Money Flow Trading Method along with Risk Management

The Wrap Up - Nightly

Comments from Benjaminis: I found this article a few moments ago which perfectly covers and explains what faces us during 2017 and yet seeing the events of Brexit to Italy to the recent USA election of President Donald J. Trump and to the FED Decision of December 14, 2016 and of course to the recent ECB decision of Draghi and tonight the decision of the BOJ.

All these all connected and reading the article below you will see the connections. From time to time I will add my thoughts if I think there is a need for clarification.


https://www.peakprosperity.com/blog/...ney-under-fire

Snippet:

Today we welcome a cohort of new readers visiting PeakProsperity.com for the first time. This article is to give them our best grounding in the massive wealth transfer underway.

Our hope is that our longtime readers will likely benefit from a revisitation of the fundamentals, as well.

One serious predicament we face is that the current leaders in the halls of monetary and political power do not appear to understand the dimensions of our situation. The mind-boggling part about it is that the situation is easy to understand.

Our collective predicament is simply this: Nothing can grow forever.

Sooner or later, everything must cease growing, or it will exhaust its environs and thereby destroy itself. The Fed is busy doing everything in its considerable power to get credit (that is, debt) growing again so that we can get back to what it considers to be "normal."

But the problem is – or the predicament, I should more accurately say – is that the recent past was not normal. You've probably all seen this next chart. It shows total debt in the U.S. as a percent of GDP:

http://media.peakprosperity.com/imag...Hoisington.jpg
(Source)

Somewhere right around 1980, things really changed, and debt began climbing far faster than GDP. And that, right there, is the long and the short of why any attempt to continue the behavior that got us to this point is certain to fail.

Comments from Benjaminis: Look at the chart and notice that the last time debt to GDP was so high was in 1929 and we all know what happened then.


It is simply not possible to grow your debts faster than your income forever. However, that's been the practice since 1980, and every current politician and Federal Reserve official developed their opinions about 'how the world works' during the 33-year period between 1980 and 2013.


Put bluntly, they want to get us back on that same track, and as soon as possible. The reason? Because every major power center, be that in D.C. or on Wall Street, tuned their thinking, systems, and sense of entitlement during that period. And, frankly, a huge number of financial firms and political careers will melt away if/when that credit expansion finally stops.

Comments from Benjaminis: Think Brexit and Donald J. Trump and of course the referendum in Italy.


And stop it will; that's just a mathematical certainty. It's now extremely doubtful that the Fed or D.C. will willingly cease the current Herculean efforts towards reviving this flawed practice of borrowing too much, too fast. So we have to expect that it will be some form of financial accident that finally breaks the stranglehold of failed thinking that infects current leadership.


The Math
As a thought experiment, let's explore the math a little bit to see where it leads us. After all, I did just say that a poor end to all of this is a "mathematical certainty," so let's test that theory a bit. I think you'll find this both interesting and useful.

To begin, Total Credit Market Debt (TCMD) is a measure of all the various forms of debt in the U.S. That includes corporate, state, federal, and household borrowing. So student loans are in there, as are auto loans, mortgages, and municipal and federal debt. It's pretty much everything debt-related.

What it does not include, though, are any unfunded obligations, entitlements, or other types of liabilities. So the Social Security shortfalls are not in there, nor are the underfunded pensions at the state or corporate levels. TCMD is just debt, plain and simple.

As you can see in this next chart, since 1970, TCMD has been growing exponentially and almost perfectly, too. (The R2 is over 0.99, for you science types):

http://media.peakprosperity.com/imag...%201-46-39.jpg

I've pointed out the tiny little wiggle that happened in 2008-2009, which apparently nearly brought down the entire global financial system. That little deviation was practically too much all on its own.


Now debts are climbing again at a quite nice pace. That's mainly due to the Fed monetizing U.S. federal debt just to keep things patched together.

As an aside, based on this chart, we'd expect the Fed to not end their QE efforts until and unless households and corporations once more engage in robust borrowing. The system apparently 'needs' this chart to keep growing exponentially, or it risks collapse.

Okay, one could ask: Why can't credit just keep growing?
Here's where things get a little wonky. But if you'll bear with me, you'll see why I'm nearly 100% certain that the future will not resemble the past.

Let's start in 1980, when credit growth really took off. This period also happens to be the happy time that the Fed is trying to (desperately) recreate.

Between 1980 and 2013, total credit grew by an astonishing 8% per year, compounded. I say 'astonishing' because anything growing by 8% per year will fully double every 9 years.

So let's run the math experiment as ask what will happen if the Fed is successful and total credit grows for the next 30 years at exactly the same rate it did over the prior 30. That's all. Nothing fancy, simply the same rate of growth that everybody got accustomed to while they were figuring out 'how the world works.'

What happens to the current $57 trillion in TCMD as it advances by 8% per year for 30 years? It mushrooms into a silly number: $573 trillion. That is, an 8% growth paradigm gives us a tenfold increase in total credit in just thirty years:

http://media.peakprosperity.com/imag...rown-8-pct.jpg

For perspective, the GDP of the entire globe was just $85 trillion in 2012. Even if we advance global GDP by some hefty number, like 4% per year for the next 30 years, under an 8% growth regime, U.S. credit would be twice as large as global GDP in 2043 (!)

If that comparison didn't do it for you, then just ask yourself: Why, exactly, would U.S. corporations, households, and government borrow more than $500 trillion over the next 30 years? The total mortgage market is currently $10 trillion, so might the plan include developing an additional 50 more U.S. residential real estate markets?

More seriously, can you think of anything that could support borrowing that much money? I can't.

So perhaps the situation moderates a bit, and instead of growing at 8%, credit market debt grows at just half that rate. So what happens if credit just grows by 4% per year?

That gets us to $185 trillion, or another $128 trillion higher than today – a more than 3x increase:

http://media.peakprosperity.com/imag...n-at-4-pct.jpg

Again, What might we borrow (only) $128 trillion for, over the next 30 years?

When I run these numbers, I am entirely confident that the rate of growth in debt between 1980 and 2013 will not be recreated between 2013 and 2043. With just one caveat: I've been assuming that dollars remain valuable. If dollars were to lose 90% or more of their value (say, perhaps due to our central bank creating too many of them?), then it's entirely possible to achieve any sorts of fantastical numbers one wishes to see.
Think it could never happen?

http://media.peakprosperity.com/imag...llion-note.jpg

The Case For Hard Assets

This is the critical takeaway from all of the math above: For the Fed to achieve anything even close to the historical rate of credit growth, the dollar will have to lose a tremendous amount of its purchasing power. I truly believe this is the Fed's grand plan, if we may call it that, and it has nothing to do with what's best for the people of this land. Instead, it's entirely about keeping the financial system primed with sufficient new credit to prevent it from imploding.


That is, the Fed is beholden to a broken system; not anything noble.

GDP growth is very unlikely to support the rate of credit expansion that the Federal Reserve wants (or, more accurately, needs). And what will happen if it indeed doesn't? A lot of painful, awful things – but central among them is a currency crisis.

Amidst the ensuing unpleasantness will be an awakening within today's hyper-financialized markets to the huge imbalance now existing between paper claims and ownership of real things. A massive wealth transfer from those with 'paper wealth' (stocks, bonds, dollars) to those owning tangible assets (the productive value of which can't easily be inflated away) will occur – and quickly, too.

Comments from Benjaminis: WE are talking about the 1% here as well as what President Eisenhower warned about , The Industrial Military State. Well we have that now and it is why the Establishment Republican and Democratic fought so hard to stop President Donald J. Trump and TRUST me they will NOT STOP unless the SYSTEM Collapses which it will.


Suggesting the key objective for today's investor is answering: How do I make sure I'm on the right side of that wealth transfer?

An important component of that answer is holding some of your financial wealth in hard assets (they value of which can't be inflated away), the precious metals (e..g, gold and silver) being most easy for investors to easily obtain.

There's a preponderance of data that shows the world's major asset markets are dangerously overvalued. And when these asset bubbles start to burst, the 'save haven' markets -- like gold and silver -- that investment capital will try to flee to are ridiculously small. Investors who do not start moving their capital in advance of crisis will be forced to pay much higher prices for safety -- or may find they can't get into these haven assets at any price:

In Part 2: Using Gold to Protect Yourself In Advance of the Greatest Wealth Transfer of Our Lifetime we detail out the specifics of how much of your net worth to consider investing in gold, in what forms to hold it, which price targets are gold and silver most likely to reach, and which eventual indicators to look for that will signal that it's time to sell out of your precious metal investments.

