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The Technical Trader3rd Floor, 3 London Wall Buildings, London, EC2M 5SY - Tel 0207 562 3370 - Fax 0207 628 3815

Email john@john-piper.comTTT 348 In Our 26th Year! 11th October 2012

The FeaturesFTSE stalling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

The Dow forming five waves down? . . . . . . .5/6

The DAX ditto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6/7

Nikkei Dow ditto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

T-Bond still pretty flat . . . . . . . . . . . . . . . . . . . . . . . 7

GOLD hesitates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

GBP/EUR sees BUY signal? . . . . . . . . . . . . . . . . 7

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The Month Ahead

Service AnnouncementI have decided to replace the monthly TTT with a video clip looking at all the markets we cover both from a long-term and shorter-term basis. I did email everyone to ask for feedback and I apologise if you did not receive this. This will be more valuable as I can cover a lot more ground in a video clip than I can in this format – which is, at the end of the day, quite restrictive - there are 5 charts in this issue, you will get 15+ in the video clip and these charts will be LIVE! I will continue to write articles on top of this which you will also receive.There are two primary reasons for this change:Time (1), I can cover far more ground in a video clip far more quickly than I can in written formatTime (2), you get the finished result far more quickly. Currently it takes me three days to write

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TTT so some of my comments are three days old!I did ask for feedback before making this change and the response was 70/30 in favour of the new format. I realise this means some of you will not be happy but I believe the two reasons above are compelling.In some ways I am saddened. I wrote the first TTT in 1989! But in other ways I am uplifted, TTT no. 349 will be a whole new experience!! 1 . IntroductionLast month we released a new trading system called KrautGap. The name was based on the term KrautRock, given affectionately to one of my favourite types of music. In this short piece I want to say a little about the philosophy behind KrautGap and also why we decided to release it as a 10 module course rather than a single manual. First the system is one I discovered simply by looking at charts and I was inspired

to do this by Mark Austin who, as you may know, is “the guru of the gap!” But I have an edge when it comes to charts and this is because I do not use the spread betters’ 24 hour charts which successfully “hide” all gaps. Instead I look at charts of the official markets and in the case of the main German Index, I assume you already realise this system is based on a German index, this means that the price action starts at 09h00 Central European Time (CET) and stops at 17h30 (CET). Why should this give me an edge? There are two reasons:• Firstlyyoucanseethegaps• Secondlymostothertradersusethe 24 hour charts.SoIamseeingstuff thatmostothertraders do not see – sounds like an edge to me! You may wonder why I am being so upfront on KrautGap – haven’t I given you the system already? I’m afraid not, as the system

Trading SummaryLONG TREND

MEDIUMSHORT

(TRADING)TRADING SYSTEM

FTSE 100 DOWN? DOWN? DOWN? 50% SHORTDOW/NASDAQ DOWN? DOWN? DOWN? 50% SHORT

DAX DOWN? DOWN? DOWN? 50%SHORTUS T-BONDS UP UP FLAT 50% SHORTNIKKEI DOW DOWN UP? DOWN SHORTGOLD£/EUR

UPUP?

UPUP

UPUP?

100% LONGLONG

* Trend change maybe imminent ?May be corrective action

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uses a number of key filters and stop levels which are what makes it so successful. If I wanted to hide the fact it was a gap system based on a German index I would have come up with another name!The philosophy behind the system is that I wanted it to be extremely simple to understand and to operate. I also wanted each module to be set out very clearly and, as far as possible, be a thing of beauty! I cannot say whether we have managed the last part but with some very able assistance I am confident that the system is easy to understand and operate. It has also continued to bring in the profits since release and this latter point is what it is all about. Although to be precise it is all about putting profits in the hands of those

who buy the system.But why have I released this as a set of modules, there are actually 11 but we always like to give something extra, in this case a surprise module from Mark on some advanced gap techniques. The idea behind the modules was simply to give time for key trading ideas to soak into a trader’s mind with a view they may stay there. Too many traders employ stops that are far too tight and take profits that are far too small, not prepared to wait for the large juicy profit that may be waiting just around the corner. These too factors are absolutely essential to trading success and make all the difference in the world. The idea of the KrautGap modules is to allow due consideration of these key

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ideas in the hope they will be better implemented.Finally here is a comment I received veryrecentlyaboutthePDS(akaPBW) system I released some years ago:“Hello John,I joined up with you a few years back on the PBW system and the big call. I am working with Mark Austin and Steve Bradley and I am having some good returns from them both,I have stuck with the PBW system and slightly refined it after studying results and data, also modified it to run with other European indices as well as the Dow.This has netted me handsome profits over the last few years running with it and enabled ourselves to do some super things, also stopped my business from hitting the

wall and glad to say we are recovering well and growing.John, frankly without the PBW we would have gone bust like the many that have over the past few years, and I will keep running with the 3 trading systems well into the future.A big thanks as it has really allowed us to change a lot of things in our lives.Kind regardsGrahamM” You may think it a cliché for me to say that it is this type of feedback that makes it all worthwhile, nevertheless, it is true. Helping our fellow man or woman is the most satisfying aspect of life in general. In the months and years to come I look forward to similar feedback on KrautGap – I hope you have

