About The Wolf

Twenty years is a long time to be involved in the trading business. Through many battles in every asset class known to man, knowledge has been gained; and, this project is a way to share that knowledge. The Wolf is a big fan of repeatable market work, or the creation of a “process.”

Nailed It! Elliott Wave Forecasts Prove Correct

As we’ve written many times here, “Policy Divergence” is a US dollar bull fantasy. This week, as risk markets became unglued, the probability of a rate hike in September is around 30% based on the Fed Funds futures market. In fact, there’s now only a 50/50 chance of any rate hike this year. Add to Nailed It! Elliott Wave Forecasts Prove Correct

Not Exactly a “Great Fall” But…

If our Elliott wave currency forecasts are correct, look for more chatter about the Fed leaving rates alone in September. It’s long been our contention that the Fed really doesn’t care about serial bubble blowing or normalizing policy. If it did, it could have raised rates by a measly 25 bps by now, considering the Not Exactly a “Great Fall” But…

Elliott Waves Say Dollar is Humpty Dumpty

The initial reaction to Friday’s lackluster US job’s number was to buy dollars. But, that didn’t last long, and by the close it seems that more traders are warming up to the idea that the Fed won’t be raising rates substantially, even if it does something in September. While the commodity smash is in full Elliott Waves Say Dollar is Humpty Dumpty

December Not September for FOMC Says Elliott Wave Forex Counts

The Wolf likes to think individual traders have some great advantages. We can sit around in cash, only taking risk when it’s appropriate. I’ve heard trading described as fishing, a lot of time waiting around, and very little time spent reeling them in. Our focus tends to be laser-like when we see a clear opportunity. December Not September for FOMC Says Elliott Wave Forex Counts

Do Valuations Matter?

Today’s lofty stock market levels are predicated on the idea that zero percent interest rates (ZIRP) and low Treasury bond yields have made cash and bonds so unattractive that stocks are the only alternative. This is represented by the acronym TINA, or There Is No Alternative (to stocks). While it is true that lower interest Do Valuations Matter?

What Doesn’t Go Down – Elliott Wave Forex Counts

This week, let’s get right into the charts for our Elliott wave forex forecasts. EURUSD Last week we were looking for a slight dip in EURUSD followed by an upside reversal, and that’s exactly what we got. We were leaning on two facts:  1. Daily RSI hadn’t fallen into Sustainable Bear territory (lower grey zone), What Doesn’t Go Down – Elliott Wave Forex Counts

Dollar Reigns Supreme as Greek Can is Kicked

While Greek bondholders may have seen a reprieve, the euro didn’t this week. We’re going to lead off with the GBPUSD because it looks more constructive than EURUSD. Many risk assets rallied this past week, but others didn’t, such as junk bonds. The Wolf is still firmly in the camp of the Fed leaving rates Dollar Reigns Supreme as Greek Can is Kicked

As the Euro Churns: Elliott Wave Edition

A fund manager friend of ours is fond of saying that European politics has always been dysfunctional, and it will always continue to be. After last week’s dramatic OXI vote from Greek citizens, the euro was sold reflexively, without regard to the euro being a stronger currency without its weakest link – Greece. With the As the Euro Churns: Elliott Wave Edition

Greece & Puerto Rico Influence Elliott Wave Forex Counts

With the unprecedented IMF default from Greece this week, and the tacit admission from Puerto Rico that it is bankrupt, it seems that this credit cycle has peaked. Both are similar in nature to the March 2008 insolvency of Bear Stearns. At the time, The Wolf was short financials (LEH, MER, FED, FNM, etc.), and Greece & Puerto Rico Influence Elliott Wave Forex Counts

Elliott Wave Currency Update Post Greek Default

As we said this weekend, a disorderly default seemed more likely. Whether or not the game of chicken between Greece and the troika ends in an official parting of the waves, or one side gives in (The Wolf believes one side will cave.) to the other’s demands, that won’t change our Elliott wave currency forecasts. Elliott Wave Currency Update Post Greek Default

