The Global Dow – Then And Now

Forex Kong:

Anyone had a look at the recent chart of $GDOW??
I will post it for your viewing pleasure.

GDOW

GDOW

Originally posted on Forex Trading with Kong:

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…

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Falling Oil Prices = Slowing Global Demand

With readership here at Kong now doubling “again” over the past few months – I struggle to understand what “new information” people are looking for.

You do understand that the recent fall in oil prices ( well …actually not so recent considering it’s been falling like a rock since June – down from 110 to now 58 bucks a barrel ) is a blatant and obvious indication that “global growth” and “global demand for oil” is falling off a cliff right?

Seriously…….if you don’t see the connection between “supply and demand” in something this blatant and simple well…….one has to wonder “what you do see” – if anything relevant at all.

Finally something “other than The Fed / mainstream media bullshit” to get you off the couch and start asking yourself?

Could it actually be? You mean all this Kong talk of “global slowdown” over the past months ( despite the ridiculous rise in equity pricing ) is actually for real?

Give your head a shake. The world outside your tiny bubble of plastic wrap and pizza boxes is selling off like hotcakes and you still think Apple looks like a buy here at 110.

Oil related currencies such as The Canadian Dollar as well The Mexican Peso are getting creamed even as The U.S Dollar is falling hard, and The Japanese Yen enters “lift off stage”.

Debate over the next couple weeks and “what ever miniscule points are left” in the general propping up of both Japanese and American markets is a dead mule.

Step back and imagine oil at 30 bucks…perhaps that will get your attention.

 

No Central Bank Bull Today – Just U.S Budget Balance

Hmmm……

Nikkei down another  150 here as of this “early morning writing ” ( it’s 5:30 here this morning ) and no big moves up in SP futures.

It still “feels” a little early but thus far reaction to the move from The PBOC has been sustained. Markets are not looking very “green” to say the least, but we all know what generally happens every morning before the U.S open.

USD/JPY usually ramps – but thus far………trading flat as are EUR/USD as well GBP/USD.

One “has to wonder” what “breaking news” from one CB or another will manage to make its way into the headlines any minute.

I can only suggest to get “under or over” currency pairs by a minimum of 50 pips, getting a couple orders into the system and just letting momentum pick you up.

Today could just as easily be a tiny “doji type candle” or very small / flat as Thursdays generally bring about the larger move.

USD has now met “all criteria needed” to satisfy the beginning of its intermediate decline, but that’s not to say things still can’t move sideways another day or two.

The sustained move lower in oil has obviously got the energy markets spooked, Yen has now put in a solid “swing low” as USD looks to have topped out. Gold and Silver consolidating the big “up moves” from yesterday so……everything “appears” to be on track.

Expect this afternoons “US Federal Budget Balance” number to again miss / disappoint as government spending continues to “grossly surpass” government revenue by oh….I dunno….120 “billion” per month?

Sounds very healthy.

Chinese Stocks – Largest One Day Fall Since 2009

It’s all too easy for investors to get caught up in the hype of the current “western media spin”, going about their daily business with the general belief that everything is moving along nicely – as U.S stocks remain elevated.

But one has to remember ( and especially these days ) that we live in a “global economy” where the puzzle pieces are so interconnected “planet wide” that even the smallest ripple in “other markets” can have a sizeable effect on things closer to home.

Last night ( on the heels of recent moves by The People Bank of China to actually “tighten monetary policy ) The Shanghai index fell 5.4%, registering the largest one day fall since 2009.

More from The Wall Street Journal:

 China’s stocks, currency and corporate bonds suffered their largest tumbles in years Tuesday after Beijing took fresh steps to rein in growing risks in the country’s debt-laden financial system.

The selloff started in the bond market, as traders rushed to sell and raise cash after a regulator banned investors from using low-grade corporate debt as collateral to borrow cash. The turmoil then spread to the yuan, which recorded its biggest two-day tumble ever. Later, the benchmark Shanghai index slumped 5.4% to record its biggest fall since 2009.

The sudden moves serve as a reminder to global investors about the country’s shaky finances, just as China opens up its capital markets more to overseas cash. Policy makers gathering in Beijing this week for a key summit are signaling to the investing public that they should prepare for a lengthy period of slower economic growth after years of amassing debt to fuel high growth levels.

It should come as no surprise that both The U.S Dollar as well U.S Equities enter “free fall mode” here this morning – with the current global economy resting like a house of cards built on pillars of sand.

There has never been a time in our history where the “global economic picture” has been so fragile, after the crash of 2007/2008 and the last 6 years of Central Bank driven “pseudo recovery” the “tiniest little breeze” has the potential to push that house cards “way out ” into the surf.

Life preservers and floatation devices now being checked and re-checked, as Gorilla’s are generally pretty shitty swimmers.

 

 

 

More Funny Money From The ECB? – Not So Fast

Todays European Central Bank announcement marks the very last “Central Bank risk event” on the calendar for 2014, as the world awaits even more easing / asset purchases from yet another of our favorite Central Banks.

The Euro has been beaten down for weeks leading up to the announcement this morning, with general market expectations “on high” – assuming Draghi will do what he’s been told to do, stay extremely dovish and give the market what it wants.

Unfortunately……The ECB has a much more difficult task than most CB’s in representing an 18 member group of countries as opposed to only one ( in the case of Japan or The U.S ) so I can only assume that we get “more of the same” from Draghi here today ie…….alot of talk ( which has been working well enough ) but very little action.

The “shared currency experiment” certainly has it’s drawbacks as it’s nearly impossible to keep everybody happy with countries such as Germany generally “towing the line” while Spain, Portugal, Italy etc continue to drift into the economic abyss.

One could assume that whatever the immediate reaction to Draghi’s statement is, this will likely put a floor under the Euro as there will be nothing more to expect until the first quarter of 2015.

 

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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