Japanese elections play out exactly as expected with a HUGE GAP UP in JPY crosses here Sunday night.
As the currency wars continue – everything is clearly in place for some serious USD devaluation. If you choose to just sit and “see how things go” you will soon (if not Monday morning even.. ) be left in the dust – as the dollar has absolutely no where to go but DOWN. I don’t go making calls in a minute to minute / day to day type way ( although if you’ve been following the trades at all – you’ll find that I might as well) but…….this is it!
I expect markets to power forward here this week and as simple as it gets – all assets shall rise!
If you’ve got dry powder – I seriously suggest no…..I SERIOUSLY SUGGEST you take this opportunity ( and perhaps get out of bed a little early tomorrow morning) to pull up a chart or two, get that broker of yours on the phone – and place a trade.
I am already trading / initiating further “risk related” trades across many many currency pairs with the same ol underlying theme – buying the risk related currencies….and selling the safe havens. I am expecting to do very, very, very well this week. Watch for “whipsaw” type activity – and please take the time to find entry at areas of support – don’t be surprised if “they don’t make it easy” – but it’s time….I believe Christmas has come a week or two early.
The spaceship I’m building on the rooftop is coming along – but in light of the recent news out of the United States ( the mass shooting at elementary school in Connecticut) I can’t get it done fast enough. What the hell is going on?
What kind of world are we living in where this kind of thing not only happens – but isn’t that like the third or fourth one of these “events” in the past month or so? What the f$%K is going on?
My Kong size heart goes out to each and every individual effected by this, as I cannot begin to imagine the grief and pain brought on by such tragic events. Being an uncle myself, not a day goes by that my little nephews aren’t racing around my brain somewhere – bringing a smile to my face….. on even the worst of days. Again I can’t say how sorry I am for the loss, in this tragic event.
Parts are a little hard to come by here in Mexico – and now I’m considering some modifications / additions that may put me back and additional week or two…maybe more.
Hopefully I can find enough seats for every single person I love and care for – so that we can all get on board……. and get the hell out of here.
I hope the wireless connection will be O.K
Definition of ‘Divergence’ – When the price of an asset (or an indicator) index or other related asset move in opposite directions. In technical analysis, traders make transaction decisions by identifying situations of divergence, where the price of a stock and a set of relevant indicators, such as the money flow index (MFI), are moving in opposite directions (thank you Investopedia).
We all see divergence a little differently depending on what you trade and what you watch. Some traders look for divergence within a specific area of focus (for example if the price of gold is skyrocketing, but the gold miners are taking a bath) and some (like myself) look for divergence across markets (divergence when I see both equities going down as well as the dollar – as well as gold!). Obviously in a situation like this – something isn’t right.
Divergence can often signal that a significant change in direction is in store – for at least one of the assets involved.
If you’ve been following the price of gold as of late, you will see that it has come down considerably in recent days. If you’ve been following the dollar you’ll notice that it too (over the past 3 days) has been falling alongside gold – as well market leader Apple Inc. – down more than 50 bucks over the same time frame.
Ask yourself – if gold (and Apple) are priced in dollars…and the dollar is falling…shouldn’t the price of these two assets be going up? – something’s got to give.
Looking out at larger time frames (I am talking a weekly chart) often helps in spotting the “odd man out”. As well – a good solid “recap” of the fundamentals driving price action in each given asset.
- Ben is printing dollars like confetti – that’s not changing anytime soon. (dollar down)
- Demand for gold is (and always will be) high – I don’t see that changing anytime soon. (gold down?….ummm)
- Apple is the most valuable company well……..ever! (apple down?…ummm)
In this example it looks far more likely that both gold and Apple are merely “pulling back” with larger uptrend to continue as the dollar continues its slide into the basement. The divergence here (and how to trade it) points to buying opportunities in both equities and gold – and a continued downward trade on the dollar.
I am fascinated by Japan’s economic story – and an absolutely huge fan of trading the Japanese Yen (JPY). In fact, I would attribute the majority of my trading profits over the past few years to trades involving the Yen vs the commodity currencies. The moves are usually quite large, and more importantly for me – the fundamental story keeps me on the right side of the trade.
Japan’s monetary policy is extremely accommodative and “quantitative easing” is more or less a mainstay.
The Japanese model is well worth studying, as it serves well as a possible pre cursor to what the Americans may soon expect to see – as a result of their “more than accommodative” monetary policy. Some economists project that the U.S is headed down the exact same path as Japan – and advise that the end result may not be exactly…….what’s desired.
