 UP NEXT: THE WORLD’S GREATEST CREDIT COLLAPSE With the help of a historically accommodative Fed, record fiscal stimulus and the decline of U.S. Treasury rates to their lowest level in history, some of the losses have been recouped. But our June 2012 Special Report on the bond market identified a key set-up for the next crisis. The first-ever combined issue of The Elliott Wave Theorist and EWFF called for a “Major Top in the Bond Market” that would lead to outright deflation and an even more devastating credit crisis than that of 2008/2009. U.S. Treasury bonds made a historic top within weeks. Now, a year later, the next crisis is fast approaching. Through the first half of 2013, EWFF has observed the same climactic credit events that we cited in early 2007. In some ways, the conditions are more extreme, as the demand for junk bonds continued to push yields to a new all-time low in May and covenant lite loans account for twice the percentage of leveraged loans that they did in 2007 (see discussion in the June issue). The broader scope of the unfolding crisis is already evident in a more pronounced interest-rate spike. The 10-year U.S. Treasury yield jumped 97% from its low in July 2012, a one-year percentage increase that is already the largest since interest rates peaked back in 1981. As rates continue higher, trouble will ensue. Many of the borrowers that managed to survive or were bailed out during the last credit crisis are barely hanging on despite the rate relief and economic recovery. For example, since 2009, 46% (306,000) of the homeowners that received help from the U.S. government’s main foreclosure prevention program have “re-defaulted.” In the resuming crisis, credit stress will reappear in all of the areas that EWFF cited in 2007. Additionally, whole new areas of default will become focal points, as the orange highlighted list on this next chart shows. Let’s look at some of the upcoming attractions:  Emerging Markets Emerging market debt is assuming the lead role played by subprime debt in 2007. Just as the market for subprime debt buckled ahead of the stock market top of in July 2007, emerging market rates, particularly in China, came unhinged in June (see discussion in Global Rap section of last month’s issue), ahead of what should be an imminent peak in the Dow Industrials. In 2007, EWFF observed that investors initially dismissed the subprime threat, citing “‘no clear signs’ of rising trouble in the debt market.” Here again, investors are unfazed. Some even insist that the initial scare creates “a lot of opportunities” (“Goldman Sachs Likes Emerging Market Bonds,” WSJ, July 11). The lack of concern is particularly pronounced when it comes to China. “If You Think China Is Facing a Credit Crunch, You’re CRAZY!” exclaims a Business Insider headline. Still, some areas of easy money continue to flow even as prior spigots run dry. A July 18 Bloomberg article notes that while China’s cash squeeze is claiming domestic victims “across the nation,” Chinese money remains “cheap and plentiful” in distant markets such as Nigeria, Sudan, Russia and the Ivory Coast. In “some of the world’s riskiest” markets, Chinese banks are lending at “hundreds of basis points below the cheapest commercial loans available.” “It’s almost free money,” says a Nigerian aviation minister who just borrowed $500 million to build four airports at an interest rate of 2%. The cheap foreign lending is done through “policy banks” and is intended to facilitate Chinese business interests. In our book, it is just another example of how government is taking a lead role in the last vestige of the old trend. Because government is driven by consensus, it commits most fully to financial trends when they are over or nearly so. |
Momentum EA Puts Up Shocking Numbers
Submitted by Jason Fielder on April 1, 2010 – 9:05 pmNo Comment.
Every once in a while, I have what I’d like to call a “moment of clarity”. Recently, I was thinking about how to use what MetaTrader has already given us (in the way of indicators) to build a complete system with. As I was thinking about what indicators to put together to logistically create a new system, I thought to myself — “why not make a system simply with two of the SAME indicator?”. Thus, the “Momentum Cross” system was born. As it was being coded and tested by my system developers and myself, I didn’t know what to expect. The results shocked me, and I felt like I just HAD to share it with all of you.
As some of the other trading labs, the rules to this system are relatively simple as well. I only use one indicator, but I use two of them (with different settings):
#1 - Momentum indicator with the setting of “1″ on Close price
#2 – Momentum indicator with the setting of “8″ on Close price
NOTE: For the long and short examples below, when I say “#1 momentum indicator” and “#2 momentum indicator”, look at the above #1 and #2 for reference.