found this short piece of interest.For more details visit: http://www .krautgap .co .uk2 FTSE 100Markets have been pausing at major resistance. At this point three markets, the DAX, the Dow, and the Nikkei Dow have seen initial five wave forms to suggest important reversals may be due. But it has all been rather sluggish and, at this point, I tend towards the view that this may just be one more correction BUT, of course, I may be wrong. In fact we already hold longer term shortpositionsinFTSE,theDAX,andtheNASDAQ.If youlookat chart *1 you can clearly see the triangle but the question is where does it start? Or more importantly

where does it end? If it ended at the low at 5229 at the beginning of June then the latest rally is impulsive and we will break out to the upside. But if it ended at the recent high at 5932 then the next move of import is down (this would be so much easier toshowonavideoclip!).SofairlyopenonFTSErightnow!TRADING TREND. TT is DOWN?3 . The DOWThe Dow has seen a fall which might easily become five waves down off the top – see Chart *2. We do need to see more but it looks impulsive at this stage. The NASDAQhasasimilarpattern(notshown) but again we definitely need more if this is to be a major game

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changer. There is some evidence thatQEhasrunitscourse,atleastas far as boosting share prices is concerned. It has done pretty much zilch for the economy and stocks rely on growth. Apple, who I met with last week, are down around 10% despite another good launch but if you cannot grow then these share prices are beyond absurd and, at some point, this will be realised by markets – possibly with a mad rush to the exits all at once, ie a crash! I cannot say whether, or when, this may happen, but it is part of the reason why we retain our longer term shorts. I cannot guarantee these will come good, they may not, but I view the positions as making good sense as part of your portfolio. We are now

50%shortof theNASDAQviatheETF Proshares Trust Ultrashort QQQ.Iwillbeupdatingthisaswego forwards in my daily reports. TRADING TREND. TT is DOWN?4 . The DAXThe DAX has seen an initial five waves down having tried, but failed, to break out above a very similar triangletothatseenbyFTSEandillustrated in Chart *1. The five waves are not ideal but fairly clear – see Chart *4 – and the only concern is that wave “3” has yet to build up a head of steam. It needs to do so if we are to get confirmation of a major reversal. We remain 50% short of the DAX viatheETFETFSFundCompanyPlcDAX2XShortFundSharesEUR (GBP).

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to look a no-brainer. Even if the various reflationary measures do nothing for the global economies they seem sure to devalue currencies – don’t they? Or could it already be in the price? Maybe, but for now I will stick with the wave pattern and this still looks good for $2000. But there are ZERO sure-fire bets in the markets. We remain 100% long of Gold via the ETF PHAU, entering first on Friday 30th December 2011 when Gold was around $1560 and giving further entry points along the way, the latest being on 31st August. TRADING TREND. TT is UP8 . FOREXGBP/USDremainsinthemiddleof that multi-year triangle and my target remains $1.65.GBP/EUR is again falling back but found support from the low at 1.2320 (the low of 14 September) and we have see a good buying response – this is a buy signal.TRADING TREND. TT on GBP/EUR is UP?

Next month’s TTT is due out on the first or second Wednesday next month in the new video format! This will include the Trading Summary .

TRADING TREND. TT is DOWN?5 . NIKKEI DOWThe Nikkei Dow has seen five waves down and now seems to be seeing a corrective, and fairly feeble, rally. This suggests that we are going lower. As I write the Nikkei is at 8750 with key support levels close just above 8000 and critically 7000 (the lowest level since 1989), so a move below 7000 would mean we are seeing new lows in a 23 year period! Right now such a move seems indicated by the shorter-term wave pattern - see Chart *5. TRADING TREND. TT is DOWN6 . US T-BondAgain no overall change on the T-Bond which is down a little, but not dramatically. Our ETF is based on shorter term maturities and continues to out-perform the longer term bonds. We are down, but not by too much (c. 10% at this point), and the price action can be viewed encouragingly. I plan to stick with our 50% short of these Bonds via the recommended ETF DB X-TrackersIIIBOXXShortUSDTreasuriesTrIndex1C(XUTS)fornow. TRADING TREND. TT is FLAT7 . GOLDGold is stalling and my only concern is that everyone seems hooked on Gold and we have a number of hype merchants trying to cash in on a never ending rally – I won’t mention any names but I would be interested in hearing from anyone who is involved. Gold continues

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Rock bottom became the solid foundation on which

I rebuilt my life.” JK Rowling

The Technical Trader is published once a month (plus “weekly” videoclips-atleast45pa)byt1ps.com,anFSAregulatedcompany based at 3rd Floor, 3 London Wall Buildings, London,EC2M5SY.Subscriptionrates£245(UK),$375(USA),and$415/£285(restof world).Makechequespayabletothe technical trader, telephone payment accepted by Visa, MasterCardorSwitchon01306882579.

All information and advice is given in good faith but without legal responsibility. We are unable to guarantee the accuracy of the information published despite the care taken in preparation. We welcome all enquiries. We can also supply details of the computer software we use on request.Editor-in-Chief:JOHNR.S.PIPERFCAATIIMSTAHbT.The Technical Trader is copyright (© John Piper 2012) and may not be reproduced without written permission.AlleditorialenquiriestoTheTechnicalTrader,Sunflowers,MartineauDrive,DorkingSurrey,RH42PN;Tel:07747030772E-Mail Address: john@john-piper.comEmail at tt101@aweber.com for my free 101 part E-course.

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