Is FOREX predictable ?

And they say markets can't be predicted.....................

Thanks for the support man.

Either way I will continue to post here the things as I see them and as I understand them. I''ll be happy if anyone finds something useful for himself. That was the point from the beginning.

If someone tell you that markets can't be predicted - please, don't pay attention ! They CAN in many different ways.

Cheers

Have you ever been to listen to the media how important
and well-dressed financial analysts explain what is happening in financial markets? And somehow, while talking, they tell you a story that you doesn't seem to understand and that makes you ashamed of your own misunderstanding. If this has happened to you, then please read the following lines to clarify together whether what is spoken in the media is useful to the audience.

Let's start from here. In general, there are two basic approaches to understand financial markets. First and most widely distributed is called fundamental analysis of the markets. That's what we study in universities and colleges of economics. But how can we use a few sentences to explain the tens of thousands of pages theories and approaches that some of us were obliged to study during their education? Well, there are two basic concepts which underpin fundamental theory. First - people in their economic behavior are always rational, and second - financial and economic markets are driven by the same factors, namely the rational behavior of the participants. In other words, according to the so-called experts who we all have seen in the media, financial markets are always trying to balance. Well done here. We clarified the two main concepts, on which fundamental theory lies. Certainly, this approach has infinitely many sub-theories, but all of them are based on these two basic assumptions.

The second approach is called technical analysis. Because of the increasingly intense pressure, academics are forced to implement technical analysis more and more in the learning process. And there are reasons for that, of course. Let me explain what are the basics in technical analysis - people are rational in their behavior only on economic markets. Financial markets participants take their decisions under the influence of emotions. In other words - financial markets participants seem to herd. According to technical analysts (among which I belong), the future price levels are projected in the previous levels. More simplified, markets draw repeating patterns that we call figures. After we determine at what stage the figure is, then, with high precision, we can tell what will happen next on this market.

The time has come to mention what is the practical difference between the two approaches - fundamental and technical. Have you noticed how in medias constantly appears a well known and respected analyst who tells you the following:

"Today stock indices collapsed because of the statement of the Federal Reserve President, or
"The euro fell because of the huge Greece deficit"

Can't you see that these people explain to us how and why something happens after it has already happened? That is the main advantage of fundamental analysts - they have become the best story tellers, after the story has occurred. It's like to tell you that it may rain outside, after you're already standing wet in the rain. I personally do not find this advice particularly useful. What about you? Technical analysis, in other hand, is the only method that allows you to forecast future price levels on the markets. And it is technical analysts over the years who were there to ring the bell about a coming market crash and economical crises. That is what I'm doing now before you.

During 2007-2008 we saw only the beginning of starting deflationary crisis. In this period, world stock indices collapsed by approximately 50%, wheat - 67%, corn - 58%, crude oil - 71%. Last year we saw the markets recovery as necessary. Unfortunately, this recovery has extremely corrective structure. Even more - we're far far away from previous markets' historical tops. And these tops and only their breakthroughs are the only confirmation that the deflationary threat is over and the world economical and financial system is headed to another boom. At this moment, this scenario looks fanciful.

Now we're standing before a renewed bear market. We expect again a collapse of stock market prices, precious metals, commodity markets and a strongly gaining US dollar. How can we protect from deflation? The most practical way is to not invest in these financial instruments, except the U.S. dollar. I expect even more bankruptcies in banking and real estate sector. If you have savings, do not rush to invest them. After passing the difficult period of several years, the value of your money (especially if they are in US Dollars) will be considerably higher. Then you will be at the right time for investments. Til then, leave your savings in the nearest cash equivalent.

I realize that is not at all pleasant to be carrier of such bad news. But this is not just another talk and talk about media appearances, but about how we can get safe from the impending deflationary crisis. All opinions expressed are the result of professional analysis of financial markets.

On Monday, March 15 I published the following chart of GBPUSD:

http://marketsinside.com/plugins/con...9218e4cf22.jpg

It was one of the charts, concerning GBPUSD. Now let's take a look what happened on the market.

http://marketsinside.com/plugins/con...1022c20d17.jpg

As you can see, we've predicted very precisely the structure and the target of the price action. Now, imagine that you had this chart those Monday and you have your trading strategy, or even already opened position on the market. Having this chart by your side could give you an excellent instrument to manage your trades and to have even more confidence in your trading strategy and the signal it provides.

Next - USDCHF. On March 18 a chart was published:

http://marketsinside.com/plugins/con...32fa4904ff.jpg

We tried to ring the bell that the market will not only stop its downmoves, but it will rally, with a specific target. That's what happened couple of hours after that forecast was published:

http://marketsinside.com/plugins/con...75a0781f01.jpg

Last, but not least - EURUSD. And again a chart, but from March 19.

http://marketsinside.com/plugins/con...5edcf4f316.jpg

...and the commentary:

EURUSD - New low.
The market seems to be ready for another leg down. The confirmation will be a breakthrough of the bottom of wave iii. Critical level at the top of wave a. Setting a target is complicated here. I point the level which I think the market will reach for sure. But it could go even more lower.