For a long: The #1 momentum indicator is currently GREATER than the #2 momentum indicator. The previous candle must have the #1 momentum indicator SMALLER than the #2 momentum indicator. So, as soon as they cross on the current candle, if the current candle is a LONG candle (current close is above current open), then go long as soon as the 2 indicators cross.
For a short: The exact same entry rules for a long (#1 momentum indicator going above #2 momentum indicator on THIS candle, etc.). Except, if the current candle is a SHORT candle (current close is below current open), then go short as soon as the 2 indicators cross.
It seems odd and awkward to have 2 different momentum indicators, and having to compare the values on each tick. So, to make things easier, we took the liberty of the “weekly indicator” to build you a FXI-MomentumCross indicator!! This will allow you to have a MACD-style indicator that is simply the 2 momentum indicators on top of one another. Check the weekly indicator for this week if you would like this indicator (optional to run this system, not required).
When I tested this, I tested 2 different variables:
1) Left the “fast” Momentum indicator at 1, but tested the “slow” Momentum indicator (everything from 3 to 10). The “8″ setting was consistently best, so ALL the tests were run with a “1″ in the fast momentum setting, and a “8″ in the slow momentum setting.
2) Tested the stop loss and take profit, at a 1 to 1. On the hour, tested everything from 20 to 60. On the 4H, tested everything from 50 to 150. And on Daily, everything from 50 to 300.
We tested on both a short term timeframe (everything from December 2009 to present date), and a long term timeframe (everything from January 2007 to December 2009). Check the results in the video below to see me walk through how this system performed, and what to look for.
First, the EA link. But before that…
VERY IMPORTANT: The Expert Advisor That Is Given To You In This Trading Labs Is Provided AS IS And For EDUCATIONAL PURPOSES ONLY. If you decide to trade this EA on your account and it blows it up to smitherines, we can NOT be held liable. It is a tool, and all tools in this world can be considered dangerous. Just be careful, and if any losses at all occur on your account, remember…you have been warned. It is NOT our fault if either this system doesn’t perform, or the EA doesn’t perform as expected. – With that being said here you go!
1) Click HERE To Download This Expert Advisor. Save it somewhere easy to find, such as your desktop.
2) Move the Expert Advisor into your “MetaTrader 4 Directory\experts” folder.
3) Re-start your MetaTrader 4 if it is already running.
4) You may now use the Expert Advisor for your testing or trading purposes. You should be able to see it in the “Navigator Window” now underneath the “Expert Advisors” tree.
Here is a listing of the variables (as well as their default values):
– Momentum Settings –
MomentumSlow = 1 <– Slow Momentum Value MomentumFast = 8 <– Slow Momentum Value MomPriceFast = 0 <– Applied Price — 0=Close;1=Open;2=High;3=Low;4=Median;5=Typical;6=Weighted MomPriceSlow = 0 <– Applied Price — 0=Close;1=Open;2=High;3=Low;4=Median;5=Typical;6=Weighted – Trading Options – StopLoss = 25 <– Trade Stop Loss TakeProfit = 25 <– Trade Take Profit LotSize = 0.1 <– Lot Size Per Trade MagicNumber = 123456 <– Magic Number (make this number unique) – EA Options – ShowAlerts = true <– Show audio/visual alerts on each new order ShowSystemStats = true <– Show total system profit (over history) on the chart
"Seemingly (credit) is a perpetual motion machine; but one day the lever will go into reverse, and the value of total credit will shrink as dollar prices collapse."
As calls for Dow 14,000, Dow 15,000 and higher flood the media while any talk of credit inflation is tossed to the compost heap, it's increasingly evident – and not surprising – that there are few bears in sight. It couldn't be clearer that investor optimism abounds, setting astonishing records in recent months. Yet not once in history have the financial markets taken extreme credit inflation as a sign of anything but an impending deep and debilitating decline. There's something so obviously wrong with this picture.
