Today’s guest is Gary Wagner of The Forex Gold Forecast who shared shared part one of his unique triple-play of forex gold analysis in a blog post titled, “A New Technical Triad and Gold”. In part 2 of his strategy, Gary explores what is now happening in the gold market and what we might expect before fall.

We hope you enjoys today’s post and leave your comments for Gary below.

Where Might Gold Head This Summer

Trading the gold market might look easy when you consider that it has gone up $282 dollars in one year. However anyone involved in gold trading whether it be through Comex, Forex or Eft’s will tell you different.  This is part 2 of a blog which began on May 13, 2010 (you can find that post here).  In part one we spoke about the relevance of using Elliot wave, Fibonacci retracement and candlestick patterns as 3 tools well suited for market analysis and forecasting gold prices. This part two will continue where we left off. On May 13th we were nearing the top of wave 3 in Forex gold. Since that time we have completed that wave, seeing gold trade to a new historical high of first 1248, then after a correction (wave 4) to a new all time high in wave 5 of 1265.

Part two will explore the possibility that we have now entered the corrective phase in this bullish gold run.  Fundamentally bullish on gold, I believe that gold over the next 6 to 8 months will take out the new historical high of 1265, and possibly test 1300 dollars. But before we get there, it is quite plausible that will enter a corrective phase. As outlined in Elliot wave theory this correction would consist of 3 waves: A, B & C. Waves A and C being the corrective (bearish) waves and the B wave being a predominately bullish wave.

Figure 1 is a daily chart of Forex gold. Starting on the far left you can see the first correction after gold hit a historical high of 1221 in December of 2009. According to Elliot wave theory, a market trend follows a cycle. That cycle is made up of eight waves. This eight wave sequence will repeat until the trend is exhausted. This trend structure is composed of eight waves, divided into 2 phases; the motive phase and the corrective phase. The corrective phase is composed of three waves (A, B and C), they will move opposite the primary trend. Waves A and C will be corrective waves, while the B wave will move in the direction of the primary trend. Here we see the corrective phase, wave C, which took gold to a low of 1045 in February 2010.

Now that the full eight waves were complete, we once again began our motive phase and another bull run in gold. This phase is composed of 5 waves (waves 1 through 5). Waves 1, 3 and 5 will move in the prominent direction of the trend. These 3 waves are called the motive waves. They will be separated by two retracement or corrective waves (waves 2 and 4), where the price action will move against the current trend.  From February 2010, until the end of June 2010 we would witness an extraordinary bull move in gold, taking it to a new historical high of 1265.  This high would prove to be the top in gold as from there it traded lower, falling under 1200 intraday to a low of 1197.00. This in my opinion began a corrective phase and the start of corrective wave A.

Figure 2 looks at the Elliot wave count starting from wave 3. Using wave 1 as a benchmark and applying the rules of Elliot wave length forecasting, it proved to be very accurate in predicating the tops of both wave 3 and wave 5. In chart 4 from part one of this blog you will see that we were looking for a top to wave 3 at 1246. At the time of that blog Forex gold was trading much below that point. Elliot Wave was able to correctly come within a few dollars of the actual top of 1248.00. By applying these rules to the fifth wave, it proved to be just as accurate as in wave 3. From guidelines set forth by Elliot Wave International, wave 5 can be about equal to wave 1. So adding $100 to the low or start of wave five (1164) gave us a target of 1265.

Figure 3 takes us to our current market time line in Forex gold. If and it’s a big if, we have entered a corrective phase where might we see Forex gold trade over the next few months?  Typically a corrective phase could last two or three months. Think of the last corrective phase which lasted from December 2009 to the beginning of February 2010. With that in mind if history repeats itself, this corrective phase might take us to September or October of this year.

Although the corrective phase can be realized with six different types of corrective patterns, two of them are the more common occurrences, so that we will look at the possibility of either a standard zig-zag, or a flat correction. For this to be a true correction wave B, cannot trade with a higher high than the fifth wave (1265). In fact if we have truly entered a corrective phase wave B should be about 50 to 75 percent of the move seen in corrective wave A.