Just in case you were wondering at that time where the market will go, what we said was a clear perspective.

Can you give some insight on sweet crude oil?

Great work on the elliot wave stuff, they don't always work, but what does. I uses patterns for my analysis and they often work and sometimes fail.

Trading is about approaching the market with a systematic system and trading to rules no matter what they are. Then you simply keep refining them until it works for you.

Good luck and keep posting

Mike

Yep, I decided to post here more analysis and forecasts. Not only Forex stuff. Hope to be helpful. I'll post something about crude oil very soon.

We're continuing the rubric Show me some Trade with the next
article, presenting the chronology of a short position that was closed this morning. But this time, we will make even stronger connection between a good technical analysis and the risk management that it gives.

The post consists lots of interesting chart. Read the full article here.

We saw a nice US Dollar rally this week and now you can find plenty
of explanations why did that happen. As always I think this is not very useful for those thousands of traders, investors and speculators, which sometimes need a forecast, based on a working methodology, such as Elliott wave Principle, and technical analysis. I don't know about you, but I'm sick of those guys who are being interviewed on the media, explaining why something happened on a market, after it has already happened. Yes, it's funny, but if you ask me, that's waste of time. Anyway, today I'll try to give you an example of how a good Forex analysis and forecast can turn into real trading. Show me some trade, again...

On March 24, I published an EURUSD forecast.

In that circumstances I took the decision to trade that forecast. I sold EURUSD and put my stop order at the critical levels. And all I had to do was to wait.

On the next day, March 25 the market reached my target and started to consolidate. I waited for a good level to close my position.

By making that one day exercise I took around 112 pips. Actually after I opened my short position I had to make a trip of 600 kilometers, and it was funny when I arrived and opened my account I saw that the market had reached my target and all I had to do was just to close the position.

It was again some good risk management. But the core of all this is the forecast and the analysis. You can use variety of trading strategies, depending on your temperament and will to risk, but the professional technical analysis is the most powerful weapon on a market.

No offence to anyone here, I used Elliot waves in the past and I got floored. I spent 3 years tying to trade with them and certainly on smaller time frames where a lot of people trade they fail.

As to whether the markets can be predicted the answer is sometimes, they can, can you do it. Again it depends on the amount of screen time you have under your belt.

Here is a possible "prediction" for the GBPUSD on the hour chart, made before the fact. My expectation is that we will see a "V" shape wave, which might terminate somewhere around 1.48675. I was late comming home, so I did not get in at the top, which was predictible as a possible top area.

Trading is about looking for high probability trades, there are no sure bets in trading. You will lose all your cash if you think you can nail every top. However, you can get close and even get the exact high or low sometimes.

Point in question about elliot waves though, they work sometimes. Hence if you do catch the tops then you will do very well. Basically, Elliot was wrong in his estimation that wave are 5 and 3 sets.

Today I've decided to show you two charts, concerning the future perspective of USDJPY, because I think we saw one of the major confirmations for the scenario that I'm presenting in this article.

I think we saw a historical bottom in the end of 2009. It matched the wave pattern of the so called truncated fifth fave. To clarify these words, let's take a look at the monthly chart.

We've had a nice triangle for wave IV, and then breakthrough of the lower shoulder, followed by a messy fifth wave, that has broken most of the rules in the wave principle, but still matching the category of fifth waves. What is probably more interesting is why I think that this is a historical bottom, even though it is still above the bottom of wave III. Now, let's check on the second chart.

First of all, observe the divergence in the fifth wave. The trend was exhausting with every day. After the market bottomed , it made a high, then went back to the downside, but it didn't make a new low. Actually the opposite, this week we saw a breakthrough of the top of what I've labelled as wave i. Even more, this breakthrough is above the trendline, which gives us all the necessary evidences of a reversal:
1) The market didn't make new low
2) the trendline is exceeded
3) the market reached and passed the top of wave i.

All the three basic signs that technical analysis needs to warn you about a coming reversal. I've tried to paint what I expect to see in the next year and even longer. If you have the appropriate risk management, this situation here could turn out to be your trade of a lifetime.

Yep, I wrote an article called "WTI Crude Oil - Don't be an extreme optimist" and I'm posting it here, cause it is still valid The article is from January 09

Here is it.

A few more steps don't mean an endless bull market.

The market optimism has embraced almost everyone, and that's why we start to talk and warn about a coming top. Of course, our analysis and opinion come from the perspective of technical analysis and Elliott wave Principle. Otherwise, if you pay too much attention and trust to the media and Central bank's presidents, you risk to stay out of the real market, and even worst - to lose a lot of your money.