Japan’s debt to GDP ratio is now well over 200% if you can get your head wrapped around that. Interestingly (very interestingly) only 5 % of that debt is held by foreign countries, while around 50% of the U.S debt is currently held by foreign countries. This is where things get interesting.
Japan’s conservative Liberal Democratic Party (LDP) is on track for a stunning victory in Monday’s election, returning to power with hawkish former Prime Minister Shinzo Abe at the helm.
An LDP win would usher in a government committed to a tough stance in a territorial row with China, a pro-nuclear power energy policy despite last year’s Fukushima disaster, and a radical recipe of hyper-easy monetary policy and big fiscal spending to end persistent deflation and tame a strong yen.
Short term I see the Yen sitting at a well-known level of support and in all would favor a bounce here, but with the election panning out as it should – it’s safe to say that the currency wars will continue as Japan is likely be the next country announcing further monetary stimulus and easing.
The theory that human beings are a product of alien genetic manipulation, and were more or less “created in their image” for the sole purpose of mining gold – is a personal favorite of mine. It keeps things simple, and provides me with the answers I need when gold goes off the charts – as it has done overnight.
It’s simple. The gold has been stolen and we’ve only the aliens to blame.
The Illuminati’s “secret knowledge” of human creation (which defies both creationist and evolutionary theories) is bound up in the tale of the Anunnaki, who according to the Sumerian clay tablets – arrived around 6000 BC in Sumeria (modern-day Iraq).
A growing number of researchers say the Annunaki bred human slaves known in the Hebrew bible as “Adamu” and in English as “Earthlings” to mine gold necessary to the survival of their home world and it’s inhabitants.
Considering the slew of completely ridiculous “conspiracy theories” out there as to the “manipulation of gold prices” this looks to me as equally plausible in that – we still don’t know whether the reserves of gold “said to be there” in the United States – are really there at all.
So there you have it. Any time you get caught up in the minute to minute watching of the price of gold, or the endless debate over price manipulation or corrupt governments etc…just keep it simple.
Blame it on the Aliens.
I would love to enter the market here this morning – but just can’t pull the trigger in light of overnight action across the board. Dollar flat, equities up, currencies “wonky” ….and gold stolen by aliens makes me a touch nervous.
I clipped / edited this as I found it to be most interesting:
A common believe is that there is no credible substitute for the dollar – so the dollar is safe as the reserve currency.
Another believe is that it would take decades to replace the dollar (central banks need to have “some” assets that hold or increase in value right?).
Increase in value right? …………………………………………………………….obviously the dollar is not doing this.
In truth almost any other asset is a better reserve than the dollar. There is no need for every central bank to pick the same one.
Some believe that it would take the Gulf States many years to replace the dollar as the currency oil is priced in. This is a peculiar claim since Iraq and Iran switched to non-dollar sales in short order (Iraq before the war). As should be expected with a dropping dollar, Iran says it profited from switching to non-dollar oil sales. Other countries can see this and can just as likely – switch too.
Imagine that central banks currently had their assets as 60% Dollars and 30% Euros. If the value of the dollar were to drop in half, then they would have equal value in Euros and Dollars without changing anything.
For thousands of years gold and silver have been used as a store of value. Imagine a central bank with 10% in gold and 90% in dollars. If the dollar goes down by 2 and gold up by 5 it could suddenly have most of its assets in gold.
The point is that the dollar could be replaced as the dominant reserve asset even without central banks ever selling their dollars, just by it’s dropping in value. Several times in the past the dollar has dropped significantly in value in a just a few short years.
Why would now be any different?
My own definition of a risk event (go figure) – An event that puts you at risk.
We’ve all got our own tolerance for risk, as a particular event (such as the FOMC announcements tomorrow) that may be considered a “risk event” by one individual, may have absolutely no significance to another. There are many factors to consider – and it really comes down to the individuals circumstances and/or evaluation at the time.
I for one – have an extremely high tolerance for risk.
Almost to a point of fault, I have been known to walk down the odd dark street at night just to “see what’s down there”, or perhaps hail a cab with no real “company name” visible on the door – however…..
I do not take undo risk with my investment or trading decisions.
The best suggestion I can make centers on the simple question of “whether or not its worth it” as a risk event approaches – and more often than not the answer comes back the same….absolutely not.
- Could something occur tomorrow that could potentially jeopardize the profits I am currently seeing on the table?
- Could I find myself deep underwater tomorrow in the case that something completely unexpected occurs?
- Am I going to miss “something massive” if I am not fully invested and exposed to the market?
Questions like these are healthy, and can go a long way in preserving capital in these volatile times – let alone reduce risk considerably.
Consider your risk tolerance. Ask yourself – Is it really worth it….. for a couple of points or two?
