Oil Prices Plummet – What Does It Mean?

The big news over the past 48 hours has obviously been OPEC’s surprise decision “not” to cut oil production.

In a world of increasingly “lower demand” for oil ( further confirmation of a truly “global slowdown” ) The Saudi’s have opted to sustain production of 30 million barrels per day, keeping market share and putting a real squeeze on The American shale / fracking business, that generally needs to see oil at 75-80 barrel just to remain profitable.

The net effect is generally perceived as “net negative” for oil exporting countries, and could also be a potential catalyst for weakness in U.S equities, with indices carrying “significant weighting” of oil / energy related companies.

The Saudi’s can produce oil much , much cheaper than other nations so in keeping production output high ( and in turn driving prices lower ) there may be more to this than first meets the eye.

A strategic move to drive other oil exporters ( in particular The U.S with it’s high costs of production ) out of the market? 65 dollar bbl oil puts the majority of U.S oil exporters on the back foot and potentially “out of business” should these price levels remain, not to mention driving home the point that “indeed” global demand for oil is certainly on the decline.

I believe it was a 35-40% decrease in the price of oil that also proceeded equities downturns in both 2008 as well 2011.

We are almost exactly at the same point with oil prices as of this morning, so it remains to be seen “what reaction” we may see here in the West as markets digest the information.

First the currency war and now perhaps a “commodity war”? Needless to say….never a dull moment here these days – with “yet another shocker” rippling through markets here this week.

Let’s see what The Central Banks do next right? As this has absolutely nothing to do with you or I.

U.S Unemployment Figures – Back On The Rise

Even with the U.S Gov / Data being as “massaged” as it currently is ( with the numbers being modified / skewed as best they can to show improvement ) – unemployment claims have missed “yet again” for the 4th straight week.

Coming in at 313,000 after an expected 287,000 – the numbers continue to increase – all the while U.S mainstream media continues to “sell the story” that The U.S is well on its way to recovery.

I’ve harped on this before, but once again….take a minute to consider that in the past seven days 313,000 “more people” ( after 288,000 the week prior ) now seek unemployment benefits  in The U.S.

Rough and nasty – a half a million “new” claims every two weeks, or 1 million freshly “unemployed” people per month…as the “downtrend in claims” has now been reversed.

I employ “anyone” to explain to me how consumer confidence numbers, GDP numbers or “any numbers” out of The U.S could possibly be an indication of “growth” with 1 million new people lining up at unemployment offices every single month.

The number ( and it’s longer term implications ) is literally – right out of this world.

Now there will obviously be those of you who will contend “who really cares as The Fed has got our backs”. So essentially what you are saying is that……no matter how bad things get ” it really doesn’t matter” because The Fed ( and The Central Banks in general ) will just keep the party going no matter what.

So in that sense you must be an “advocate” of such monetary policy.

Policy that continues to kill your currency, killing your buying power and reducing your savings ( and most certainly the savings of your parents / grandparents ) to such an extent that people who at one point may have considered “retirement”, now have little choice but to keep “slugging it out in the trenches” another 8-10 years longer.

What kills me is that “you’ll riot in the streets” over the injustice you feel so strongly about ( when a cop isn’t prosecuted for a murder that perhaps you feel he should have ) but will just sit back on the couch and continue to stuff your face with Doritos – watching your Government and The Fed rob you blind.

Is it true that The U.S educational system has been degrading at such a phenomenal pace, that people really “truly” claim that they “just don’t understand”?? Just….back to the football game on T.V, back to the frozen pizza and coke, back to complete and total ignorance as to what is “truly going on” around them?

I’ve never wanted to believe that, but there really does come a point…..

After 5-6 years of supposed “economic stimulus” ( and one would think “recovery” ) – U.S Unemployment figures are back on the rise.

Unreal.

Stacking Cans – Get Long EUR and GBP

As generally bearish as I am…I’m really not what you’d call a “doom’s day’er” although these days…..it really does feel like that’s what this is setting up for.

Everyone on the planet is 100% convinced that The Central Banks have this all under control, and that there is no possible way things can wrong.