Our focus for today is on WTI Crude Oil. The first chart shows our Elliott wave count and the remaining numbers of new peaks that we expect. The first target that we can set from now is at 95.00. The basic idea that we want to expres is that long trades are not recommended in this moment. What we're trying to do is to identify where the top could be. This idea could be very useful to decide where is your place to close your long positions.

The second chart a candlestick perspective on a smaller time frame. It shows the buy signal from 16th December 2009 and the Kumo cloud, which represents the support area. In this case the Ichimoku analysis doesn't give us some worthy confirmations that we can expect reversal of the long term corrective recovery during next week.

Both forecasting methods - the Elliott wave Principle, and the Ichimoku give us expectations of a new high. But we have also very strong signals that the top is near. Don't be to greedy.

That's it Hope to be useful. Very soon I will post update of Crude Oil

As precious metals are extending their corrective recovery, we can see impulses on smaller degree. Although that situation is not very appropriate for trading by newbies, there are some opportunities that deserve attention. One of the problems here is how to set up a reachable targets, when we expect to see an impulsive rally, having in mind that this impulse is part of a corrective pattern.

That forecast was published on March 30. One week later the market reached its target for wave iii.

In a corrective patterns impulses happen to be quite tricky to forecast and difficult to target. In such a situation every analyst or trader needs to observe and explore every single market move on a smallest time frames, searching for confirmations and leads for a reachable targets.

was it possible to foreseen the market fall ?
The answer, of course is YES. But let's start from the beginning. Today I was looking in the media about Goldman Sachs's fraud scandal and I found plenty of self repeating headlines, like...

"Stocks fall as Goldman Sachs charged with fraud" - Kansas

"U.S. Stock Futures Fall as Goldman Sachs Faces Probes in Europe" - Businessweek

"It was mostly smooth sailing for stocks during the first week of earnings until Friday, when news of Goldman Sachs' troubles with regulators cast over Wall Street a cloud of uncertainty almost as thick as the volcanic ash above Iceland." - MarketWatch

"The news dragged down broad U.S. equity indexes, which fell more than 1 percent." - Yahoo Finance.

The guys of course explain Friday's fall with the scandal. And in every article I found one pawky comment, that no one could have predicted that scandal and the immediate market reaction. With this I do not agree. And you know what, I have evidences that on Wednesday, some people were aware of the market's intraday reversal. All the charts and commentaries below are part of our Indexes Bulletin from Wednesday, April 14, just two days before the action. Take a good look, cause this is not a fraud, it's forecasting...

"NASDAQ - Near a reversal.
I have my reasons to think that the first major stock index that would reverse and lead others in the same direction will be NASDAQ. Be careful, to be long in this situation is not very wise."

"FTSE - New high, then reversal.
I need to see first a completed ending diagonal for wave c, and then I'll pay attention for possible signs of a reversal, like five waves in the downside direction. Appropriate target for the top of wave c at 5,862.91."

"DAX - Near reversal.
It is difficult to predict where the top of wave c will be, but I have my reasons to suggest that it will not be far from the previous high. After we see that top, I recommend you to be patient, because the market could reverse in five waves down."

The truth is that all these stock indices were ready to pull back. The reasons are psychological, technical. Goldman Sachs was just the trigger to that. Basically, there are two groups of people observing and participating the markets. The first that follow news and one day realises that is out of the game. Cause news are always late. So are the people. The second group of people is the so called technical analysts. They are capable of predicting markets actions before they occur. With that knowledge, they have confidence in their trading or investing decisions. And believe me, that confidence raises your trading account.

One of the most common types of contracting volatility is a technical figure, called triangle. It occurs when the market is hampered in its decision whether to continue its current trend, or to reverse in the opposite direction. According to Elliott wave Theory triangles happen only in waves B (or X), and iv.

The common understanding is that after a triangle is complete, the market continues it current trend. With that conclusion in mind, will take a look at two daily chart of EURGBP.

Scenario 1 - That beautiful triangle for wave IV is done, and the market is preparing a rally for wave V. To confirm that outcome, I would like to see price action above the two resistance lines. That kind of confirmation is needed to convince us that we see a technical figure breakthrough.

Scenario 2 - Here we discuss the triangle as wave X. As you can see here the direction is exactly the opposite from the first scenario. The confirmation is represented by a breakthrough of the triangle's lower line. This will launch the beginning of wave Y.

Both of the scenarios are equal in their possibility to happen. The purpose of this article is to warn you of a future high volatility on this market. Whether we will see the first or the second scenario depends on the intermarket analysis in the next weeks.