How to Handle Stalled Elliott Wave Counts

Last week we were looking for a continuation of the rally in the euro, which failed to materialize this week. As I write, it seems the Eurogroup is closer to allowing a Greek disorderly default. And, while that’s a possibility, that’s not what we are focusing on. Instead of focusing on fundamental developments, or only How to Handle Stalled Elliott Wave Counts

Elliott Wave Forex: The Trendline Breaks

Why does former resistance become support when prices push above it? And, why does former support become resistance when broken? There is one reason that this “reverse polarity” has ALWAYS been the case – human psychology, which never changes. The psychology has to do with an overwhelming desire to “take profits rather than losses.” Think Elliott Wave Forex: The Trendline Breaks

Euro Ready to Launch, Says Elliott Wave Currency Forecast

Sailors signal the launch of an F/A-18F Super Hornet

As recently as March, many were calling for parity for the EURUSD. One Forbes article stated, “Like a hot knife through butter, the EUR has managed to penetrate its long-term medium target with ease (€1.0762). It’s near impossible to stop a runaway train…” While the Forbes article wasn’t making a direct forecast, it reflected sentiment Euro Ready to Launch, Says Elliott Wave Currency Forecast

Creating Inflation & Elliott Wave Currency Counts

Mark Twain quote: It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so

This week the Federal Reserve’s mouthpiece at the Wall Street Journal John Hilsenrath penned a letter questioning, with an almost baffled tone, why people aren’t freely spending money. While I could write a list of reasons why they aren’t, suffice it to say that the economy isn’t nearly as good as those holed up in their ivory towers assume. And why is that?

The “Most Hated” Currency & Elliott Wave Forex Counts

There’s little doubt the yen will ultimately end up in the currency dustbin of history - Elliott wave forex counts

We’ve made no secret of our detest for Japanese monetary and fiscal policies, and the ultimate outcome for the yen. There’s little doubt the yen will ultimately end up in the currency dustbin of history, along with the Zimbabwean dollar and Venezuelan bolivar (The Wolf correctly called for Venezuelan hyperinflation in January 2010.). In fact, The “Most Hated” Currency & Elliott Wave Forex Counts

Burning Yen & Elliott Wave Currency Forecasts

Coins exposed to fire - Traders were awfully comfortable taking home USDJPY long

USDJPY Back when writing as an analyst professionally, I was taught, “Don’t bury the lede.” In other words, start with the most interesting facet first, and that’s why we’re starting of with dollar/yen. It closed at a new high today, since its all-time low, and we’ve often pointed out the importance of Friday closes. Traders Burning Yen & Elliott Wave Currency Forecasts

What’s the Big Idea? – Part 1

What was the big trading idea in the past

Sometimes, when searching for trades, it pays to take a step back. If one formulates a valid long term investment theme, it can be used as a bias to trade for months (given confirming price action and momentum). An example would be the post we wrote about the Turkish lira back in October. That article What’s the Big Idea? – Part 1

Monetary “Quacks” & Elliott Wave Currency Forecasts

monetary mis-management

At the end of last week’s post, we lamented about the sorry state of monetary policy today. This week, we’re going to show a few charts that show some proof that the “adults have left the room” when it comes to prudent monetary policy. There’s only one tool the current crop of central bankers know Monetary “Quacks” & Elliott Wave Currency Forecasts

Gatsby’s Punch Bowl & Elliott Waves

McChesney: take away the punch bowl just when the party gets going

This week, we’ll get right into the Elliott wave currency forecasts, since we’ve ended this week’s piece with a bit of a tirade against the buffoons that control monetary policy today. EURUSD The euro fulfilled our forecast for a push to a new high this week, which completed a five wave rally. The push higher Gatsby’s Punch Bowl & Elliott Waves

Einhorn Blasts “Frackers” (Beneficiaries of the Junk Bond Bubble)

Today David Einhorn gave his presentation at the Ira Sohn Investment Conference. For those who aren’t familiar with the conference, it’s turned into an annual who’s who lineup of top investment minds; and, it’s for a great cause – pediatric cancer research. The title of his presentation was “Meet the Frackers (YouTube link).” In it, he Einhorn Blasts “Frackers” (Beneficiaries of the Junk Bond Bubble)

Combine Elliott & Wilder’s RSI For Clues

The Welles Wilder's RSI is a speed indicator that helps to pick the preferred Elliott wave count.