That’s scary in itself as….haven’t markets always traded “up down, up down”, bull bear, bear bull, back forth on and on – same ol thing since the beginning of time?

It’s when the boat gets a little too loaded to one side when markets are generally known to “do what they always do” no?

If the Euro and Pound have not bottomed against the US Dollar here - I’ll eat my hat.

EUR/USD has been basing and putting in a continued series of higher lows on a 1H chart  since Nov 6th!

GBP/USD MUST have now double bottomed at 156.00 on the dot.

What is absolutely amazing here day-to-day, is that we “still” see the Dollar Index ($DXY) appear to be higher, but really have it in range for the past 10 straight days. This price action is grueling, with the story of all stories still being that of the seemingly “ever depreciating Yen”.

It’s actually “showing up/making a difference” within the DXY basket of currencies (considering how small a percentage it carries), and considering that EUR is continually moving higher.

Now that is what you call some “serious weakness”, as well some serious divergence. You have to be watching both EUR as well GBP for bottoms vs USD here, and along with it a host of other market dynamics on the cusp of change.

Gold as well Silver both look to be “front running” potential weakness to come in USD – and as I suggested earlier, the move is going to be large and take the majority of passive traders completely off guard.

It’s impossible to put a target on USD/JPY at this point considering that it’s in “no mans land” but as far as any kind of “count” might go ……we are well into the final stage of 5 of 5.

If all of this coincided with a sudden crash, or news of the world ending I would not be surprised at all, in fact……at this point it’s looking just as likely that things are setting up for “exactly that”.

I’ll be “stacking cans” in my bomb shelter for the rest of the day.

That’s a joke.

 

Japan Enters Recession – Stocks At The Highs

It sounds completely and totally ridiculous doesn’t it?

Japan has now “officially” entered recession – last night posting it’s second straight quarter of negative GDP growth, while Japanese stock hang near 5 year highs.

You must see the hypocracy in it all.

You understand that Japan’s QE program has been “triple that of The U.S Fed” over the past year, and just last week was increased “even further” with The BOJ now buying 100% of newly issued bonds. Not just “a few of the bonds issued” – but every single one.

This literally equates to Japan sitting in their basement with some fancy printers and xerox machines and “point-blank” printing / counterfeiting Yen all day “every day”to pay off their debts. No different “in any capacity” to a petty criminal organization doing the exact same thing ( counterfeiting and passing artificial money ) – although obviously….risking years in the slammer.

If it where you or I – we’d be tracked down, handcuffed and whisked away to a maximum security federal prison – never to see the light of day again. You can’t just “print fake money”!

Now get this…..Japan raised it’s sales tax from 5% to 8% back in April, and there have been plans in the works to “further raise the sales tax” to 10% early next year! ( Although in light of the current economic disaster they “might” put this on hold). Can you see where I’m going with this?

If that doesn’t amount to “slavery” I don’t know what does.

Imagine yourself heading for the grocery store tomorrow, and seeing a 23% increase in the price of goods ( as your currency has been so dramatically devalued ) then “on top of that” and additional 3 to 5% increase in the tax!

Where you suddenly offered a 25% increase in your salary? Had you recently planted a small grove of “money trees” in your back yard just to stay afloat?

Where are all the new parks / bridges / roads and infrastructure that you “assume” your tax dollars go to ? Where are all the benefits to citizens ( as I know for a fact the people of a country such as Canada “expect” when taxes rise )?

How can the common man “not” see this as essentially being enslaved? You go to work for the same old pay, with rapidly devaluing currency in your hand – in an environment where taxes are going up!

You don’t work for yourself – you work for the bank!

There is no possible way the average person ( in an economic climate of “slowing global growth” ) stands a fighting chance. You used to live in a house, now you and your family live in a one bedroom apartment.

You used to eat the occasional bit of chicken or steak – but it’s “all rice” now.

QE is a complete and total disaster for the people of Japan, and unfortunately the same rings true for those of The United States.

Japan has thrown “everything but the kitchen sink” into devaluing their currency ( as The U.S is also attempting to do ) and has now “brilliantly” entered recession.

