EWI presents a new interview with Mr. Roberto Hernandez, a maverick trader and, as his mentor Dick Diamond calls him, "a true Elliott wave expert."
You may already know Roberto's name; some readers may have met him at Dick Diamond's 4-day trading course in Vero Beach, FL, where Roberto is Dick's assistant. On May 7, EWI's Vadim Pokhlebkin and Ed Rodriguez spoke with Roberto from his office in Mexico City. He shared his thoughts on this year's market action.
(NOTE: As you may already know, Dick Diamond is teaching an intensive 4-day trading course in Florida on July 25-28. The course does not focus on Elliott wave analysis. Diamond teaches his own methodology, which is extremely technical, but not Elliott-wave based.)
Elliott Wave International: Roberto, we last spoke in January. You've said that oscillators are your favorite market indicator -- since our previous talk, has there been anything unusual about their behavior, or in stock market price action generally?
Roberto Hernandez: There has been. Since December or so, I've noticed that while the stock market kept going higher, the euro -- which moved higher with the DJIA for most of 2009 -- broke off and began falling instead. That was an important clue for me regarding the trend, because we saw a similar divergence before stocks peaked in 2007. That's probably the most "unusual" thing I've noticed since we last spoke. On top of it, my oscillators and Dick's spreadsheet indicators* are pointing down. So we're looking at a potentially very significant trend change. But one thing Dick teaches in his class is that tops take time to develop: They are "built" on greed, and greed takes a long time to let go. Bottoms are different: they happen fast because they're driven by fear.
Volatility has increased lately, and that's good for the way Dick trades. That's something we focus on in the tutorial -- what kind of environment is best for trading: how much volatility is good, and how much is "too much." Overall, the market today reminds me a lot of the 2007 top. It's flashing its "stop lights."
EWI: There are lots of rumors that the Federal Reserve is engaged in stock market manipulation, or even in "holding up" the stock market. What's you take on that?
RH: I don't believe the Fed has enough power for that. They may try and hold it up for a few minutes, but the market is just too big. Today [May 7, the day after the Dow suffered its 1000-point "mini-crash" -- Ed.] a lot of people are saying that the Fed stepped in. It's like they've blocked from their memories the 500+ point rallies we saw in late 2008. They all got erased by the continuing bear market! People said the exact same thing in 2007, too: the Fed won't allow a crash. Well, it happened. If they could stop it they would have. There is really nothing else to add to that.
EWI: Any advice for market speculators going into the summer?
RH: I'm not sure if THE top is in for stocks yet. April-May was Bob Prechter's target range for a top, so this may very well be it. All I can say that "the perfect storm" is brewing; in fact, it may already be here. Over the years I've noticed that markets which go up, up and up for months -- like the DJIA since the March 2009 low -- also tend to reverse and then go down, down, down for months at a time. Even if Prechter's forecast and my expectations are wrong, we should at least see a nice correction.
But in class, we teach you how to make money trading in both bull and bear market. So it's really irrelevant where stocks go from here. If the market wants to be bullish, I will be bullish. If it goes down, I will be bearish. As a trader I don't care what the trend is; I only care about being correct with my trading.
EWI: Thank you for your time!
RH: My pleasure.
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*Dick Diamond's proprietary list of market indicators in a spreadsheet format that he shares with every student at the trading course.
(Dick Diamond is teaching an intensive 4-day trading course in Florida on July 25-28. The course does not focus on Elliott wave analysis. Diamond teaches his own methodology, which is extremely technical, but not Elliott-wave based. More details here.)