If you haven’t taken notice recently…..U.S Bonds have tanked over the past few days, with TLT ( the 10 year bond ) falling hard from 119 to 113 in a pinch.
Bonds “price” and bond “rates of payment” are inversely correlated so as bond prices fall…..bond “yields” ( the amount of interest paid out to you as a holder ) increases so…..the lower the price of the bond…the higher the interest the U.S Gov needs to pay out.
The U.S Gov cannot afford to pay out higher interest on these bonds because ( as you remember from the “debt ceiling debacle of days past” ) The U.S is already 100% completely broke.
100% completely and totally broke. Period.
For every single point that bond yields rise,The U.S Gov falls deeper into the abyss – as default looms.
Absolutely nothing has changed since the last “debt ceiling debate” as unemployment continues to plauge any idea of a “real recovery” – but now with stocks near all time highs!
You don’t see a problem with this?
After 5.5 years up, everything that “can be done” HAS been done, and there is no other direction for a responsible trader / investor to do look……………….. other than DOWN.
You are a fool to consider that “this time it will be different”.
Bonds…..the currency and finally stocks.
When she goes……it’s all gonna go.
This morning looks about as dead / flat / boring as most these days with “yet another” doji type candle expected in U.S Equities.
The Nikkei hasn’t done a thing overnight but most certainly looks tired here, with JPY now looking like it’s found a low. Check out the “waning” MACD as well RSI ( on your own chart ) on the weekly. This thing has been getting by on a lot of hot air and “funny money” as no one in their right mind is “actually” buying Japan.
Keep in mind that the correlation of The Nikkei and USD is nearly 100% , and USD is now as overbought as it’s been in years. I think you get the picture.
The next “decent move” should have JPY, EUR and GBP ( as well gold and oil ) moving higher while USD, AUD, NZD as well CAD move lower.
We can also see the inverse correlation and completely “oversold” conditions in EUR.
I can’t suggest getting into anything new here today as it’s Monday ( and we all know how Mondays go ) but things are certainly falling in place for the larger trade at hand.
You gotta love the headline, and I can see it now…..
Every “kool-aid drinkin Fed head” on the planet convinced The U.S Dollar is “on the rise” due to strong U.S economic data – biting my head off here in days to come.
How dare you suggest The U.S Dollar is going down hard! How dare you Kong! How dare you!
I’m actually amazed that The Fed and U.S Gov have allowed the thing ( USD ) to get this far out of the basement as it is so……..yes I’m saying it – I think a whole lot of USD bulls are about to get taken down the river.
The boat looks about as loaded as need be.
Let’s tip this thing.
A quick update for those who’ve been following and have come to understand the “extremely large” position I’ve been building “short” The Australian Dollar.
They say that “good things come to those who wait” and believe me……I’ve been waiting.
If you can imagine, The Australian Dollar has traded sideways / flat for an incredible 24 weeks, until just yesterday smashing lower -250 pips in a matter of hours.
We all know that “in general” The Australian Dollar trades along side risk, moving higher with stocks so it is worth noting that with yesterdays “tiny fall” in U.S Equities we certainly got a reaction out of AUD.
If / when a larger correction unfolds one can only imagine profits generated “staying short” AUD as I plan to.
On a side note – I don’t believe for a second that Scotland will vote “yes” to separate from The U.K, and that long GBP here is looking very, very good.
Long GBP/AUD anyone? Kinda makes sense if you actually take a minute and think about it.
GBP going up….AND AUD going down. These are the trades that pay.
These past summer months had to have been the “absolute worst trading environment” I’ve experienced in my entire life.
A virtual “dead zone” with many currency pairs barely fluxtuating in tiny ranges, extremely low volume and a continued stream of “every conflicting data” flying directly in the face of any realistic fundamental analysis. Many a trader threw their charts out months ago, choosing to either sit on the sidelines until volume returned or possibly adopt the attitude of “oh to hell with it – let’s just buy stocks and everything is going to be fine”.
I haven’t really heard much from many “perma bulls” since the correction back in July wiped an entire 6 months worth of profits in a matter of 10 days, and wonder how the “let’s just buy” strategy has really worked out. Hats off to those nimble traders who may have not only sold at the correct time, but possibly even caught the next leg up. Fantastic trading.
So September is now upon us, and it finally appears that markets are starting to come alive once again, only that “volume” seems to be returning on the “down days” and not so much on “the up”.
- Both gold and silver have been taken down to test the near term lows made back in June, with silver in particular testing the “ultimate low” around 18.00.
- The Japanese Yen ( which trades in tandem with Gold as they both generate “safe haven flows” ) has now reached it’s most oversold level of the past 2 years.
- The U.S Dollar ( inversely ) has now reached the most “overbought levels” of the past few years.
- U.S Equities as seen via The SP 500 have recently made “all time highs” around 2011 level.
Call me crazy but, would one not agree that each of these correlated assets are just about as stretched to extremes as we’ve seen them in a very long while?
Does it not make complete and total sense that “this would be the case” just prior to a sizeable move being made in the opposite direction? Of course it does….as this is how markets function.
Get the boat as “loaded to one side” as you possibly can – “just” before tipping it.
We’ve seen it over and over, and over again and this time it will be no different.
Amber lights flashing ahead.
So Draghi actually did something but…..so far – not really.
The European Central Bank’s plan is to buy “repackaged debt” to help boost lending and the euro zone’s lagging economy. What’s important to understand is that the program is designed to encourage banks to increase lending by allowing them to “repackage loans into bonds” and sell them to the ECB and other investors – freeing up their balance sheets to make further loans.