Get ready for “QE 4, 5 and 6″ coming soon to The U.S – and get ready to start buying rice in bulk.

The USD Pogo Stick – Explained

Consider that stocks ( even at these “lofty” levels) still only have a global market capitalization of slightly over $60 trillion. The global bond market is well over $100 trillion, and the global currency market trades OVER $5.3 trillion per day.

It is currencies, not stocks, where the most significant moves occur, as the currency markets are the largest, most liquid markets in the world. They are always first to move when things change.

So what’s changed?

The recent rise in USD has a number of contributing factors, and it’s extremely complex and likely a bit confusing.

On one hand we’ve got the simple “Yen Carry Trade” which we’ve discussed several times before, BUT we’ve also got “The U.S Carry Trade” where “USD itself ” has simply been borrowed on the cheap and invested elsewhere in search of yield.

The recent rise in USD “could” imply two very different things – pushing USD higher for two completely different “and somewhat opposing” reasons.

You’ve got The BOJ ( and anyone else for that matter gobbling up cheap Yen and using it to buy assets priced in USD ) – implying a continuation of “risk on”. Where as on the other hand you likely have “unwinding of The U.S Carry Trade” – where investors who have borrowed USD ( now perhaps fearing  a potential rise in interest rates etc.. ) are unwinding their investments abroad and repatriating USD – implying “risk off”!

Both trades contributing to a stronger U.S Dollar for completely opposite/opposing reasons!

It’s my belief that………..

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The Global Dow – Bear Market Begins

It’s difficult for many to see what’s “going on globally” when all you’ve got day to day is “canned news” via the mainstream media. A casual glance at the T.V and it’s pretty easy to just assume “everything is up” – everything is moving along just fine.

The Global Dow – The Global Dow tracks leading companies from around the world in all industries. It covers both developed and emerging markets. In addition, it includes companies from emerging sectors, such as alternative energy. The components are equally weighted, which means that price movements of the larger stocks have no greater impact on index performance than those of the smaller stocks.

(GDOW) is a 150-stock index of corporations from around the world, created by Dow Jones & Company. Only blue-chip stocks are included in the index.

Lets take a look at the chart:

GDOW_Forex_Kong

GDOW_Forex_Kong

The Nikkei looks like a double top here around 17,125 after the massive “blast higher” brought on by The BOJ’s surprise announcement of even further “further” QE, now causing considerable political concerns in Japan.

I’ve considered this as a “last ditch effort” as opposed to a meaninful contributor to further fuel global appetite for risk, as we have all now clearly come to understand – QE does absolutely nothing to better an economy. It hasn’t worked in Japan – and it won’t work for The U.S either.

Nikkei_Forex_kong

Nikkei_Forex_kong

The current pattern playing out in U.S Equities ( commonly known as a “Megaphone”) has now reached its upper levels of resistance, and will likely be turned back here as of today, and if there is still “some semblance of reality in markets as we know them” – The U.S Dollar should now follow suit.

 

Canada Inks Deal With China – Bypassing U.S Dollar

Canada and China have signed a reciprocal currency deal that’s expected to dramatically boost exports, and bypass the use of USD.
The hub will foster far easier trade between the Canadian dollar and the Chinese yuan, also known as the renminbi. It makes Canada the first country in the Americas to have a deal to trade in the renminbi.

Read the rest of the article here

And we all thought that Canada was just another “American patsy/ pawn” eh?

How’s it goin eh?

Bravo Canada – Bravo!

Here Is Your Ass – Thanks To The Fed

Perhaps I’m a bit to “cryptic” at times – and I apologize for that, but I just can’t stand the standard technical analysis – spouting out endless waves that never complete, Fib retracements that continually get breached, and technical indicators that have been proven “useless” time and time again. Look at them sure….but “live by them”? – No.

The fundamentals “do” still matter however masked / disguised they’ve been ( via our good friends at The Central Banks ) and the longer term time frames / macro trading still trumps “slugging it out in the trenches” day after day – during these unprecedented times of indecision.