The battle to keep gold's price in check is truly one for the ages. Not because gold deserves such treatment per se, but because the alternative is for the world's central planners to admit that they've poorly managed an ill-designed monetary system of their own creation -- which they'll avoid at any cost.

The Wrap Up - Nightly

https://www.peakprosperity.com/insid...r-our-lifetime

Snippet:
Executive Summary

1. Calculating the "floor" beneath which gold will likely not fall
2. The coming Great Wealth Transfer, which almost certainly will occur in our lifetime
3. How much to invest in gold
4. How to invest in gold
5. Exit strategies: when will it make sense to sell your holdings? And what should you exchange them for?

The Floor
The one place that I most like to buy something is as close to its replacement value as I can. And the replacement value for gold is both below its current price of $1,080 and rising steadily. Theres a floor under the price of gold which, like any mined substance, is determined by the cost to get more of it out of the ground.

As has been true for all mining and oil production, the all-in costs of getting gold out of the ground have been rising, and rising sharply, for many years. Currently the all-in cost to produce gold, across the whole industry, is more than $1,200 per ounce.

Comments from Benjaminis: I will continue with the Gold and Silver part at another time. WE must think "Outside The Box" because as hard as it is to grasp OUR World will change drastically starting during 2017 so the time to educate yourself and prepare is NOW !!!

The Monthly Chart on Gold from Finviz

http://finviz.com/futures_charts.ashx?t=GC&p=m1

The US Dollar Index from Finviz

http://finviz.com/futures_charts.ashx?t=DX&p=m1

The EUR/USD Monthly Chart from Finviz

http://finviz.com/forex_charts.ashx?t=EURUSD&tf=mo

From one of the most respected Funds in the World...

http://hussmanfunds.com/wmc/wmc161219.htm

Snippet: December 19, 2016
Red Flags Waving

John P. Hussman, Ph.D.
All rights reserved and actively enforced.
Reprint Policy

“Happiness isn’t good enough for me! I demand euphoria!”

- Bill Watterson, Calvin & Hobbes
There are several instances across history when valuations have broken well-beyond their historical norms, as the speculative “animal spirits” of investors have scrambled off like greased pigs at a rodeo. Those speculative episodes were typically concluded by one of two events: 1) a combination of overvalued, overbought, overbullish conditions appearing as a joint syndrome, or 2) deteriorating uniformity and widening dispersion of market internals across a broad range of individual securities, industries, sectors, and security-types, indicating a subtle shift among investors toward risk-aversion (when investors are risk-seeking, they tend to be indiscriminate about it).

Indeed, in market cycles across history, those two events were regularly “stuck together,” in the sense that overvalued, overbought, overbullish extremes were typically either accompanied or closely followed by deterioration in market internals. That regularity turned out to be our Achilles Heel in the half-cycle since 2009. After admirably navigating previous complete market cycles, I insisted on stress-testing our methods against Depression-era data in 2009. The resulting methods picked up the fact that overvalued, overbought, overbullish extremes were consistently associated with market losses across history, and we responded by taking a hard-negative market outlook when they appeared. The problem in the half-cycle since 2009 was that zero interest rates - and specifically short-term interest rates below about 10 basis points - acted as a kind of “solvent” that separated the two events, and encouraged yield-seeking speculation by investors long after extreme overvalued, overbought, overbullish conditions had emerged. In the presence of zero-interest rate policy, one had to wait for market internals to deteriorate explicitly before adopting a hard-negative market outlook.

We presently observe the third most overvalued extreme in history based on the most reliable valuation measures we identify, in the presence of 1) the most extreme “overvalued, overbought, overbullish” syndrome we identify, and 2) explicitly deteriorating market internals. Based on a composite of measures best correlated with actual subsequent market returns across history, other two competing extremes were 1929 and 2000.

After more than three decades as a professional investor, it’s become clear that when investors are euphoric, they are incapable of recognizing euphoria itself. Presently, we hear inexplicable assertions that somehow euphoria hasn’t taken hold. Yet in addition to the third greatest valuation extreme in history for the market, the single greatest valuation extreme for the median stock, and expectations for economic growth that are inconsistent with basic arithmetic, both the 4-week average of advisory bullishness and the bull-bear spread are higher today than at either the 2000 or 2007 market peaks. In the recent half-cycle, extreme bullish sentiment and deteriorating market internals also preceded the near-20% decline in 2011, yet extreme bullish sentiment was also uneventful on a few occasions when interest rates were in the single digits and market internals were intact. That distinction is critical. The zero-rate “solvent” that allowed overvalued, overbought, overbullish extremes to detach from deteriorating market internals and downside risk is now gone, and investors should understand that subtlety.

As a side note, among popular alternatives, Investors Intelligence publishes one of the better surveys of bullish/bearish sentiment, while the AAII survey is far noisier. For our part, we focus on a slightly different balance, between trend-sensitive and value-conscious investor groups. As I detailed in Lessons From the Iron Law of Equilibrium:

“When prices are unusually elevated relative to the norm, it’s almost always because trend-followers (and other price-insensitive buyers) are ‘all in.’ Those positions are - and in fact have to be - offset by equal and opposite underweights by value-conscious investors. A sudden increase in the desired holdings of trend-sensitive traders has to be satisfied by inducing a price increase large enough to give value-conscious investors an incentive to sell. Conversely, a sudden decrease in the desired holdings of trend-sensitive traders has to be satisfied by inducing a price decline large enough to give value-conscious investors an incentive to buy. Any tendency of investors to buy on greed and sell on fear obviously amplifies this process.

“From this perspective, (and one can show this in simulation), what we’re really interested in is not the balance between bulls and bears per se, but the balance of sentiment between trend-sensitive and value-conscious investors. Market tops emerge when trend-followers are beating their chests while value-conscious investors are nursing bruises from their shorts. Market bottoms are formed when trend-followers wouldn’t even touch the market, and value-conscious investors are bleeding from all of the falling knives they’ve accumulated.”

Valuation update
Over a century ago, Charles Dow wrote “To know values is to comprehend the meaning of movements in the market.” To offer a long-term and full-cycle perspective of current market conditions, I published a chart last week of the ratio of nonfinancial market capitalization to corporate gross value added, including estimated foreign revenues (what I’ve called MarketCap/GVA), and a second chart relating that measure to the actual 12-year S&P 500 total returns that have followed. From present valuation extremes, we expect 12-year S&P 500 total returns averaging just 0.8% annually, with a likely interim market collapse over the completion of this cycle on the order of 50-60%. Valuations are poor tools to gauge near-term market outcomes, but they are both invaluable and brutally honest about potential consequences over the complete market cycle. They also offer a consistent framework to understand market fluctuations. Recall for example, my April 2007 estimate of a 40% loss to fair-value, and then following that 40% loss, my late-October 2008 comment observing that stocks had become undervalued. Over the complete market cycle, valuation is quite a strong suit for us.
Similarly, as I wrote at the March 2000 bubble peak:

“Investors have turned the market into a carnival, where everybody ‘knows’ that the new rides are the good rides, and the old rides just don’t work. Where the carnival barkers seem to hand out free money for just showing up. Unfortunately, this business is not that kind - it has always been true that in every pyramid, in every easy-money sure-thing, the first ones to get out are the only ones to get out... One of the things that you may have noticed is that our downside targets for the market don’t simply slide up in parallel with the market. Most analysts have an ingrained ‘15% correction’ mentality, such that no matter how high prices advance, the probable maximum downside risk is just 15% or so (and that would be considered bad). Factually speaking, however, that’s not the way it works... The inconvenient fact is that valuation ultimately matters. That has led to the rather peculiar risk projections that have appeared in this letter in recent months. Trend uniformity helps to postpone that reality, but in the end, there it is... Over time, price/revenue ratios come back into line. Currently, that would require an 83% plunge in tech stocks (recall the 1969-70 tech massacre). The plunge may be muted to about 65% given several years of revenue growth. If you understand values and market history, you know we’re not joking.”