It’s my view that until the euro zone banks “know” how much the ECB intends to buy ( which at this point they do not ) there will be little movement in this area, and that for the most part banks will likely just hang on to these assets ( considering the costs of selling them ) and continue to “choke” lending – essentially killing the programs intended effect.
We’ll get more information early October but for the most part I still see Draghi’s actions as “lots of talk and no action” and assume ( perhaps after another day or two ) markets will also come to this conclusion.
The Euro vs USD scenario appears pretty self explanatory as the “Central Bank ponzi ping-pong” continues, with The Fed essentially “ending QE in October” and The ECB cranking it up. I find this somewhat ironic if one didn’t already have the broad understanding that it’s all just a part of the same coordinated effort.
The United States looking to come out as “the shining winner” as both The BOJ and now ECB look to carry the weight of the world on their “balance sheets”.
Is this the “new normal” as Central Banks continue to run the show? or will the natural forces affecting human decisions making / behavior again be reflected in markets, as they have been in the past?
Will humanity prevail?
So we’ll see here soon.
The Nikkei has just moved 340 points higher on rumour that Yasuhisa Shiozaki ( who has been advocating for the GPIF to reduce allocation to domestic bonds ), may be appointed the Health Minister ( so what? ) when Abe announces his new cabinet tomorrow.
The GPIF ( The Government Investment Pension Fund ) The world’s largest pension fund ( yes a Japanese fund not American ) is expected to increase purchase of Japanese shares to 20 percent of holdings and reduce domestic bonds to 40 percent.
With the market way ahead of itself here it’s the actual “timing” of said purchases that is still unknown. The fund would need to buy an additional 3.5 trillion yen of domestic stocks to reach the 20 percent target, so the “span of time these purchases would be made over” is key. The fund will announce its new asset allocations in the fall – according to GPIF investment committee chairman Yasuhiro Yonezawa.
Both Gold and the Japanese Yen got absolutely demolished overnight, with fear “once again abated” having the largest pension fund on the planet now suggest it’s ready to “step it up” in support of the ponzi we’ve all come to love.
This comes as tough news for Kong as I’ve been trying to “get long JPY” on the inevitable turn, so it remains to be seen if this will manifest as a simple “spike” or develop into something larger. My initial thoughts are “nothing can save Japan” and that this only goes further to affirm the complete and total desperation currently sweeping the land of the sinking sun.
Regardless – one has to respect that a player as large as The GPIF most certainly has the ability to “ruin your day” should they decide to go all in.
We are very close here folks.
Aside from the currencies, nearly every other thing I track / read / research suggests that this may not only be a strong area for “correction” – but the start of something much larger.
There has rarely ( if ever ) been a time in history when as many separate indicators / charts / graphs and info has been “this skewed” to suggest such divergence and risk of serious “downside action in global appetite for risk”.
Considering the current geopolitical backdrop and with U.S Equities still “clinging” to the highs, personally – I don’t see a blow off top scenario. To whatever degree that retail investors have “taken the bait” over the past 7 months….I believe they are “already in”.
The situation with Ukraine really only being the tip of the iceberg now as Putin’s “Gazprom” now announces “massive oil deal with China” again…bypassing the U.S Dollar in trade. These are tremendous blows to the U.S system, and make clear The U.S “true intension” in Eastern Europe.
They must save the U.S Dollar as world reserve currency – and will stage a war to do so.
The Nikkei rolled over a couple of days ago, USD looks set to plunge along with equities, and the entire currency market has more or less moved “risk off”, with USD/JPY “not breaking out”, falling back into range and expected to fall further.
The real-time trades in currencies, gold and silver as well U.S Equities, weekly reporting and daily commentary can be found at the members site: Forex Trading With Kong.
Again….you generally need to be “ahead of these moves” in order to take advantage ( note yesterdays post- please scroll down ).
Gold, & Silver Jump As Citi Sells All USD Positions Fearing “Squeeze”
I envision a time ( in the not so distant future ) when “all things American” ( USD, Stocks and most certainly the bonds ) are sold.
I’m sure you’ve noticed the correlation of USD strength = U.S Equities strength so…..one would have to imagine the complete and total “inverse relationship” as well right?
Or they just all keep going up forever. RIght.
Little chance of that.
Other than the few short USD positions already in play I’m more or less “cash ready” for the large positions “long JPY” ( against most every other currency on the planet ) kicking in here soon.
No shorts in SP 500 as of yet.
More at the Members Site: Forex Trading With Kong
A very large “gap up” here in the wee hours Sunday night before markets really kick off, and the U.S Dollar continues to surge higher against the E.U currencies.
One can’t imagine a single USD bear left on the planet.
Exactly as it should be…. before the thing tanks.
It’s amazing to me how public perception continues to view USD’s recent surge as “some indication” of a stronger U.S Economy.
How on Earth can The U.S Governement ( as well the crooks at The Fed – a private held bank ) handle the enormous contribution to the “serviceable debt load” ( remember The U.S is “officially broke”, with a continued rise in the “allowable debt ceiling” now just a given ) brought about by a stronger U.S Dollar?
It’s impossible. The Fed mandate is to “kill USD” at whatever costs, as to keep these balls in the air as long as they possibly can.
A strong U.S Dollar “kills” the U.S economy! As exports tank, and the amount/value of outstanding sovereign debt balloons “past” the balloon we already know to be.
Find me an “economist” who can make the arguement that “a strong U.S Dollar is good for America” and I’ll eat my hat.
A strong U.S Dollar represents everything the U.S Gov and The Federal Reserve fear most so….I encourage you to start looking for signs of reversal – as opposed to getting to excited.