You’ll notice from time-to-time that we’ll have multiple counts on our charts. In fact, The Wolf likes to think more in terms of probabilities of counts, rather than either/or. For example, the top count will usually be 50-85% probable, with the top alternate 15%-50%, and the second alternate 5%-20%. Doing that has a couple benefits Combine Elliott & Wilder’s RSI For Clues

We’ve correctly called the early week USD weakness, especially against the pound and Kiwi. We tweeted out a bit earlier today that we’ve moved flat ahead of the US GDP announcement and Federal Reserve meeting that begins tomorrow. There’s still plenty of room to the upside under bullish Elliott views, but sometimes it’s just about managing risk and avoiding volatility. We’ll be looking to be dip buyers on GBPUSD, AUDUSD and NZDUSD.

When It All Goes According to Plan

Last week's Elliott wave currency forecast was accurate

We started last week with a question, “What’s more important, Signals or Elliott waves?” Going into the week, we didn’t write, “this week we’re super confident of the outcomes,” but sometimes, you’re just in the zone. We were able to catch both the early week dollar rally, using EURUSD, and the late week dollar decline When It All Goes According to Plan

Are Signals or Elliott Waves More Important?

Our weekly column that shows our Elliott wave currency forecasts is step one in our trading methodology – the Context. Steps two and three are Momentum and Signal. You have to start looking for opportunities somewhere, and for us, we build “themes” and weekly opportunities off of daily charts. But, just because we’ve generated an Are Signals or Elliott Waves More Important?

Blindsided by the Housing Bust? Don’t Miss the Junk Bond Bubble’s

There’s a reason The Wolf continues to harp on the Junk Bond Bubble, and the Dosimeter, which lists over 100 defaults now. That’s right, I’ve capitalized it, turned it into a proper noun, hashtaged it to death and won’t stop talking about it. That’s because it’s the SINGLE MOST IMPORTANT ISSUE for this next down cycle, whenever it Blindsided by the Housing Bust? Don’t Miss the Junk Bond Bubble’s

Currencies At a Crossroad

Potentially look for opportunities in some currency crosses

All of the pairs don’t agree on the near term path for the dollar. At a point in time like this, it’s best to view each of the pairs individually (as opposed to a dollar theme), and potentially look for opportunities in some crosses (EURGBP & CADJPY). Early week action may confirm several counts, and Currencies At a Crossroad

Fugazi or the Real Deal?

Is the dollar decline is a head fake or the real deal?

The US dollar’s trend isn’t so unanimous anymore, is it? We’ve pointed out ad nauseum over the past several months that the Fed may balk at raising rates, may raise them awfully slowly when it finally does, and that a Greek default doesn’t have to mean a weaker euro. This week’s manic/depressive action in currency Fugazi or the Real Deal?

Triangulation Continues For USDJPY

On Thursday last week The Wolf sent a Tweet about the clear three wave decline in USDJPY. And, over the weekend we mentioned an “aggressively bullish” posture. The USDJPY has yet to push higher, and it has been triangulating further, which we show as the alternate count below. Regardless of which short term count is Triangulation Continues For USDJPY

The Great Euro Collapse

A photo of rubble - the damage is the done the EUR has collapsed

The euro refuses to stage any rally at all. In fact, most participants have become extreme in their thinking: Greece will exit the EU causing banking failures, deflation has ensnared the ECB and the US has “policy divergence.” Here’s the thing though, each and every one of those thoughts was also true six months ago The Great Euro Collapse

Time For Business Insider to Update Its Numbers

David Einhorn follows a second "guy"

We would like to welcome our latest Twitter follower, the esteemed David Einhorn who is the founder and President of Greenlight Capital, a long/short hedge fund. We are honored, humbled and motivated to continue to strive for excellence through promotion of our Context, Momentum, Signal trading approach for all of our Twitter followers, but David’s addition Time For Business Insider to Update Its Numbers