As it happened, the S&P 500 lost half of its value by the October 2002 low, while the tech-heavy Nasdaq 100 Index lost an oddly precise 83% of its value.
With regard to the advancing half-cycle since 2009, I can be reasonably criticized for my insistence on stress-testing our methods in response to the global financial crisis (which we anticipated, but that also produced outcomes that were "out of sample" from a post-war perspective). My well-intended fiduciary inclination inadvertently shot us in the foot, because the resulting approach to classifying market return/risk profiles embedded a regularity of both Depression-era and post-war market cycles that, in this cycle, was disrupted by zero-interest rate policy. Our mid-2014 adaptations resolved that issue. Though I’m convinced that our methods have ultimately come out stronger, the criticism is legitimate, as is criticism about the time it took to disentangle and address the underlying issue. That said, investors are entirely misguided if they believe that those challenges in this cycle give them a "free pass" to ignore obscene valuations. If investors rule out the potential for the S&P 500 to lose 50-60% of its value over the completion of this cycle, they’re actually ruling out an outcome that would be wholly run-of-the-mill from a historical perspective, given current valuation extremes. They’re also ignoring that my previous risk estimates in prior cycles were devastatingly correct.

Disciplined investing isn't easy (and whenever it seems like it is, you're about to learn a costly lesson). The market has been in a more than two-year top-formation with internals lagging the major indices, with investors chasing high-beta stocks (those with amplified sensitivity to market fluctuations), and with rather shallow corrections from a full-cycle perspective. All of that has been a headwind for value-conscious hedged-equity strategies, but it won’t prevent the completion of this market cycle. Indeed, our impression is that the recent swing by investors from active to passive investment strategies represents nothing but performance-chasing, at a point where valuations imply historically low prospective 12-year returns for a conventional portfolio mix. If history is a guide, nobody will remember the patience, discipline, and tolerance for frustration that were required to avoid or to benefit from the 50-60% market loss that we estimate over the completion of this cycle. A focus on market internals may help, but even the less-extended 2000 and 2007 peaks were frustrating for us. As John Kenneth Galbraith wrote decades ago about the Great Crash, “Only a durable sense of doom could survive such discouragement.” Meanwhile, distinguish full-cycle outcomes from immediate outcomes. They can often be two quite different objects.

While MarketCap/GVA is an apples-to-apples measure with a correlation of about 94% with actual subsequent 12-year S&P 500 total returns, the ratio of market capitalization to GDP compensates for its slightly lower reliability by providing a more extended historical view. The completion of every market cycle in history has taken this ratio at least 40% below present levels, and generally much lower. The chart below shows MarketCap/GDP on an inverted log scale (blue line, left scale) versus actual subsequent 12-year S&P 500 average annual total returns (red line, right scale). Current valuations are consistent with expectations of S&P 500 nominal total returns averaging scarcely 1% annually over the coming 12-year horizon. Outside of value-conscious, historically-informed, risk-managed, full-cycle investment disciplines, I’m not terribly excited about the 10-12 year investment prospects for either stocks or bonds. But given a 10-year Treasury yield of 2.6%, I expect Treasury bonds to outperform the S&P 500 over that horizon.
http://hussmanfunds.com/wmc/wmc161219a.png
Internals deteriorate further
As for recent market action, under cover of a negligible pullback in the S&P 500 last week, our measures of market internals deteriorated materially. Notably, declines on the NYSE outpaced advances by nearly 2-to-1, an imbalance that’s usually associated with a weekly market loss closer to -1.5%; corporate debt weakened; the number of issues registering new lows expanded past levels last seen when the major indices were materially lower; and Friday registered a high-volume reversal characteristic of previous buying climaxes.

A week ago, we observed the single most extreme syndrome of “overvalued, overbought, overbullish” conditions we identify (see Speculative Extremes and Historically Informed Optimism); a secondary signal at a level on the S&P 500 4% higher than the syndrome we observed in July. With the exception of set of signals in late-2013 and early-2014 (when market internals remained uniformly favorable as a result of Fed-induced yield-seeking speculation), an overextended syndrome this extreme has only emerged at the market peaks preceding the worst collapses in the past century. Prior to the advance of recent years, the list of these instances was: August 1929, the week of the bull market peak; August 1972, after which the S&P 500 would advance about 7% by year-end, and then drop by half; August 1987, the week of the bull market peak; July 1999, just before an abrupt 12% market correction, with a secondary signal in March 2000, the week of the final market peak; and July 2007, within a few points of the final peak in the S&P 500, with a secondary signal in October 2007, the week of that bull final market peak.

Last week also produced enough internal dispersion to generate a confirmed “Hindenburg Omen.” I discussed this widely-misunderstood signal the last time we observed it (see the section of my August 10, 2015 comment titled “When Hindenburg Omens are Ominous”). That instance was quickly followed by a decline of over 11% in the S&P 500 over the next two weeks. Part of that discussion is reprinted below:
“I’ve frequently noted that Hindenburg ‘Omens’ in their commonly presented form (NYSE new highs and new lows both greater than 2.5% of issues traded) appear so frequently that they have very little practical use, especially when they occur as single instances. While a large number of simultaneous new highs and new lows is indicative of some amount of internal dispersion across individual stocks, this situation often occurs in markets that have been somewhat range-bound. Still, when we think of market ‘internals,’ the number of new highs and new lows can contribute useful information. To expand on the vocabulary we use to talk about internals, ‘leadership’ typically refers to the number of stocks achieving new highs and new lows; ‘breadth’ typically refers to the number of stocks advancing versus declining in a given day or week; and ‘participation’ typically refers to the percentage of stocks that are advancing or declining in tandem with the major indices.

“The original basis for the Hindenburg signal traces back to the ‘high-low logic index’ that Norm Fosback created in the 1970’s. Jim Miekka introduced the Hindenburg as a daily rather than weekly measure, Kennedy Gammage gave it the ominous name, and Peter Eliades later added several criteria to reduce the noise of one-off signals, requiring additional confirmation that amounts to a requirement that more than one signal must emerge in the context of an advancing market with weakening breadth. Those refinements substantially increase the usefulness of Hindenburg Omens, but they still emerge too frequently to identify decisive breakdowns in market internals. However, one could reasonably infer a very unfavorable signal about market internals if leadership, breadth, and participation were all uniformly negative at a point where the major indices were still holding up. Indeed, that’s exactly the situation in which a Hindenburg Omen becomes ominous.”

As I noted in the August 2015 instance, a situation where fewer than 60% of stocks are above their 200-day average typically defines sufficiently weak participation to give a confirmed Hindenburg Omen substantial bite. Currently, that figure is about 68%, so intrepid speculators insistent on scaling past Dow 20,000, red flags be damned, can at least monitor participation. For our part, it turns out that these syndromes also typically bite when we observe unfavorable market action on our own measures. In contrast, we observed several instances in 2013 and early-2014 that were not accompanied by broader internal deterioration or weak participation, and those signals were ineffective. Suffice it to say that under most conditions, Hindenburg signals in their raw form are of little use, but when they are complemented by other measures of internal dispersion and extremely overvalued, overbought, overbullish syndromes, they do tend to live up to the “omen” part.

Emphatically, our pointed concerns about market risk would quickly ease to a neutral outlook if our measures of market internals were to become favorable. Again, the reason is that overvaluation typically gives way to sharp market losses only during segments of the market cycle when investors have subtly shifted toward risk-aversion. Since risk-seeking speculators tend to be indiscriminate about that speculation, the best measure we’ve found to infer those risk-seeking or risk-averse preferences is the uniformity or divergence of market action across a broad range of internals.

So while our long-term (10-12 year) expectations for S&P 500 returns remain near zero, and we now expect a 50-60% market retreat over the completion of this cycle (an outcome that would be only run-of-the-mill from present valuation extremes), our expectations about more immediate market outcomes will remain heavily driven by the quality of market action we observe at each point in time. Presently, those measures are hostile, which is why we’ve got red flags waving, but a shift toward favorable uniformity across our measures of market internals would defer those concerns. Put simply, market conditions don’t forecast or require a near-term market collapse. Rather, they are currently permissive of a market collapse, and on average, market returns under such conditions have historically been quite negative until those conditions have cleared.