Figure 4 is a daily chart of Forex gold glimpsing at what a flat correction might look like. In a flat correction the low of both the A and C wave are about equal. It forms what looks like the letter “W”. To calculate the possible targets for Waves A, B & C, we use Fibonacci retracement theory. One can look to use standard trend analysis; however I have found Fibonacci retracement theory, to match very well with standard trend lines, and much easier to plot. To Create a Fibonacci number set for the corrective phase I used the high and low of wave five, and thereby created the following target points. 1187 equals a 78% retracement:

- 1203 equals a 61% retracement

- 1214 equals a 50% retracement

- 1226 equals a 38% retracement

- 1241 equals a 23% retracement

If 1203, the 61 % retracement of wave 5 turns out to be the bottom of the first corrective “A” wave, then in a flat correction the “B: wave could go to either 1226 or as high 1241, before we see the final “C” corrective wave.  We will look for candlestick patterns at the Fibonacci retracement levels for confirmation of a top and bottom of that wave.

We have an incomplete piercing line pattern our daily Forex gold chart. The last two trading days on this chart form that pattern. The piercing line pattern in Forex will open at the prior candles close and close at or above the midpoint.  In this example the close does not reach or exceed the midpoint of the previous black candle. I have found in my research that if we get a confirming candle, which would be a red candle with both a higher high and higher low, then this pattern can prove to be a reliable signal.  Although quiet from the holidays, it has attempted to form a base at 1203. If so we might be witnessing the beginning of wave B, the impulse wave within the corrective phase. If it cannot find support at 1200, then the next support level would be 1187.

If this corrective wave “A” continues to trade lower the next logical point to see it find support would be 1187.00 or a 78 % retracement of the fifth wave as seen in figure 4B. We will see over this week if the 1203 (61% retracement of wave 5) proves as I believe to become a support level and the low of Wave A.

Figure 5 is a daily chart of Forex gold projecting what a zig-zag correction might look like if we have entered a standard corrective phase.  In such a scenario, and if 1203 proves to be the support level for corrective wave “A”, then figure 5 shows how gold might trade. For this type of corrective phase to occur, the low of wave C would have to be below the low of wave A. Figure 5 shows such an example.

According to Elliot Wave theory the following describes the psychology during a zig-zag corrective phase (this from the Left Anchor website)

Wave A: In a manner analogous to the wave 1, the wave is the most difficult to identify this phase. During the development of the wave A is still the most economic news will be positive and most of investors, traders, and analysts see no more than a correction within a bull market valid and active. A sign of this wave, again similar to the wave 1, is the increase in volume.

Wave B: Clearly corrective in which many take the opportunity to resume the uptrend but in reality this is no longer valid because we are now clearly at the stage of corrective trend. There may still be positive news but I begin to hear negative fundamental data. The volume during the development of this wave is far less than it had during the wave A.

Wave C: The main feature of this wave is the fall in price with marked increase in the volume, and fundamental economic news commensurate with the market’s negative sentiment. The C-wave amplitude reaches the 161.8% Fibonacci extension of the wave A or lower.

Are we in a simple market correction or the start of a corrective phase, no one knows the future for certain. We will only know after time has passed and we look back over the next few months. One thing we can say is that using Elliot wave, Fibonacci retracement and candlestick patterns has provided much insight and relevant market information. Properly used it can guide the trader/technician with reliable information

I have an underlying market bias, as I am extremely fundamentally bullish on gold long term. I think that over time it will continue to increase in value. I think that before we see a new record high we will enter a corrective phase. We need to pay close attention to our market indicators and plan accordingly. Where gold trades, is something we can all speculate about. However I am certain of two things: First, gold will offer us an opportunity, an opportunity for great successes, if we know how to correctly analyze it.  Secondly, the gold market will also offer us moments of uncertainty. It is my hope that the technique contained in this blog will allow you to experience more successes in your trades and less uncertainty in your market analysis.

Best,

Gary S. Wagner

The Forex Gold Forecast

Gary S. Wagner a technical market analyst for twenty five years is the executive producer a daily video newsletter “The Forex Gold Forecast tm” for wfgforex.com. He is the Co-author of “Trading Applications of Japanese Candlestick Charting”.  A frequent writer for Technical Analysis of Stocks & Commodities magazine, he also Co-developed software applications for market forecasting. He produces.  Gary can be reached at gary@wfgforex.com

REFERENCES

* Gary S Wagner & Bradley Matheny – Trading Applications of Japanese Candlestick   Charting (Wiley, USA)
* R.N. Elliott, R.N. Elliott’s Masterworks New Classics Library, 1994
* Alfred John Frost, Robert Rougelot Prechter, “Elliott wave principle: key to market behavior”, New Classics Library, 20th edition 1998
* Gregory Morris – Candlestick Charting Explained: Timeless Techniques for Trading Stocks and Futures (McGraw Hill)

**Content is contributed independently by INO.com. marketHEIST.com is not responsible for any comments or opinions stated in this post.**

Steve Zelin from Zantrio has provided some great guidelines for trading penny stocks and finding the right broker for you without putting your investment at risk. The goal at Zantrio Trading is to bring the world wide group of financially oriented individuals together, to share their valuable financial ideologies. We hope you will enjoy his article and comment below.