Dow Theory Non-Confirmation

Dow Theory was developed by Charles Dow, Robert Rhea and others as a way to determine the health of a particular trend. It’s track record of calling tops and bottoms is quite good using only the Dow Jones Industrial Average and the Dow Jones Transportation Average. Basically, the theory is that if both averages are Dow Theory Non-Confirmation

Clear 3-Wave Decline on 60-Minute Chart For NZDUSD

NZD banknotes

Here’s our Elliott wave currency forecast on the hourly chart for NZDUSD: I wanted to show some additional color on the kiwi, because we feel the rally has a little room to run. Here’s the details: First, we can see rallies a, c and a are all in five waves. Declines b, (x) and b Clear 3-Wave Decline on 60-Minute Chart For NZDUSD

The Dollar Wrestles for Control

EURUSD walking on the rope - illustration by Laszlo

Thursday’s reversal in the dollar from support leaves our larger dollar sell-off call at risk. Many longer term players we’ve spoke with have “taken advantage” of the recent dollar sell-off to get bullish again. Maybe we’re wrong here, and the low isn’t in place, but we see an ending move even if the dollar has The Dollar Wrestles for Control

A Sideways Week Means Dollar Pullback Can Continue

A sideways, consolidating market usually means continuation. Here’s the tough part. Both the daily chart, and 240 minute charts have been moving sideways. The daily charts would suggest sideways equals continuation of the uptrend, but the shorter term charts suggest continuation of the budding uptrend. Generally we’ll defer to the larger degrees message, but in A Sideways Week Means Dollar Pullback Can Continue

Non-dollar Pairs Attempt to Lift

Sailor lifts weights during a squat competition - When does he reach the point of failure?

It’s not much, but it’s a start. That about sums up the ongoing counter trend rally in many USD pairs (EUR, GBP, AUD, NZD, CAD and CHF). We still believe that the longer term trend for the dollar is up, but a “reset” is needed to balance the market prior to the next bull wave. Non-dollar Pairs Attempt to Lift

Radio Shack, the Partridge Family and God – All in Bankruptcy Court

Yes, it’s true…sort of:  Radio Shack’s 95-year run has come to an end, David Cassidy of Partridge Family fame has filed BK (not the whole family) and while God isn’t in bankruptcy, one of God’s booksellers, Family Christian LLC, is.

We’ve been writing about the Junk Bond Bubble for some time now. In case you haven’t read our previous work, or seen The Wolf’s thousands of tweets about junk bonds, here’s the synopsis.

Central banks have left rates at 0% for so long, that the traditional discounting mechanisms used in finance have been turned on their heads. All of this monetary expansion is in an effort to combat over capacity (there’s too many burger shops, nail salons and auto dealers for the underlying economy to support) and over-indebtedness (people, corporations and governments).

Junk bond yields look attractive to investors at 6.5% today, when that was what 10-year Treasuries offered in 2007. So, companies have borrowed to the hilt in an attempt to make a buck for themselves. Unfortunately, when the economy slows even a little, coupon payments get missed and defaults start to happen. Follow along on our Junk Bond Bubble Dosimeter.

A Chink in the USD’s Armour

Suit of armour image detail

You’ll notice a different look with this week’s “Wolf’s Prey” Elliott wave currency forecasts. As we get closer to publishing more than once per week, we’ve moved to the shorter 240-minute charts as our default time frame, which is ideal for The Wolf’s swing trading style. We’ll still publish our longer term charts from time-to-time A Chink in the USD’s Armour

Despite the accepted mantra of central bankers and politicians everywhere, a weak currency doesn’t necessarily mean a country’s trade balance will improve. We’re seeing that first hand in Japan, for instance, where importers are declaring bankruptcy at a rapid rate, and the Japanese economy is suffering – even if a few exporters benefit.

Now, take the example of Turkish President Erdogan, who is complaining almost daily that interest rates aren’t low enough. According to our contacts, and analysis, rates in Turkey actually need to go up, not down. The fact that Turkey has the worst current account deficit/GDP doesn’t argue for lower rates, as we pointed out in Currency or Debt Crisis in Turkey.