The next regular comment will be the week of January 9, though I'll post a brief update over the holidays if market conditions require. Wishing you a wonderful Christmas, a bright Hanukkah, and a joyful New Year! - John

The foregoing comments represent the general investment analysis and economic views of the Advisor, and are provided solely for the purpose of information, instruction and discourse. Please see periodic remarks on the Fund Notes and Commentary page for discussion relating specifically to the Hussman Funds and the investment positions of the Funds.
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Prospectuses for the Hussman Strategic Growth Fund, the Hussman Strategic Total Return Fund, the Hussman Strategic International Fund, and the Hussman Strategic Dividend Value Fund, as well as Fund reports and other information, are available by clicking "The Funds" menu button from any page of this website.

Estimates of prospective return and risk for equities, bonds, and other financial markets are forward-looking statements based the analysis and reasonable beliefs of Hussman Strategic Advisors. They are not a guarantee of future performance, and are not indicative of the prospective returns of any of the Hussman Funds. Actual returns may differ substantially from the estimates provided. Estimates of prospective long-term returns for the S&P 500 reflect our standard valuation methodology, focusing on the relationship between current market prices and earnings, dividends and other fundamentals, adjusted for variability over the economic cycle.

http://www.zerohedge.com/news/2016-1...ops+to+zero%29

Snippet:
Last year at this time markets were grappling with the Feds first rate hike in almost a decade. Although many optimists were confident the economy was plenty strong enough to handle the increase in rates, within days it was obvious they were sorely mistaken.
Fast forward to today. With the election of Trump, there is even more optimism filling the air.

Dont get me wrong, I understand all the reasons to be bullish.
But doesnt the fact that everyone else understand all those reasons too not worry you just a little bit?

There is no wall of worry to climb. Instead we are faced with complete and overwhelming confidence the Fed hike will not derail the good times.
Now maybe I worry too much. Maybe the Fed hike will not slow down the markets even in the slightest.

Yet a little part of me wonders if the problems with the shortage of US liquidity will come rushing back to the forefront with the Fed hike.
And just in case it does, I think it is instructive to review what happened last year when the Fed hiked.
Lets start with the S&P 500:
http://themacrotourist.com/images/SPXDec1916.png
After last years Fed hike the S&P 500 managed to stay bid for a week before collapsing in the worst start to a new year in the history of finance.
How about the US dollar?
http://themacrotourist.com/images/DXYDec1916.png
Although the US dollar went up for a few weeks after, it eventually rolled over and had a terrible first quarter of 2016.
So far all the reactions to the Fed hike seem to have some delay. Yet have a look at gold. The pet rock bottomed on the day after last years Fed hike and never looked back.
I dont want to goocher it, but so far, the pattern is playing out exactly the same. Gold has once again bottomed on the day following this years Fed hike, and knock on wood, has not yet violated that low.
http://themacrotourist.com/images/GoldDec1916.png

This all coincides with the gold/S&P 500 ratio once again bumping along the support at the previous low.
http://themacrotourist.com/images/GLDSPXDec1916.png

Putting it all together, will the gold/S&P 500 ratio repeat last years performance?
http://themacrotourist.com/images/RepeatDec1916.png
I know any suggestion of gold rising and stocks declining seems absurd. After all, gold is probably the most hated asset class on the planet with stocks being the most loved.

Yet somehow that doesnt bring me much comfort as I am pretty sure last year the bulls were extremely confident the Fed hike wouldnt derail the budding recovery. The fact they are even more confident today doesnt bring me any solace

http://finviz.com/futures_charts.ashx?t=GC&p=h1

Shorted USD30 as instructed.

The USD/JPY short will be on both demo and my live accounts.
Enjoying all the reading mr. Benjamin

Best regards!

Thank You

It is appreciated !!!

Bank of Japan Statement !!!

http://www.boj.or.jp/en/announcement...6/k161220a.pdf

http://finviz.com/forex_charts.ashx?t=USDJPY&tf=m5

We will watch what the North American Equity markets do and look at the chart of USD/JPY and check support and resistance and it should be safe to Short $100,000 of USD/JPY making sure you put your Limit Out near the point that it reverses yesterday which appears to be 116.60 and put your STOP LOSS at US Dollars $1000 so do your calculation and post what you have done here. This will now be our Second Trade Plan to Short USD/JPY.

Ticket Account Symbol Usd Mr Amount S/B Open Close Stop Stop Move Limit P/L Gross P/L Open Comm Close Comm Roll Net P/L Time
114959542 02706903 USD/JPY 1,000.00 100 S 117.879 117.900 118.500 116.609 -2.1 -17.81 4.00 4.00 0.00 -25.81 12/20/2016 02:55

NOTE: I did the trade just now so do your Report and copy and paste and post it like I just did. That saves me from logging into your account. Thanks.

If you have any questions about this post them here. I am going back to bed for a few hours !!!

P.S. I put my STOP at 118.50 as I want to see reports that come out in the morning and I want to see how Europe reacts at the Equity open that happens now for the DAX and the CAC and the FTSE.

“The geopolitical backdrop to trading on Tuesday has darkened in the last 24 hours,” said Kathleen Brooks, research director at City Index, in a note. “This may be enough to boost safe havens on Tuesday, after a rally in U.S. Treasuries (yields fall), gold and the yen as the news broke on Monday.”
Investors typically buy into the safety of the Japanese currency at a time of geopolitical and financial instability.

“The Russia/ Turkey issue could make an already tense situation in Syria worse, so we will look out for further information on this shooting on Tuesday,” Brooks added. “While we doubt that the risk on trend has come to an end, recent events are enough to remind people that holidays are coming, and it could be time to book some profit.”


BOJ rate call: As widely expected, the Bank of Japan decided to stand pat on monetary policy by keeping its short-term rate target at minus 0.1% and its 10-year Japanese government bond yield TMBMKJP-10Y, -8.63% target at around zero. It also said it would continue to buy Japanese government bonds at the previous pace of around ¥80 trillion a year.

But the central bank raised its assessment of the economy for the first time since May 2015 by saying that the world’s third largest economy “has continued its moderate recovery trend.”

“There was no surprise,” said Marito Ueda, director at FX Prime by GMO.

Although the policy decision was uneventful, the accommodative policy stance gave investors a feeling of relief, prompting short covering of the dollar against the yen midday, said Ueda. Tokyo stocks were higher after the policy decision with the Nikkei Stock Average NIK, +0.53% rising 0.5%.
The ICE U.S. dollar index DXY, +0.20% which compares the greenback against a half-dozen rivals, rose 0.2% to 103.34. The WSJ Dollar Index BUXX, +0.20% , a measure of the U.S. dollar against a basket of major currencies, was up 0.1% at 93.35.


Comments from Benjaminis: It appears we had some short covering and if the Equity markets head down the USD/JPY will reverse.

You can put on a second position with a STOP LOSS of $500 and a LIMIT OUT at 117.00

Later !!!

114961459
US3010012/20/16 3:09 AM19,910.50 -80.000.000.000.00-80.00Mktd102731143001
12/20/16 4:16 AM 19,918.50
114963519USD/JPY100,00012/20/16 3:43 AM118.211 114.33-4.000.000.00110.33Mktd102731143001

Like this? It's very confusing I'm sure everyone else is confused as well by this format.

Basically I took a STOPLOSS on US30. (EDIT: -170 USD)

I re-entered the short higher and atm on -75 USD floating loss
and +105 USD floating profit from USD/JPY
(emulated in my live acc on mt4 with 12 Pips profit)

Good Day

I will log in to your demo account and see what you did. This is new to you of course however the point of learning is to trade without FEAR or Greed or Ego which goes to the most important factors in trading. Most people can learn a method of trading however if you do not have the discipline or the proper capital to trade with especially in markets that can sometimes in present times move 10% one day it is clear why 95% of retail traders lose trading Forex.

I ask you to be very careful if you are trading Real Funds as the purpose is to learn how to fish then you can fish on your own, I spend over 3 years only trading using a demo account even though my skills would have allowed me to start trading anytime since I definitely was able to trade and make money.

I am going into more detail because this applies to everyone not just yourself personally.

You also are trading with a different type of platform using MT4 which adds to the confusion. We will solve and work out all these issues through communicating here. I will return after I look at your trades.