With the massive undertaking of the cleanup for the BP Gulf Oil Spill heating up, investors are looking intensely, although with extreme caution, into penny stocks that provide specialized services to clean up chemicals, such as oil. Savvy investors as well as small, even first time investors seem to be willing to fork over a small amount of disposable cash, to take a chance at that potential, big shot with these penny stocks. With so many websites on the Internet that provide penny stock tips, investors should give serious consideration before utilizing these frequently ruthless, pump and dump schemes however, we are not implying that all of these sites provide bogus or misleading information. Before taking any recommendation from these penny stock tip websites, investors should investigate as to whether the website is being reimbursed for promoting any particular penny stock. Frequently, potential investors will find that these websites are in fact being compensated for promoting a particular penny stock thus; investors should do their own extensive research prior to risking any amount of money on even the most appealing, penny stock tip.

The overall financial and managerial strength of all penny stock companies will vary of course, due diligence is in order. Financials are extremely relevant when considering which penny stock to invest in. Few investors would be willing to risk even a minimal amount of disposable cash in a company that refuses to provide or is unable to provide disclosure to the public markets. Some companies are basically a store front for investors who buy up shares to merely, build the bank account of the management. Seriously, if you have a company with weak financials and the management is serious about trying to build the company, you would think that the focus would be on putting any revenues back into the company instead of management’s bank accounts. Look closely for previous bankruptcy filings reported as these firms should be given extreme consideration prior to making any type of investment in them. Prior bankruptcies tend to increase risk in the investment.

Depending upon your investing strategy, you may want to take into consideration the maximum price a penny stock has ever traded at. Many penny stock investors will make the investment after doing their research and determine their selling price based on historical performance. Investors would not want to make an investment in a penny stock and intend to sell at maybe a dollar when the stock has never traded at that price.

Prior to investing in any penny stock, investors should look deep into the company’s website for information about the company, if one is available. Additionally, do a Google search in an effort to locate additional information from any third parties who have done or do business with the company. Review current and previous news releases from the company. Take the time to compare chart action from dates of news releases. Comparing news versus charting action can give you an overall view of potential interest by investors upon the release of news. Overall, investors need to be prepared to spend a great deal of time performing research. If you do not have the time or do not want to take the time to do your own research, maybe investing in penny stocks is not something you should be doing.

It’s been found that many penny stock companies have subsidiaries’ that they base their success upon and not the actual company. We found this to be somewhat acceptable since, if such subsidiaries were to be bought out for example, the potential is there for sale proceeds to follow through into the penny stock company itself. One thing we recommend avoiding is message boards for penny stocks. Frequently, participants in penny stock message boards are merely trying to pump a stock, because more often than not, information posted is useless.

Investors in penny stocks need to price shop and compare services provided by online brokers who deal in penny stocks. Most investors investing in penny stocks look to trade hundreds of thousands or millions of shares and outrageous transaction fees can be avoided by shopping around for brokers who handle penny stock transactions. While the old phrase of ‘you get what you pay for’ stands true, investors should do extensive research on these brokerage firms as some charge higher transaction rates, than others. It’s actually a good idea for investors to pick up the phone and call a potential broker, to get a verbal response from their customer support department and get a feel for how the company handles potential customers.

So just remember:

•    Beware of pump and dump schemes and message boards

•    Look closely at a firm’s previous bankruptcy filings; it increases investment risk

•    Consider the maximum price a penny stock has ever traded at

•    Price shop and compare services provided by online brokers

Finally, don’t forget to research, research, and research!

Hoping you turn your pennies into dollars,

Steve Zelin, Zantrio.com

About the author:

Zantrio Trading maintains their focus on the popularity and expansion of online trading. A revolutionary website style that provides individuals involved in the global financial markets, one location for all their financially associated needs, at no charge. The goal at Zantrio Trading is to bring the world wide group of financially oriented individuals together, to share their valuable financial ideologies. We provide a premium selection of Free Stock Picks on a daily basis for traders who wish to swing trade, profitably. Up to date and breaking financial news is made available and easily accessible on the website to all visitors, on the World Wide Web. The ground breaking technology utilized by Zantrio Trading will allow all savvy financial individuals the opportunity to seize potentially profitable opportunities, when they happen.

