Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How Understanding Market Psychology Can Help You Time the Market

InvestorEducation / Trader Psychology Mar 07, 2014 - 06:08 PM GMT

By: EWI

InvestorEducation

Two economic reports hit the newswires Thursday morning (March 6). Both were important, yet each one had the opposite implication for the trend.

The market chose one report over the other, and the question is, why -- and what can we learn from that?


Editor's note: You'll find a text version of this article below the video.

Both reports came out at the same time, 8:30 Eastern on Thursday morning. One was from Europe, where the European Central Bank said that they, "…decided to keep the key ECB interest rates unchanged." That suggested that the European economy was getting stronger.
The second report was from the United States, where "…the weekly applications for jobless benefits fell to a three month low." That also was a sign of economic improvement.

Immediately after, the euro jumped to a new high for the year against the U.S. dollar. But why did the euro gain, and not the dollar? After all, the news from the US was also positive?

The answer comes down to understanding market psychology. All things being equal, it's the bias of the traders that determines the market's fate. The question is, how do you know what traders are thinking?

That's where Elliott wave analysis comes in. Wave patterns in price charts reflect the struggle between the bulls and the bears. So by tracking wave patterns, you can anticipate which side will ultimately win.

Let's take a look at what the waves were saying before the surge in the euro on Thursday. The day before, our Currency Pro Service told subscribers that the euro was forming a wave pattern called a triangle.

A triangle is pattern that moves against the primary trend, so when it ends, the old trend resumes -- in this case, up. On Wednesday, that allowed us to make a very clear forecast for the euro-dollar:

EURUSD
[Posted On:] March 05, 2014 03:27 PM

From nearby levels further consolidation through waves D and E [of the unfolding triangle] should set the stage for a thrust above 1.3824.

On Thursday morning, not only did the euro hit its Elliott wave target, it actually went as high as 50 points above it.

The lesson here is obvious. In the world of finance, where every day you have multiple news reports competing for your attention, focusing on market psychology goes a long way.

Trading Forex: How the Elliott Wave Principle Can Boost Your Forex Success Free 14-page eBook
Trading Forex: How the Elliott Wave Principle Can Boost Your Forex Success

Learn how to apply Elliott wave analysis to your markets. Elliott Wave International's Senior Currency Strategist Jim Martens pulls from 25+ years of experience using Elliott wave analysis to show how you can put the power of the Wave Principle to work in your forex trading.

Download your free 14-page eBook now >>

This article was syndicated by Elliott Wave International and was originally published under the headline How Watching Market Psychology Can Help You Time the Market. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world's largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in