Benjaminis

Good Day

I have logged into your demo account and have entered the Stop Loss and Limit Out for you. You did fine and what I see happened is that on the first trade you did shorting US30 at 2:34 AM at 19,901 was closed at 3:36 AM at 19,918 for a loss of $170 US. Your Stop Loss was set too close and that is fine because that is why I teach using a demo account for this exact reason. You now are short US30 at 19,910.50 and on your USD/JPY short you entered at 118.211

I have put your Stop Loss and your Limit Out so for the moment you do not need to do anything except to learn and let the market decide what happens protecting yourself and also putting yourself in position to make good profits.

I will repost here for yorself and others the structure and the purpose of how I intend to teach and what the goals are. For any Forex trader or any trader whether in Stocks , Bonds or Commodities to become a winning trader they need DISCIPLINE. Without that not being in place there can be no success.

Good day fellow traders on Forex Factory. I have been trading Forex for over 10 years now and with the incredible movements on a monthly basis which has been caused by the intervention efforts of the world's central banks trading today is much different trading before 2008. Thus RISK MANAGEMENT must be a priority for any serious forex currency trader. You should never RISK more than 5% of your trading capital on any one trade plan. I also strongly suggest that you never trade more than 20% of your total trading capital at anytime. Example - If you are trading $50,000 in US Funds NEVER have more than 20% or $10,000 US Dollars on your various trade plans always using the 5% rule for risk on each trade plan being used.

The Money Flow Trading Method is based each trading day on Risk On or Risk Off which means are the markets heading down or heading up. I use the DOW to determine this each day. When the markets head down and we have Risk Off the money flows into US Dollars first and then the money is parked usually into US Bonds so the bonds go up and the yield goes down. Money also flows to USD/JPY. I will give more explanations when the forex markets reopen on Sunday. If you have any comments or questions please post them on this thread. Tomorrow we have two important events the most important being the referendum in Italy.

The results will move the markets whichever result we see. This is a Fundamental Fact and that combined with Technical Indicators as to Support and Resistance along with investor perception of the meaning of the results short term will lead the direction of the market. I will be thinking of going short on USD/JPY depending on the results of course and Risk being off.

Before I do any FX currency trade I always develop a Trade Plan as previously explained. So my Trade Plan will be to SHORT (Sell) 3 $100,000 US Dollar contracts of USD/JPY in 3 stages. My first trade will be my base trade and my MAXIMUM LOSS would be 100 PIPS or $1000 US Dollars. My second position when opened would also have a ENTERED STOP LOSS of $1000 US Dollars and so would my third and LAST position. With this strategy my MAXIMUM loss is $3000 US Dollars or 3% of my trading capital. After I enter the 3 positions I will print out a updated statement in Real Time so we all can follow along.

Again if you are a member of Forex Factory all feedback or questions are welcome and appreciated. If you are not registered as a member please register so that you can participate in this thread and other threads of course. Thank You !!!

I decided to open a second trade plan because of short covering in EUR/USD and I just shorted my first position of $100,000 US of EUR/USD at 105.40 and I will see where things stand at the Frankfurt open tomorrow morning. My total margin used is now at $3200 US Dollars for my three open positions. If I have on all 6 positions the capital used will total $6600.00 and my Net Possible loss will be $6000 US however I expect to close all positions at a profit most likely over the next 24 hours. You can never lose taking a good profit trading forex.


Just for the record I normally only trade from 2:00 AM EST at the Frankfurt open until 5:00 PM EST when the North American markets are closed. There is just not enough volume and my Money Flow Method works when all the Equities are trading so we start with the DAX , FTSE and CAC. By 6:00 AM when North America comes on board and the MSM gives their two cents worth. By 9:30 AM to 11:30 AM when Europe goes home and most major news comes out between 8:30 AM and 10:00 AM and daily Options on currencies close out for some of them at 10:00 we have plenty of material to work with. I do use technical indicators to determine entry and exit. We are in interesting times for the rest of December with the Electoral college declaring on December 19, 2016 and on December 31, 2016 we shall see the Shanghai Gold Exchange become very important because for the FIRST TIME Muslims can trade Gold and associated products as Comex which is effectively a paper market becomes less relevant. 2017 will be an extraordinary FX trading year.

The reason that I do NOT put on my third position on either of my trade plan is it is because it is usually my third position that is the most profitable as I scale in my positions rather than buy them all at the same time. The next 24 hours will most likely see many movements in the currencies and keep in mind that since the Trump rally is way overdone we may see a MAJOR reversal in Risk Off and money will flow to Gold and USD/JPY and with the weakness in EUR/USD it will be interesting to see how the US Bond market and the other Bond markets react.

Edit to Add FINVIZ link - 10 Year US Bonds. http://www.finviz.com/futures_charts.ashx?t=ZN&p=d1

You can see money FLOWING into the 10 Year US Bond for safety and look at the gap on the 5 Minute chart. MONEYFLOW is my KEY to successful forex trading.http://www.finviz.com/futures_charts.ashx?t=ZN&p=m5


COMMENTS FROM BENJAMINIS: What I have decided to do this morning as for me in Canada it is 9:23 AM EST is to post all the information that is relevant in one location so it is easier to understand for anyone interested in becoming a successful trader. As I have just started to do it and I expect it will take me a few hours to complete it as I post I will reference it to where the information came from. The following post came from my post number 19 so with that as reference it makes it easier in case you go back and review my other posts. I will start another page after the basic information becomes too much for this page or I might start a new page after each of te 14 pages already up.

From Page 19:

My subject this morning is PERCEPTION and REALITY. The results of the Italian referendum last night are a perfect example of that. In normal times which means free markets where we have proper price discovery, it is easier to make speculative decisions on market trades. Today we all live in a financial world where the truth is always distorted by those in control. The control for the moment rests with the Central Banks of the world led by The Federal Reserve and followed by the ECB and the BOJ and the BOE.

After the financial meltdown of 2008 involving Lehman Brothers and TARP, which originally was voted down in the USA and then approved, the financial world entered into uncharted waters never ever seen before. It started with QE in the USA and it continued with Draghi in Europe saying he would do whatever had to be done. We also see the failed monetary policies of the last ten years in Japan by the BOJ.

So now we live in a world of NIRP and the attempt all over the world especially recently in India removing the 500 Rupee and 1000 Rupee as legal tender. Because of the Money Printing and Helicopter Drops clearly stated by Bernake in his role as Fed Chairman, there has been so much electronic cash created that now the Central Banks of the World must remove actual cash from the World before the Public figures out that the real cash does not exist and if everyone realized the truth that all monies would be removed from the banks of the world and our financial systems would immediately collapse.

So with the first two paragraphs as background is it any wonder that at times the ability to understand day to day movements in the various currencies is impossible. The fact that EUR/USD has gone up and the markets are ignoring the REALITY and looking as the market psychology of the PERCEPTION then it follows that the MARKET is always right until it is not. Another excellent example with real life consequences is the behavior of the US Stock Markets and the World Bond Markets since November 8, 2016 and the election of Donald J Trump.

Based only on hope and surely, NOT REALITY the wrong assumptions of stimulus in the USA with the NEW Trump Presidency has lead to over Two Trillion Dollars of loss in the World Bond Markets and new highs in the Dow and SP500. There is no possibility that everything will NOT reverse, when REALITY TRUMPS PERCEPTION and that is the whole point. It is in knowledge of reality and the timing of the reality taking effect.

It would be most appreciated to have some feedback so intelligent discussions can be entertained. This week might be the week for REALITY when we hear from the ECB on Thursday and of course next week the FED meets on December 13, 2016 and comes out with their Rate Decision on December 14, 2016. This could be the principle of buy the rumor and sell the news which is what seems to have happened with Italy and the referendum results. When the FED raises rates for the first time in one year even though last December when they raised once and no again.

Thank you very much.

I just noticed the SL should have been -1000 USD. My bad..

On a side note, does placing more trades as the price goes against me is a good thing to do?
For example on USD/JPY as we know there is a very high probability for it to go bearish, should we place more trades now, to rake more profit? Or this is illogical and risky.