**Content is contributed independently by INO.com. marketHEIST.com is not responsible for any comments or opinions stated in this post.**

The last time Mark Young posted on the Trader’s Blog, he shared his views on a contrarian way of looking at the popular MACD indicator. Today, however, he is writing about something many of us have probably never heard of, “sentiment trading”.

Mark has been an active investor in equity and options markets since 1983, and has been publishing his unique research and trading services since 1992. We hope you enjoy a look at this unique strategy he has developed and leave a comment for him here on the blog. We also encourage you to visit his site, WallStreetSentiment.com.

For much of the past 25 years until recently, with some notable exceptions, “Buy and Hold” has been a challenging benchmark to exceed. While many active investors have “beaten the benchmark”  during that period, many investors were or would have been better served by simply taking a passive approach and allowing the market to provide them with historically impressive returns.

I hold, however, that those days are gone, and gone for the foreseeable future. The demographic factors that helped to drive the outsized gains of the 80′s, 90′s, and 00′s are now working against even garnering mediocre long-term gains. To make matters worse, it is looking like the tax policies of the future are likely to become much less favorable to investing, capital formation, and economic growth.

If you agree that we are facing a very challenging investment climate in the years ahead, then you will agree that we need a very robust investment tool-set if we hope to prosper and thrive in the current environment. This is where Sentiment comes in. Over the past several decades, the use of sentiment trading has become more widespread and more sophisticated. I found it to be so useful that I have made it my specialty.

So, in order to survive in a market that has no powerful up-trend, one needs to be able to spot tops and bottoms as quickly as possible, otherwise the moves could be virtually over prior to actual confirmation of a trend change. Sentiment is a big help for this, but there’s a lot of different types of sentiment measure out there. What measures are most useful and how are they used?

Let me say right off the bat that there are a lot of different ways to measure market sentiment and a lot of different approaches to using such. We can’t cover all of them here. I will, however, give you some of my favorites and my general approach, as well as some specific examples and tips.

In my work, I like to look at several different “sentiment sectors”. Not every pool of money looks at the market the same way, but for some reason when any of the three largest “sentiment sectors” get leaning heavily one way, it’s time to look for a possible move in the opposite direction. It is important to note that it is not at all uncommon to have many sentiment indicators in neutral territory while only one sector is calling for a turn. One can be enough to trigger a turn.

Let’s look at the April highs. AAII was showing very benign readings with nearly equal Bulls and Bears. On the other hand, the indicators measuring smaller advisors’ sentiment were heavily Bulled up.

Obviously, this was pretty useful, but it was important to note that some of these measures were pretty Bulled up for quite some time. If these measures are all you are using, you will need to have some form of trend confirmation of a turn unless you can tolerate significant draw downs while you wait. But, there are other sentiment tricks that one might use to fine-tune an entry.

We have found that big, fast jumps in Bullishness or Bearishness often trigger moves in relatively short order. A perusal of our research shows that on 4/23/10, ISEE showed a big jump in Bullishness, which reliably predicted a decline within two days. By Monday night, Hulbert reported a big Bullish shift in the advisors that he tracks and the Tickersense Blogger poll also showed a big Bullish shift. It doesn’t get much better than that. When sentiment shifts hard and fast to the Bullish side of the ledger, it’s usually an emotional call and it’s usually the wrong one, short term. Of course, with the benefit of hindsight, we can see that this would have provided a virtually perfect early entry and just a few days later trend measures would have confirmed a change in trend to the down side.

We pore over these measures every day and look for even more, and we’re constantly looking for new tricks in their use, but adding even a few of these tools to your repertoire can dramatically improve your entries and exits. In a tough market, that can be the difference between survival and thriving.

Best,
Mark Young
WallStreetSentiment.com

Mark Young is the publisher of the Wall Street Sentiment Daily and Weekly newsletters. He is also the founder of Traders-Talk.com, an on-line community and resource for traders and investors. You can find out more about his research at www.WallStreetSentiment.com

**Content is contributed independently by INO.com. marketHEIST.com is not responsible for any comments or opinions stated in this post.**

Unless you’ve been hiding in a cave somewhere, you know about the largest oil spill in U.S. history which was triggered when the Deepwater Horizon drilling rig suffered massive failure and subsequently sank, causing oil to begin gushing into the Gulf of Mexico.

Many of us also remember the Exxon-Valdez spill of 1989 which, until recently, was considered the worst in U.S. controlled waters and an environmental disaster. In the years since this tragedy in the remote waters off the Alaskan coast, Exxon has made a full recovery, including a 1999 merger with Mobil which made ExxonMobil one of the largest publicly traded companies in the last few years.