I admit that recently I started to follow the latest news and headlines from the financial media. Not because I think they have some influence over the markets, but because it is actually pretty funny for a guy who use wave principle in his trade to watch how majority of markets participants love to seek blame for changes in their attitudes and moods, reflecting on the market's trend . And since this has become literally a game of cat and mouse - which government will announce higher deficit or which credit rating will fall more. Honestly, that's a great fun for me, and I would like to give my own contribution to this "game . Only that my arguments are different. Because what actually happens in the nature of this game is something else. Traders and investors change their mood, the emotion that prevails is fear. It triggers the national stock market sales. That is how the fear becomes apparent. And because people love to design their fears on something ... we go outside to look for reasons for that indexes' suffered losses and bankruptcies, unemployment. So, dear readers, I proudly present my suggestion for the next crisis guiltt government - Spain.

A few words on the technical picture. If we see the confirmation of this bearish scenario, it is very likely to see the beginning of a longer-term collapse of the main Spanish stock index. This crash course would be accompanied by a sufficient number of scandals, failures of key sector corporations, very unpleasant social changes in the country. However, let's mention the two critical levels. If the markets breaks them, I will have to change the wave count. Especially important is the higher level - 12.280.

So, with this chart by your side, you will hardly be surprised by the headlines of decreased credit rating and increased budget deficits. And shall we blame Greece and Spain for the future bear market ? I don't think so. But this is subject of another more detailed article.

One of the predicting's biggest advantages is the stability of knowing the perspective and having enough time to prepare your strategy. Let's do that with one of the most important grain market - Wheat.

On that weekly chart I've tried to set up a scenarios, which is based on technical analysis and Elliott wave Principle. I need to see a little bit more upside price action to complete the triangle for wave x, and then, after the confirmation, Wheat could get back to its mid-term bearish trend. The top of wave a is so called critical level. It represents the level, breaking of which will lead to changes in the wave count, and of course to a different perspective.

...or just another example of how technical analysis tells you the story far before news or financial reports. Still lots of people think there are no ways to forecast the Forex market. And the only way to be with the trend is to follow news and headlines. But if you ask me, I can take the risk to say that these two types of usual events (news and headlines) are the things that can fool you the most. Or in the best way - they do tarry enough to make you just part of the herd. If that sounds to you like a non-sense, take a look at the recent headlines, concerning British Pound:

The pound tumbled to a 1-year low against the U.S. dollar last week, on mounting political uncertainty in the wake of Britain's tightly fought general election, which left no party with an outright parliamentary majority- Forex Pros

Yeah, it does sound convincing, doesn't it ? But before considering fundamental news as a pure truth, let's think for a second. The general elections in Britain were on May 06. The GBPUSD intraday trend started days before the elections, and even more - it actually wasn't influenced a bit by the elections. Yeah, that's right. And my proof here is the following chart, published on MAY 02.

Surprise ! Our subscribers knew about that the future 1-year GBPUSD low, four days before most of the people in Great Britain actually knew whether they will vote or not. That sounds funny, but it is not, because a lot of people loose their money every day relying on news. That is one of the few things that could bring a disaster to your trading account.

Ten years ago, when I started to study financial markets, I wondered why it is so important to set targets
in your analysis. I couldn't understand why knowing where the top could be is such a big deal. I thought that knowing the direction of the trend is enough to win money and to get rich. Of course I was a fool. Pointing targets in your analysis, doesn't matter intraday, short- or long term, is one of the most important factors for raising your trading account, or investment portfolio. Can you image what a blessing thing is to know where a trend could top ?! Knowing it could give you the power of the real money management. And to be more specified, take a look at that chart, regarding USDJPY, published on April 18:

Now, let's make two major conclusions:
1) Our subscribers knew that there is going to be another rally for wave v. And it really was.
2) The thing with fifth waves is that setting a target for the top means, that after that you expect a reversal. You know what happened after the target was reached.

With strongly gaining US Dollar, high budget deficits, restarted bad news and reports, the well known
media analysts suddenly started to talk about deflation, again. But what is more surprising is that all of them have one and the same opinion - precious metals will be the save haven. And because I trust charts only, let's have some feedback and see whether SILVER is really going to be the safest place for your investments.

On April 20 our Metals Bulletin subscribers had the chance to see the following chart:

Back then SILVER was at 17.932 and we forecasted that it will make a new high around 19.9000. And it did. But more important is what we can expect on the big picture now.

There is only one critical level, breaking of which will make the bearish perspective invalid - 21.370. While the market is below that level, it could reverse any moment and start its wave C, which will lead to a renewed mid term bear market for SILVER. It also means that it is very likely to see prices below the 8.41 bottom. And it means that you wouldn't want to own SILVER in these circumstances, right ?

Think again when you make your investment decisions. At that moment I would not recommend you to buy Silver. Actually the opposite. The best position during the next year will be the short. But where is the best place to sell Silver ? When to do it ? It is all written in our weekly Metals Bulletin.