Thankyou

Hello my friend. There is NO BAD !!! That is the whole purpose of learning so just relax and enjoy the experience. You have communication skills and that is part of your learning. I have decided thanks to your questions to start at page one of my thread on Money Flow Method and Risk Management to take all the information that only relates to the trading method that I have developed over the last 10 years all together so that someone new to the thread has all the information to read at one place. I thank you for helping me to make that decision. It may take awhile however when I finish most of your questions will be answered and others will save time by having everything in the basic way together,


Benjaminis

The following information came from post 23 on December 5, 2016

I want to post this chart of USD/JPY so everyone can visually see what happened today in both the stock market (Dow) and the USD/JPY.

http://finviz.com/forex_charts.ashx?t=USDJPY&tf=m5

http://finviz.com/futures_charts.ashx?t=YM&p=m5

Everyone can see that based on the results of the Italian referendum of yesterday it was originally expected the markets would be Risk Off however for whatever reason the Dow went up for part of the day until it reversed which you can see from the 5 minute chart that I linked here of the Dow. You can see that as the Dow reverses so does the USD/JPY almost 160 PIPS. This was my whole POINT of MONEY FLOW TRADING. You can see the money flowing out of the Dow and some of this flow causes money to go into the Yen. Knowing this you have an EDGE in putting on a Trade Plan. If anyone reading this is not 100% clear please post a question for me.

At 7:48 AM this morning I shorted my third position of USD/JPY at 114.321 and I will hold my position overnight and my unrealized profit is now $476.36 with USD/JPY at 113.77.

Imagine not needing to plan a trade solely on the technical indicators and the FUNDAMENTAL becomes the Money Flow caused by the movements of the various Asset Classes such as Gold. As the US Dollar Index went down because of the unexpected strength in EUR/USD and since the Euro makes up 57.6% of the US Dollar Index then this has caused the US Dollar Index to go down and usually Gold would go up so you could also have a Trade Plan of going Long Gold. I will also link the 5 minute chart on Gold so you can see in pictures with your own eyes my strategy which ALWAYS WORKS !!! That is one of my edges.

http://finviz.com/futures_charts.ashx?t=GC&p=m5

With regard to Gold based on volume there seemed to be two large interventions at the start of the Europe open and the Dow open. When I find a review of that I will post it later here by editing and adding.

I found if not an explanation that makes sense at least a review of the insanity which could only be Planned Intervention by a powerful source.

Snippet: You have to wonder "who" stepped in at the European open and panic-bid with both hands and feet for Euros and US and EU equities...? As one trader mocked earlier, Brexit took 3 days to recover its losses, Trump took 3 hours, and Italeave took 3 minutes.

Snippet:
Finally we leave you with this...from Rhino Trading's Michael Block who offers the following perspective on why European stocks spiked the most since the Trump victory last month (largely a black swan event), courtesy of Barron's:

[Apparently] the pattern of fading a potential crisis and then scrambling to cover and get long when everyone takes a breath and realizes that this time is not the apocalypse either still holds more than ever. I cant justify any of this. The lesson investors and traders are getting is that everything is a buying opportunity and you need to not miss the boat. Brexit? Bullish. Trump winning the election? Bullish. Italy saying no to the referendum and the Prime Minister handing in his resignation? Bullish. Heck, all we need is a coup detat in India and the entire Belgian banking system to go kablooey and the S&P 500 will be at 3,000 by Christmas Eve.

http://www.zerohedge.com/news/2016-1...ops+to+zero%29

The following information came from post 33 on December 6, 2016

http://www.capitalandconflict.com/economics

Snippet:
That’s the backdrop. So what is Tim looking at now for signs the situation in Italy is deteriorating? Last night he pinpointed four things. I’ll explain them in turn afterwards:

Things to watch:
1) The spread of BTPs (Italian government bonds) over bunds (German government bonds) – any meaningful widening would denote rising credit fears.
2) CDS (credit default swap) spreads of Italian bank debt – ditto.
3) The share prices of Italian banks.
4) I would personally favour owning GBP or USD over EUR. And watch the VIX index for broader macro fears.

http://finviz.com/forex.ashx

The above link is a great visual resource that I use. Enjoy !!!

Daily Visual Chart on EUR/USD

http://finviz.com/forex_charts.ashx?p=d1&t=EURUSD

FINVIZ - Charts on 2 Year , 5 Year , 10 Year and 30 Year US Bonds.

http://finviz.com/futures_charts.ashx?t=BONDS&p=d1

THE KEY US BOND CHART TO MONITOR !!!

http://finviz.com/futures_charts.ashx?t=ZN&p=d1

The following information came from post 37 on December 6, 2016.

FREE OFFER AT NO COST OTHER THAN YOUR TIME !!!

I will teach the first 6 traders that sign up here how to earn 5% NET a month or ROI of 5%

CONDITIONS:

(1) You must have been trading for at least one year.
(2) Your methods have not been profitable.
(3) You will invest one hour a day of your time.
(4) You will open up a $50,000 US Funds Demo Account with FXCM UK
(5) You will email me your user name and password so that I can check your results daily.
(6) I will give you 30 days of my time and knowledge and at the end of the 30 days I will give you a grade out of 100 HOWEVER your real Grade will be if you show NET PROFIT or ROI of 5% or $2500.00.


The first 6 qualified persons that sign up and agree to the above conditions will be given my Private Email address so we can communicate. All QUESTIONS AND ANSWERS WILL BE PUBLISHED ON THIS THREAD IN ORDER TO HAVE FULL DISCLOSURE.

Thank You and have a Great Trading Day !!!

Contact Benjamin at [email protected] Thank You and I look forward to hearing from you.

The following information came from post 38 on December 6, 2016.

Psychological Challenges of Speculative Trading

An Extract from the book of “Beat the Odds in Forex Trading” by Igor Toshchakov, published by Wiley

A successful trader’s career mainly depends on his or her psychological stability in stressful situations, which are common in the process of trading. Theoretical knowledge can be acquired by reading professional literature; practical skills and experience are acquired in the process of actual trading. The most difficult process is adjusting psychological stress, because in real life it is impossible to completely eliminate the stress factor influencing human activity. Underestimating the stress factor could play a mean trick on trader and even completely block their abilities to make reasonable decisions in real trading situations. The psychological stress of those trading in the FOREX (and any other) market is extremely high. Traders must work under permanent psychological pressure, making decisions in highly unpredictable and uncertain market situations.

Each trader goes through mistakes, failures, and losses in his or her own way, in accord with his or her personality and temper. Some might blame their failure on market’s “wrong behaviour”, which didn’t comply with the trader’s brilliant forecast and caused the failure of the magnificently planned speculative combination. Others blame themselves and their own inabilities to make right decisions in situations, which afterwards seem to be simple. It is an interesting fact that, in hindsight, traders usually find the decision that should have been made at the lost critical moment and can reasonably prove their point of view. Why can they find the right decision so easily and quickly in hindsight? Was the trader unable to do so at the right moment? I don’t think it can be simply explained by looking at yesterday’s situation from today’s point of view. I do not think it can be explained by the fact that classical technical analysis at allows for multiple explanations of almost any market situation. It is always possible to find an appropriate basic explanation for any market shift after the event takes place. In the heat of the moment, however, the trader was influence by stress, and that stress caused the error. This is proven by the fact that most novice traders show exceptionally good (and even phenomenal) results trading dummy accounts but can’t even come near those result when trading with real money.

Being permanently under stress, a trader can often make insufficiently considered, impulsive, and therefore, wrong decisions that result in losses or premature liquidation of profitable position, that is, in lost profit. Sometimes, after a few successive failures with various trades, traders become fearful of the market. They are in as state of psychological stupor, and even a simple market situation may cause panic. They cannot overcome their emotions or soberly evaluate the current situation, and they are unable to make any decision – reasonable or otherwise. In many cases when the market situation shifts against the trader’s position, they can only passively watch the growth of their losses, because they are unable to make any decision at all. Often, after the market stabilizes and traders have the opportunity to calmly analyse daily diagrams of currency fluctuations, they come to the conclusion that the main cause of failure was not the lack of knowledge or training but their own emotions. However, the situation cannot be reversed. Time has passed, money has been lost, even everything should be begun again.