There are many differences between the Exxon spill and the recent BP spill, namely the proximity to the continental United States and its thriving coast along the Gulf of Mexico, so the question we pose to our Trader’s Blog readers is, is it a great time to invest in BP stock and hold out for its recovery, or is a short position the only one to consider when talking about this market?

**Content is contributed independently by INO.com. marketHEIST.com is not responsible for any comments or opinions stated in this post.**

Unfortunately the President seemed to miss the point – capping BP‘s huge gusher off the Gulf. Coincidentally, I read today that BP now stands for BIG PROBLEM and not British Petroleum.

Surfing around the web today I read comments like, “if we could put a man on the moon 40 years ago and 238,857 miles away, how is it that we can’t cap a well that’s 40 miles off the US coastline in deep water?” I, myself, am asking the same question.

I believe that the President missed the boat on this one. He has not focused the entire might of the United States on getting this problem fixed. As they say, he was a day late, and in this case, billions of dollars short.

Note: There is a poll embedded within this post, please visit the site to participate in this post’s poll.

It seemed outrageous to me that we had local governments wanting to get to work on clean-up and conservation, but were having to wait for permits from the Army Corps of Engineers and other Federal agencies to start making decisions. The reality is, the Federal government is huge and has no idea what the left hand is doing in regards to the right-hand.

There appears, even now, to be very little coordination. Which means that no one is going to accept responsibility and finger-pointing is going to go into high gear.

So far, BP has agreed to put up $20 billion. Are you kidding me? That’s not going to clean up the marshes and restore people’s livelihoods. Yes, I know a great many people in the Gulf rely on the oil industry for their livelihood, but oil can be drilled in many other places whereas the Gulf has been basically destroyed for years and years and years to come. In fact, it may never be restored to its former vitality.

I’m sure you can tell the frustration in this post and I know many of you have voiced your opinion on our Tuesday poll, but I would like to hear what you have to say about this national disaster, how the President is dealing with this crisis, and how that is going to affect the economy and our way of life.

All the best,

Adam

**Content is contributed independently by INO.com. marketHEIST.com is not responsible for any comments or opinions stated in this post.**

I recently had the good fortune to travel to France with my wife on holiday. We both wanted to go to Provence which is an area in France that is steeped in history and Roman antiquities.

Okay I admit, we did eat some great food and how could we not drink the wine. What’s that expression, “When in Rome … “? Also Provence is home to Châteauneuf du Pape, one of the worlds best known wine regions.

We traveled all over Provence taking in the sights, smells, and yes, our share of wine. It was during a visit to the small city of Arles that the immensity of the Roman Empire really struck me. It was there that I witnessed the awe of a true Roman amphitheater.

This brings me to the popular myth, “Morituri te salutant,” known as the gladiators salute. This was what was supposedly said before every gladiatorial contest in Rome and cities like Arles before the gladiators went into combat. Now I ask you, is that something that you would say before going into hand-to-hand combat with an uncertain outcome? I can think of a great many things I would be say, but “Morituri te salutant” would not be one of them.

It was there in Arles that I realized I could actually touch history; it was there that I discovered how much we, as traders, have in common with the gladiators of old. Right now you’re probably thinking, Adam you been sipping on too much wine, right? But, the question I have for you is, are you a gladiator in the markets?

Let me explain my thoughts. It is a pretty well-known fact that most people that trade in the futures and forex markets lose money, or to put it another way, get “killed” in the market. The guesstimates range from 80-95%, depending on who you talk to, but it is definitely up there. It’s not unlike the gladiator fights of old when only a few gladiators ever won their freedom and made it out alive, but when they did, they were showered with money and glory.

I want you to become that winning gladiator today so you to can enjoy the riches of winning in the markets.

Here are five easy steps to put the odds in your favor. These five steps will make sure that you walk out a winner in any trading arena.

One: Trade with a game plan
Two: Diversify into different arenas
Three: Implement good money management stops
Four: Act and think confidently
Five: Follow all of the above

Unlike the gladiators of old where the odds were stacked against you, traders who follow the five steps outlined above will become winners in any market arena you choose to fight in.

Thanks for taking the time to read this blog. I welcome your feedback and comments.

Every success,

Adam Hewison
President, INO.com
Co-creator, MarketClub

**Content is contributed independently by INO.com. marketHEIST.com is not responsible for any comments or opinions stated in this post.**