But, instead of complaining about the economic illiteracy of Erdogan, we’ll simply say thank you. Because, our bearish lira bets are paying off handsomely.

US Dollar Trend is Unanimous

White water rafting on The Nile in Uganda

Markets are constantly changing. Currencies in particular move from a “trending” status, to one of “ranging” status quite often. Recall 2013, when with the exception of the yen and Aussie, currency market volatility was extremely low, and it paid to buy dips and sell rallies, as markets made little net progress. That changed in 2014 US Dollar Trend is Unanimous

Canadian Bankruptcies Begin, Not Only in Energy

First, and foremost, we’re traders here at Trader Skillset. We don’t need stories, or narratives, about our trades – we use technical analysis. But, sometimes, if you get stories that back up your analysis, your conviction on a trade may lead to larger wins. Such as in USDCAD. We mentioned our USDCAD target of 1.1985 Canadian Bankruptcies Begin, Not Only in Energy

Dollar’s Run Turns Climactic

A mountain climber reaches top - on the brink?

On the back of Mario Draghi’s quantitative easing announcement, and a Canadian rate cut, the US dollar has become ever more popular, and the trend has become euphoric. A counter trend move is due, although it’s difficult to want to fight the trend without clear cut reversals. Wait for them to show up first. We Dollar’s Run Turns Climactic

Tomorrow comes the most anticipated announcement from the ECB since Mario Draghi’s notorious, “Whatever it takes” monologue. Many are spending time attempting to guess at a “proper” level of QE, and what more or less than that “proper” number will mean for the euro, S&P 500 and every other asset. To me, it just doesn’t matter what the ECB does.

Right now, the EURUSD sits a full 250 pips away from its 20-day moving average, which means a snap-back rally is due. At the same time, we have yet to see an impulsive rally from the low, so the trend remains down. How about instead, we focus our attention on something actionable, rather than something ambiguous?!!!

How about the very clear three wave decline in USDTRY for instance.

Lira Should Fall, USDTRY Headed to New Highs
Lira Should Fall, USDTRY Headed to New Highs

Our previous mentions of the potential currency or debt crisis, the recent lowering of interest rates and our tweets regarding the pair all reinforce our objective up towards 2.80. Rather than take a guess on the ECB and how the market will react, take a setup that has Context, Momentum and a Signal already present.

Swiss National Bank Cries Uncle

MMA style chokehold

What a week in currency land. The biggest story, of course, was the Swiss National Bank’s (SNB) realization that it’s not more powerful than the market. By removing the artificial peg versus the euro, it allowed the franc to strengthen, essentially admitting its mistake in creating the peg in the first place. Two items are Swiss National Bank Cries Uncle

Dollar’s Rally Stalls

A light aircraft stalls upward

We’ve been talking for a while now about looking for evidence of a turn in the US dollar. Friday’s action was almost uniformly bearish for the buck. The NZDUSD in particular, along with the Aussie, appear to be bottoming according to our Elliott wave currency forecast. There’s still room for a final Elliott wave move Dollar’s Rally Stalls

Four Ideas for 2015

fouréleaf clover illustration

Here are some long term charts that we feel will be a source of trading opportunities in 2015. It’s not a license to trade them blindly with no risk controls, but we do like these ideas. This piece is meant to highlight some technical, and fundamental, concepts we’ll focus on when looking for actual trades this year. We will apply Four Ideas for 2015

Monthly Charts for Perspective, Daily Charts for Trading

Welcome to 2015. We’re going to provide our long-term, monthly Elliott wave counts along with our shorter term counts to start off the year. This will provide some perspective for some of the counter trend rallies being called for. In addition, we’re going to discuss the difference between analysis and trading. Last week we wrote: Monthly Charts for Perspective, Daily Charts for Trading

Dollar Extends Gains as “Levitation” Continues

There’s still no evidence the larger US dollar rally is complete, although we do see that in NZDUSD. We’re not going to ignore reversals, although maybe the market is waiting for the calendar to turn 2015 prior to that. Right now, the meme is “the world is weak, the US is strong,” economically, and the dollar Dollar Extends Gains as “Levitation” Continues

Beware of the junk bond bubble! Whether it’s the Dutch sports car maker, late-night TV advertising law firm or small mortgage brokerages over indebted firms are declaring bankruptcy daily.