Another problem that causes severe and even catastrophic consequences is the trader’s wilful thinking. In this case, treaders are sure that their forecast of market trends is solely correct. They feel the market cannot and should not give any surprises. They do not consider other options that could be helpful or they think of other options in a vague and uncertain form. Sometimes, traders consider a market shift against their positions. They acquire new contracts at a lower price in the hope that the market situation will come back, and all the positions will become highly profitable. Afterwards, as the situation worsens, they will be able to come out of the market without serious losses. Being sire they are right, traders lose the ability to critically evaluate the condition of the market and accordingly their own position in the market. In this case, they consider only those basic and technical features that justify their wishful thinking, and they discard the contradicting features. This wishful thinking costs them dearly and can lead to psychological frustration. The market’s “wrong behaviour” not only deprives traders of a certain amount of money and often ruins their trading account, but also undermines their self-esteem and their hopes of being a winner in the trading battle.

After such a loss, traders blame themselves, repeatedly going through the details of the unsuccessful trade. They blame the market for the “wrong behaviour” or themselves for errors in what then seems an absolutely clear situation. Sometimes, the trader-market relationship takes the form of a vendetta. Traders consider the market as their personal enemy, treat it in an unfriendly way (even with hate) and dream of immediate revenge. Doing so, they miss the fact ht at they are essentially blaming nature for changing sunny weather to rain. It is very important to be prepared beforehand for this change. Traders should always have close at hand one or few options in case of sudden change of the situation/weather, so that their foresight assures their good time or good profit.

The third main psychological problem is trader uncertainty, especially when traders are inexperienced in abilities and skills – specifically about each market position they hold. Immediately after each position is opened and a money contract is bought, treaders start questioning their choices. This is revealed most vividly in the case of a moderately active market at the moment of fluctuations close to the opening price of the position. Any moment (even insignificant) against their position causes traders to have an irresistible desire to sell the recently acquired contract to limit losses, until it is too late and the market does not shift too far away from their position opening price. On the other hand, an insignificant market shift in the desirable direction causes the same desire to eliminate the position, until it provides for any (even tiny) profit and before this profit does not turn into losses.

Sacred and trouble traders rush and race about. They open and liquidate their positions too often, and experience many small losses and gains. Within a short period of time, they turn intermittently into bulls or bears. As a result, they suffer losses on a dealer’s spread and/or commissions when there were no significant market changes, and all the market fluctuations were no more than just regular market “noise”. Such losses are typical for beginners and individual traders with small investment capital or little experience and insufficiently psychological preparation.

Not uncommon are cases of traders’ impulsive decisions on trading, without any plans or serious preliminary market analysis. The position is opened under an impulsive, invalid emotional reaction. Often, it can be explained by traders’ fear of losing a brilliant opportunity to earn money they think is being offered by the market at that moment. I have witnessed these attempts to jump onto the last carriage of a departing train, and such attempts have ruined a lot of traders. Many traders cannot calmly watch any kind of market movements. Some of my students have confirmed this reality. If they have no positions at the moment of more or less significant market movement, they consider it as a lost opportunity to gain profit. This can inflict a serious shock to them.

When they have no position, they seem unable to realize that each market movement can be considered both ways, and the opposite situation can quite possibly develop. Statistics show that, at each market movement, the chances to lose are much higher than to profit. How does it happen that reasonable people (who in everyday life, without any emotion, can watch a bank casher counting other people’s money) consider the fact of market movement as a threat to their own pockets? Why is other people’s money in the hands of a bank cashier not considered as a lost profit, whereas capital shift on the market and the corresponding quote fluctuations are causes of negative emotions? I think the answer is in the illusory simplicity of business itself, which is considered by many people as a good and simple opportunity to earn a lot of easy money. Similar notions are widely spread among novice currency traders. The soon traders abandon such ideas, the sooner they become professionally efficient traders.

The most difficult problem for every trader (regardless of their experiences) is to learn as quickly as possible how to recover quickly from losses, which are inevitable in this business. At the same time, they must learn to handle shocks and psychological damage inflicted by the losses, because there situations could negatively influence their future work.

The losses themselves and the fear of losing, both of which permanently torture traders, negatively influence their ability to make reasonable decisions in a complicated situation. These factors also undermine traders’ ability to follow their own rules about trade strategies and systems.

I have become personally acquainted with hundreds of traders and have watched their activities. I have taught many students, and have had my own experience as a trader at various steps of my career in the currency market. Therefore, I have come to the conclusion that the main causes of trader failures in speculative operations in the FOREX marker are without a doubt those associated with psychological trauma – the inability to control their own emotions and to find an adequate way to fight stress.

I have finished posting the first two pages of the 14 on the Money Flow Method and Risk Management and please interchange with me so I can understand anything that you want to say so I can help you.

Thank You

Benjaminis

It looks like the Dow probably will be put over 20,000 as it is now at 19,982.16

Morning Thoughts - Daily

http://finviz.com/futures_charts.ashx?t=YM&p=m5

Watch the Show as they PUT it over 20,000 and then the REALITY takes over during 2017.

Have a great trading day !!!

The following information came from post 58 on December 9, 2016.

Good Morning - Morning Thoughts

I want to explain to all forex traders how fundamental knowledge and understanding my Money Flow Method allows you to set up your Trade Plan.

This article explains some of the issues about how and why the Dow is in irrational exuberance land as the Maestro, former FED chairman Greenspan has pointed out in the past.

It is also called animal spirits. There are two main reasons in my opinion why the Dow continues to head higher towards 20,000. One is the larger traders are probably waiting for the end of TAX SELLING so that they can postpone their profits into next year. The other reason appears to be that the SHEEP, the general public has jumped on the TRUMP TRAIN. We all now how that ends in the game of Musical Chairs.

How are these thoughts and opinions tied together to develop your Trade Plan ?

Here is what I do. I know that when the Dow reverses the MONEY FLOWS out of the Dow into other Asset Classes. There always is MONEY flowing into the safe trade currency of USD/JPY and so knowing this in advance my Trade Plan that I am focused on is to short USD/JPY because I now know the DIRECTION of the Short Term Trend. NO TECHNICAL INDICATOR can tell me this however of course I use technical indicators to decide my Entry and Exit.

I then use my PERFECTED Risk Management Strategy to limit my risks to NO MORE than 5% of my Trading Capital.

I would be glad to teach anyone here how to use this proven Money Flow Method as I have offered here before. I will as I have done with my Initial $50,000 Demo Account continue to follow this Trade Plan and post the results here on my Money Flow Thread.


Benjamin



http://theeconomiccollapseblog.com/a...-2000-and-2007

Snippet:
Are We Being Set Up For A Crash? Stocks Hit A Level Only Seen During The Bubbles Of 1929, 2000 And 2007

http://theeconomiccollapseblog.com/w...icons/user.gif By Michael Snyder, on December 8th, 2016.

Right now, the U.S. stock market is surging, with the Dow leaping toward 20,000, a number rooted in fiscal insanity and delusional expectations. There are no fundamentals that support a 20,000 Dow, but fundamentals have long since ceased to matter in a financial world hyperventilating on debt fumes while hallucinating about utopian economic models that will soon prove to generate fools instead of real wealth.


Today I’m going on the record with a prediction that I’ll offer with near absolute certainty: The rigged markets that now seem to defy gravity will be deliberately and destructively imploded under President Trump for all the obvious reasons. There will be financial chaos like we’ve never seen before: Investors leaping off tall buildings, banks declaring extended “holidays” that freeze transactions, and California pensioners slitting their wrists after they discover their promised pension funds were just vaporized by incompetent bureaucrats.

On the other hand, there are others that believe that Trump is just walking into a very bad situation and that a crash would be inevitable no matter who was president.

History tells us that there is no possible way that stock prices can stay at this irrational level indefinitely. But for now a wave of optimism is sweeping the nation, and many of those that are caught up in it will get seriously angry with you if you try to inject a dose of reality into the conversation.

But like I said yesterday, let’s hope that the optimists are correct. A survey that was just taken of 600 business executives found that 62 percent of them were optimistic about the U.S. economy over the next 12 months.

Incredibly, that number was sitting at just 38 percent the previous quarter.
For the moment, business leaders seem to be quite thrilled that we have a business executive in the White House.

The following information came from post 64 on December 9, 2016.

