer unique perspectives and insights to be considered that hopefully expand the world around you and add value to your experiences. We believe that information and knowledge, combined with varying perspectives, are the most powerful tools we can ever posses. TRIGGER$ aims at assisting in the forging of these tools. The reader acknowledges that any use of the tools obtained from this publication are done so of their own volition and risk. 2011 TRIGGER$ Media Publications. The information herein was obtained from sources which TRIGGER$ believe is reliable, but we do not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that TRIGGER$ contributors may already have invested or may from time to time invest in securities that are recommended or otherwise covered in this publication. TRIGGER$ does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security any of the contributors may or may not be part of. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or suggestions you receive from this or any other information source.

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Economic & Technical Analysis for the Active Trader

Traders Mentor ade r M e n to

Technicall Anallysiis & Techn a na ys s & Tradiing Strategy Education Trad n trateg Ed ca

Tradiing The Standard Deviations Tr ng he n v at n s

Given the thousands of indicators and various analysis tools at our disposal, there is literally no limit to the combinations that could be employed to develop a trading strategy. The only barrier would be your own imagination and ingenuity. This being the case, it then becomes very important that you (a) do have a strategy to begin with, and (b) the strategy is as simple to follow and execute as possible. With this in mind, we will take a look at Deviations or Bollinger Bands for use in a trading strategy. They are very simple to use and offer up a lot of information at a glance. Because of their simplicity, they would also make an ideal candidate for use in the development of an automated trading strategy. Bollinger Bands themselves are comprised of a moving average and an upper and lower band that measure volatility. The bands are set to a standard deviation and expand and contract as volatility increases and decreases. The analysis was developed by John Bollinger and we recommend further study and reading on your own as there are multiple applications that can be used. We are going to look at just a couple of the simpler strategies. "Simple" does not in any way imply a lack of analysis , as you will see they are powerful tools, but rather describes the ease of use. It is the ease of use, 'readability' and 'tradability' that has us looking at them within the KISS parameters (Keep It Simple Stupid). Here we have BB set on a 55ma with a std. dev. of 1.8. A common strategy is to try and trade between the BB, as indicated by the red dots. This strategy works best in a consolidating or sideways market. An issue can be the triggers for entry and exit. They are not always clear and require more than the just the BB to determine.

Trading T he Standard Deviiations Tra T n d e at

chart 24

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Economic & Technical Analysis for the Active Trader

The chart below is demonstrating another use for the BB. This is the same chart of the NASDAQ as the previous one, slightly larger, with the BB settings at 55ma and a std. dev. of 0.8. The idea here is to trade when the price exceeds the standard deviation of 0.8. The goal is to try and capture the movement of a trend, entering when price goes outside of the BB envelopes, exiting as price comes back inside the 0.8 deviation.

chart 25

This seems to capture trends well, as you are trading in to a movement as it is expanding through the 0.8 deviation. As the chart above shows, it is common for the trend to be more than 0.8 std. dev. from this ma (moving average). While most effective in a trending market, losses appear to be minimal when not trending. Another positive to this strategy is only having to rely on the BB no other indicators for entry and exit are needed. Simple. (Although we wouldn't recommend using just the BB, it helps with KISS). Another technique is given in the chart to the right. BB are measuring Volatility. They will expand and contract based on this. When they contract it is indicating lower volatility. Waiting for these periods and then trading out of them as the BB expands again, in to increasing volatility, is another viable methodology.
chart 26

33
Economic & Technical Analysis for the Active Trader

As shown below, BB's can aid in the determination of W bottoms and M tops. Both the moving average and the BBs offer potential perspectives for entry and exit triggers.

top

Breakout & Pattern Confirmation

bottom

The 'W' bottom shown has two possible triggers for trade. The first being the move above the middle of the 'W' on the right hand leg of the pattern (W). This continues to extend and breaks above the BB, offering more confirmation of the pattern and a second potential trigger. The 'M' top has the both of these triggers occurring together. Finally, one last application for you to consider for the use of Bollinger Bands. The chart to the right has three BB sets in place. Each of them are based on the 200 moving average but have different standard deviation settings. Grey is 2 std.dev., Blue is 3 std.dev., and Red is 4 std.dev. Here we are looking for periods of extreme movements to capitalize on.

chart 27

Hopefully we have demonstrated some useful Band applications for you to think about. Their ease of use and readability make them a favorite amongst traders. There are more techniques that are applicable we'll let you do some exploration on your own. These should get you started. Goldenphi END

chart 28

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Economic & Technical Analysis for the Active Trader

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Always looking for feedback. Agree or disagree with anything we have printed here? Something you would like to see covered?, analyzed? What would make this better for you as a trader? Let us know.

Contact TRIGGER$ : triggers@GordonTLong.com

TRIGGER$ would like to acknowledge and thank the following for their contributions: www.calculatedriskblog.com chart 1 University of Michigan Commerce Department chart 2 HaysAdvisory.com chart 3, 4, 5, 19 StockCharts.com chart 9, 10, 12, 13, 14, 15, 16, 17, 18, 20 FreeStockCharts.com chart 21, 22, 23, 24, 25, 26, 27, 28

Economic & Technical Analysis for the Active Trader

www.GordonTLong.com

Gordon T. Long has been publically offering his financial and economic writing since 2010, following a career internationally in technology, senior management & investment finance. He brings a unique perspective to macroeconomic analysis because of his broad background, which is not typically found or available to the public. Mr. Long was a senior group executive with IBM and Motorola for over 20 years. Earlier in his career he was involved in Sales, Marketing & Service of computing and network communications solutions across an extensive array of industries. He subsequently held senior positions, which included: VP & General Manager, Four Phase (Canada) Vice President Operations, Motorola (MISL Canada) Vice President Engineering & Officer, Motorola (Codex USA). After a career with Fortune 500 corporations, he became a senior officer of Cambex, a highly successful high tech startup and public company (Nasdaq: CBEX), where he spearheaded global expansion as Executive VP & General Manager. In 1995, he founded the LCM Groupe in Paris, France to specialize in the rapidly emerging Internet Venture Capital and Private Equity industry. A focus in the technology research field of Chaos Theory and Mandelbrot Generators lead in the early 2000's to the development of advanced Technical Analysis and Market Analytics platforms. The LCM Groupe is a recognized source for the most advanced technical analysis techniques employed in market trading pattern recognition. Mr. Long presently resides in Boston, Massachusetts, continuing the expansion of the LCM Groupe's International Private Equity opportunities in addition to their core financial market trading platforms expertise. GordonTLong.com is a wholly owned operating unit of the LCM Groupe.

Gordon T. Long is a graduate Engineer, University of Waterloo (Canada) in ThermodynamicsFluid Mechanics (Aerodynamics). On graduation from an intensive 5 year specialized Cooperative Engineering program he pursued graduate business studies at the prestigious Ivy Business School, University of Western Ontario (Canada) on a Northern & Central Gas Corporation Scholarship. He was subsequently selected to attend advanced one year training with the IBM Corporation in New York prior to starting his career with IBM.