As per the prior couple posts  outlining the perceived “future movements in forex markets” – this “will” play out exactly as outlined.

I’m not placing any new trades here today….and likely “neither should you” but…..a quick recap:

JPY UP = Risk OFF

JPY UP = USD DOWN = U.S Equities DOWN

USD DOWN = EUR , GBP and CHF UP

RISK OFF = AUD, NZD, CAD DOWN

This is general ( yet invaluable ) information you can keep with you for the extent of your forex trading career, while keeping an open mind that “at times” a few of these may temporarily shift. These “times” are macro , MACRO MACRO, and are more so an indication of a “change in the investment environment” and not as much about the individual country / currency.

We will see this dynamic change WHEN INTEREST RATES BEGIN TO RISE, and we enter a time of monetary “contraction” as opposed to “expansion”.

The time is coming very soon, but until then – the “next trade” is either “more of the same” ( which by any analysis appears near impossible ) or the outline suggested above.

I say USD tanks and the majority of  “predominantly American investors/bulls” get their asses handed to them  by the very same banks / institutions that sold them the stock in the first place.

Japanese Tsunami – Big Waves On The Horizon

The idea that “the entire planet” is racing into The U.S Dollar as well U.S Equities, in the face of “waning global appetite for risk” is ridiculous. Investors don’t “seek shelter” in Twitter or Facebook – you can guarantee that.

The European stock markets (The London $FTSE as well German $DAX ) have already rolled over, putting in a solid series of lower lows and lower highs – with the Canadian $TSX following suit.

It’s obvious only a few days later, that the BOJ announcement of “even more QE” has done absolutely nothing in a “global sense” as it’s effects can only be seen via the currency pair USD/JPY and the continued “buoyancy” of U.S Stocks.

Even The Nikkei itself has given back a full – 530 points overnight – taking a nice “chunk” out of the massive spike of the two days prior.

The BOJ’s move is looking more like a “preemptive strike” as opposed to something spurring global investors to “jump back on the risk train” – and it only makes sense really.

If Japan sees a Tsunami of cheaply borrowed Yen rolling in from The Pacific, wouldn’t it make sense to get the currency as low as they possibly can “prior”? Buying themselves a little more time and space before the economy is crushed like sushi roll underfoot?

Back in the day ( before the roll out of this massive QE campaign ) Japan would openly intervene directly in currency markets with hopes of keeping The Yen at bay, and time and time again the market would “slam it right back in their face” reversing the entire move – usually within the same 24 hour period.

Perhaps this time will be no different as Japan’s QE initiative will look like a “tiny water pistol” compared to the Tsunami ( unwinding of The Carry Trade ) gathering speed in the distance.

Small trades will come and go. Winners and losers alike, but “the big trades” come in “big waves” – and that’s where the money is at.

 

Waiting On Yen – Waiting On USD – Waiting Waiting…

As contrarian as it may sound – you all know I’m looking for an intermediate “top” in USD –  leading to a much larger decline.

The immediate reaction ( obviously ) to the “official end to QE” resulted in a huge spike in USD, sending EUR/USD and GBP/USD lower as well USD/CHF higher.

Today’s “candle” in $DXY ( pin bar ) is now looking prime for reversal, as it will take very little price action tomorrow – to close under today’s low.

This would fall right in line with a bottoming in JPY, and our expectation of “risk aversion” to continue.

JPY_Futures_Forex_Kong

JPY_Futures_Forex_Kong

If you’ve had any doubts of my continued view of both JPY as well The Nikkei – I hope this “blatant example” can finally put them to rest.

The correlation  of “JPY down = risk on” and “JPY up = risk off” could not be more obvious as The SP 500 has done “the exact opposite” over the past week and a half.

Exactly.

I suggested some time ago that the currency pair USD/JPY  “is the market” as Yen is borrowed on the cheap , then converted to USD to buy stocks. This could not be more obvious in viewing the correlation over this last “massive V-shaped move” in both Yen as well The SP.

USD reversal “lower” ( any day now ) and JPY confirming reversal “higher” will put a stamp on the end of this upward correction – and the beginning of our next leg lower.