This article from Zerohedge will summarize the serious position all of are in at this moment. You cannot stop it however being aware of it takes you out of the category of sheep or uninformed citizens of the world.

http://www.zerohedge.com/news/2016-1...ops+to+zero%29

Snippet:
“There’s no non-messy way out of this,” said Luke Ellis, chief executive of Man Group, one of the world’s biggest hedge-fund firms with $80.7 billion in assets. “There’s two versions” of how this ends, he added. Either central banks could move to so-called ‘helicopter money,’ where they buy debt from the government, which then spends the proceeds or gives it to the population to spend. This “for a few years looks golden then leads to hyperinflation,” he said. Or the speed at which money circulates within the economy could grind to a halt. “Then you effectively have a barter economy,” he said.

In a series of exclusive interviews with the Journal, hedge-fund executives overseeing around $280 billion in total highlighted a range of problems created by quantitative easing. The problems they highlight are precisely those that QE was designed to solve, and are exactly the same problems we warned about since the 2009, for which we have been repeatedly branded some variation of "fake news." Now the skepticism has become mainstream.

This is what, according to the hedge fund managers interviewed by the WSJ, will happen:

Damage to economic growth
Rather than kick-starting growth, quantitative easing may do the reverse. Some managers fear it distorts financial markets and undermines capitalism. That system relies on profit-hungry investors to differentiate between strong and weak companies—funding the strong while letting the weak die. QE, say some managers, doesn’t differentiate.

For instance, the Bank of England is buying the debt of firms it deems make “a material contribution” to the U.K. economy. That has led some investment banks and companies to create new debt especially for it to buy. The ECB has bought €48.2 billion ($51.2 billion) of corporate debt since June, but the hoped-for private-sector investment hasn’t materialized.

“What does a market do? It’s a voting mechanism,” said Michael Hintze, billionaire founder of hedge fund CQS, which runs around $12 billion in assets. “Instead you’ve got this 800-pound gorilla out there who’s hovering up assets. “There’s a misallocation of capital and an opportunity cost to the real economy,” added Mr. Hintze, whose portfolio is up 30% this year, ranking it one of the world’s top-performing hedge funds. “It means GDP is not growing as much as it might.”
Some put it even more strongly. “It’s definitely destructive of economic growth,” said Crispin Odey, founder of Odey Asset Management, which runs $8.2 billion in assets.

“Capitalism dies a death,” said Mr. Odey, who sees government policy as the main factor influencing markets. His fund, a top performer after the credit crisis, is down sharply this year because of being too bearish. “It’s all policy. It’s the Kremlin. And I’m in the gulags.”
* * *
Damage to society
In her speech to the governing Conservative Party conference in October, U.K. Prime Minister Theresa May spoke of “some bad side effects” from quantitative easing as people with assets got richer while those without them suffered. U.S. President-elect Donald Trump has said low rates have robbed savers. Those side effects include “envy and distress” within society, “as people think ‘I can’t get out of where I am,’” said Andrew McCaffery, group head of solutions at Aberdeen Asset Management, who looks after $170 billion in assets.

Ultralow interest rates mean the large part of the population with few financial assets begins to despair of how to generate income to fund retirement, he said.
“People see a developing black hole,” he said. This “increases the sense of there being little to lose for many” people.
Andrew Law, chief executive of New York-based Caxton Associates LP, which runs around $7.8 billion, said quantitative easing averted economic depression after the financial crisis.

But he added: “The losers of QE are society, and democracy is also a loser, because central banks are not publicly elected officials.”
* * *

The following information came from post 66 on December 9, 2016.

The Wrap Up - Nightly


https://srsroccoreport.com/market-in...le-in-history/



Snippet:
Investors have forsaken all reason, logic and wisdom by rushing into the biggest stock and financial bubble in history. Even some precious metals investors are selling their gold and jumping into the markets hoping to make big profits as President Trump takes over the White house in six weeks.

Unfortunately, the worst time to jump into a market is when everyone else is doing the same thing. Of course, this doesnt mean the Dow Jones Index wont continue higher for some time, but the fundamentals of the economy continue to rot from the inside out.

No one really notices this as automobile dealers are now selling cars with zero interest rates, nothing down and no payment for 6 months. If this is the sort of business model the automobile industry has to resort to in order to continue sales, we are in big trouble.

Then we have these few headlines pointing to a worsening U.S. economy:
Restaurant Industry, Leading Indicator of US Economy Sours, Bankruptcies Pile up
ESPN Loses A Record 621,000 Subscribers In One Month
Greenspan: Western World Headed for a State of Disaster
The Housing Market Is Waving A Red Flag
These are just some of the many headlines pointing to an economy and stock market that is not heading towards better times. It was interesting to read that ESPN lost 621,000 subscribers in one month. However, ESPN has lost over 15 million subscribers in the past five years.

Market Insanity Pushes The Dow Jones Up To Tulip Mania Heights
I wrote about the 17th century Holland Tulip Bubble in a previous article:
Nothing has changed since the 17th century Tulip Bubble that also destroyed the ability of people to act rationally. At the peak during the Holland Tulip Mania, some tulips were selling for 10 times the annual income of a skilled craftsman (Source: wikipedia)

According to Wikipedia about the Tulip Mania:
. the growing popularity of tulips in the early 17th century caught the attention of the entire nation; the population, even to its lowest dregs, embarked in the tulip trade.[6] By 1635, a sale of 40 bulbs for 100,000 florins (also known as Dutch guilders) was recorded. By way of comparison, a ton of butter cost around 100 florins, a skilled laborer might earn 150 florins a year, and eight fat swine cost 240 florins.[6] (According to the International Institute of Social History, one florin had the purchasing power of 10.28 in 2002.[35])

https://srsroccoreport.com/wp-conten...lbs-Bubble.png

As we can see from the chart, investors lose all economic and financial sense when asset prices start to go insane. Instead of using some restraint and wisdom, they drop all reason and jump in on the rising bandwagon.
Again, the worst time to get into a market is when everyone else is jumping in with both feet. I have updated my chart showing the increase in U.S. Debt vs the Dow Jones Index since the first quarter of 1980:

https://srsroccoreport.com/wp-conten...1980-Today.png

In 36 years, the Dow Jones Index and the U.S. Debt have increased at the same exact ratio 23 TIMES. This is no mere coincidence. Investors who have parked their hard-earned money into market have placed their bet on stocks that are backed by nearly $20 trillion in U.S. debt.
In 1929, right before the Great Depression hit, the U.S. debt was $17 billion versus a $105 billion Gross Domestic Product (GDP). Thus, the U.S. debt accounted for 17% of the U.S. GDP. If we fast forward to today, it is a much different picture.

The U.S. Debt is now 105% of the U.S. GDP. Basically, the U.S. economy is powered debt… and a lot of it. President Elect Trump may have grand ideas for the U.S. economy, however his hands will be tied by the massive debt and terrible energy predicament overhanging the country.
According to the sources I have read, nearly 10% of U.S. oil production is being produced by either bankrupt or financial challenged energy companies. I also mentioned in a prior article that the largest oil company in the U.S., ExxonMobil, had to borrow $8 billion in 2015 to pay dividends or CAPEX. Number two Chevron had to borrow even more at $18 billion to pay dividends and CAPEX in 2015.

This is not a good sign for a healthy market to invest in.

Unfortunately, this will not stop more precious metals investors from selling their gold to play in the Dow Jones Casino. The reason to hold onto precious metals is to protect oneself when the FAN FINALLY HITS THE COW EXCREMENT.

Who sells their homeowner or automobile insurance to play in the stock market? This is how insane the mentally of investors has become.

FINAL COMMENTS: You will NEVER read about these matters in the Mainstream Media. As part of my trading skills I decided 10 years ago that I needed to know and understand all these associated matters in order to understand what was really happening behind the scenes.

This is how I was able to develop My Money Flow Method over the last 5 years and it is why I am able to generate a ROI (Return On Investment) of 10% a month.
There of course is much more to achieving these results. There is NO TRADER whether trading Equities or Commodities or Forex that can succeed unless they have the DISCIPLINE to CONTROL first their EGO. (The Market Is Always Right) Then control their GREED and finally most important their FEAR !!!

Good Evening an enjoy your weekend.

Benjaminis