While none of these firms were large enough to hit our Junk Bond Bubble Dosimeter, they are nonetheless endemic of the reason we created it.

The Fed’s irresponsible monetary policy (six years of 0%) and a $4 trillion balance sheet, have sent false signals to business people, who created and expanded businesses, which means there’s now too much capacity in place. Much of that capacity has come to be on the back of loans which won’t be fully repaid should the economy slow. We’ll continue to update the Dosimeter, so check back often.

On Christmas Eve, we here at Trader Skillset wish you and yours a Happy Holiday Season, and we have some big things in store for 2015.

Running Flats Abound, Create Clear Wave Counts

The US dollar rally is becoming a bit of a cliché, in part due to the Russian ruble’s collapse to start the week. However, by week’s end the Central Bank of Russia raised overnight interest rates from 10.5% to 17%, making it awfully expensive to bet against. Vladimir Putin told citizens to expect up to a 2-year Running Flats Abound, Create Clear Wave Counts

Signs of US Dollar Weakness

The week isn’t quite complete, but The Wolf will be traveling again this weekend, so this week’s Wolf’s Prey comes slightly prior to Friday’s close. EURUSD Prices saw a substantial bounce from the .618 expansion target from the wave (iv) correction. This is consistent action with our idea of a Terminal Set Up and larger corrective bounce Signs of US Dollar Weakness

Junk Bond Bubble Dosimeter

A yellow warning sign; exposure to junk bond default hazards

Six years of the Federal Reserve’s zero percent interest rate policy (ZIRP) has created a bubble in junk bonds. Investors can’t beat inflation in safe assets any longer, so some of that money has poured into junk bonds and floating rate notes. Those inflows pushed more, and more, money into businesses of marginal quality. Should Junk Bond Bubble Dosimeter

Bloomberg article about the impact of declining oil prices

Update: High yield bonds at new lows! We are on record suggesting that the Federal Reserve’s reckless 0% interest rate for the last six years has created a bubble in junk bonds:

The Bond Bubble is in Junk Bonds, Not Treasuries

Junk Debt & Auto Loans Reminiscent of Subprime in ’07

Now, we’re about to see the defaults start coming from the energy sector, due to the collapse in oil prices as written about in a recent article from Bloomberg. According to Dealogic and Lawrence McDonald, author of A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers, oil and gas exploration companies issued $70 billion in junk bonds in 2014 alone.

So, is it any surprise that the junk bond ETF JNK hit a 52-week low today?

Just like subprime imploded in late ’06/early ’07, and the S&P continued to party on, were seeing stocks do the same today. But, even a few defaults could cause a cascade of liquidations which will have follow on effects. It’s time to exit junk and up your quality, if you haven’t already.

Dollar Rally “Topping Process” Continues

The US dollar pushed to new highs versus most major pairs on Friday, leaving a lasting top elusive. It seems people are of the belief that the economy is improving in the US, and so rate hikes can’t be far off, and maybe they aren’t. Of course, according to the Federal Reserve, the economy isn’t Dollar Rally “Topping Process” Continues

Elliott Wave Currency Review

It can be worthwhile to step away from markets for a time as a way to refresh the mind, and come back with an objective viewpoint. The Wolf is on vacation, but thought a quick comment on the EURUSD was worth making. We’ve been talking about looking for a bottom in EURUSD, but the bounce from Elliott Wave Currency Review

Junk Debt & Auto Loans Reminiscent of Subprime in ’07

“…the problems in the subprime market seems likely to be contained.” Ben Bernanke March 28, 2007 “Bear Stearns is fine.” Jim Cramer Tuesday March 11, 2008 (Four days before its insolvency) “…the likelihood of a severe financial panic has diminished…” Janet Yellen April 29, 2008 (Global Financial Crisis was well underway.) In late November 2006 Junk Debt & Auto Loans Reminiscent of Subprime in ’07