An aside – I have little doubt that tomorrow’s FOMC announcements/outcomes will result in markets moving higher, and the dollar getting sacked. However – it may not play out as “matter of fact”. I have 100% confidence that any trade opportunity that is currently available to me – will equally be available to me tomorrow (and likely the next day for that matter). Do I care?….nope…not really.
Kong banks an additional 2% on the day – and back to the ol favorite – 100% hard cold cash.
I’ve been going on about this for almost a full month now, and despite the profits made dipping in and out – it has been no simple task sticking to the dollar short trade. The USD Dollar has done just about everything in its power to confuse and confound traders as of late – and has hovered around the 80.00 mark for far longer than most may have expected.
The Dollar is now set to provide some consistent and “tradable” downside action.
As outlined prior with the “swing low” in silver (and now subsequent swing low in gold as of Monday) we now see that the dollar has (opposingly) made its swing high. Often when solid technicals line up with the underlying fundamentals in such a perfect manner – big things can happen.
We already know that The Federal Reserve wants a weaker dollar – so on a purely fundamental level (and in conjunction with the FOMC meeting set for Wednesday) it appears that this piece of the puzzle is well in place. Coupled with a “swing high” as well as a failed attempt at a downward sloping trend line break in the USD over the past two days – puts us right on track for a solid move….south.
There are several ways to play this – be it through equities (that will rise with a falling dollar), gold and silver related stocks and ETF’s, and of course through the currency markets where I will likely be adding to current positions long both AUD/USD and NZD/USD as well short USD/CAD, USD/CHF – as well a basket of other (and more exotic) “risk on” related pairs.
For more on the “swing low” please reference the prior post.
Let’s face it – the markets have become increasingly more difficult to navigate. For the most part, anyone sitting idle for anything more than a week or two max, has likely come out on the receiving end of a “good swift kick in the account” – if you know what I mean. Hedge funds drying up, blogs offering “financial advice” dropping like flies, and the majority of investors left wondering “what the hell to do” next. Well……………….
It’s only going to get worse.
I’m not looking to scare anyone ( as you should already be completely petrified no?) but I see 2013 -14 as likely the most difficult / volatile / dynamic / screwed up / challenging / trading environment I will have faced in my entire career. The number of variables are staggering, and the new “forces that be” (now being the majority of central banks on this planet) are not only locked and loaded – but have more chips than well…..they’ve got a lot of chips.
You can’t be a bull. You can’t be a bear. Anyone sitting on one side of the fence or the other (for any considerable length of time) will be liquidated like butta. You are going to have to learn to trade like a gorilla – or you will surely be left with “less” – if you currently have anything at all.
I should explain…….
I have no bias. I trade in one direction or the other (avoiding “sideways” at all costs) with 100% conviction. I have absolutely no concern where the market is going – only in that, I am going with it. I don’t cling to any idea what so ever that the “world is a beautiful place” or opposite “the apocalypse is upon us” – zip , nada , zero as it pertains to my account balance.
This is trading like a gorilla.
You will have to evaluate/ re-evaluate your current “animal character” very soon in that – whatever you’ve been doing has likely not been working….and whatever anyone else is “telling you to do” is suggestive that what “they are doing” – isn’t working either.
I expect to enjoy these last few weeks of 2012 – and possibly the first few of 2013 before things really start to get complicated. With the printing presses of both Europe and the U.S cranking away and the conflicts in the Middle East broiling, it’s going to take a lot hard work to squeeze out those dollars in 2013 – 14.
I imagine some bulls will make money…. and some bears……..but we gorillas will make more.
Where do you think things are headed in the coming year?
A quick recap of some numbers out of China this weekend:
- Factory production climbed 10.1 percent in November from a year earlier – 10.1%!
- Retail sales growth accelerated to 14.9 percent – 14.9%!
- The consumer price index rose 2 percent from a year earlier.
- Fixed asset investment excluding rural households in the first 11 months of the year rose 20.7 percent.
- Output of rolled steel rose 16.5 percent in November from a year earlier. (That’s a lot of steel).
- Growth is on track to rebound sharply above 8 percent this quarter.
Wasn’t it just a couple of months ago that the headlines (well….at least those out of the U.S) where riddled with talk of “China’s fall” “China’s Hard Landing” or “The Chinese Economy Derailed” – I think not. The growth engine is chugging right along, and I see absolutely nothing but “sunshine and rainbows” ahead for the Chinese economy.
China is now Australia’s largest export market, with trade worth at least $115 billion a year so continued growth in China should bode well for both Australia and neighboring New Zealand as well commodity rich Canada moving forward.
Companies supplying construction and mining machinery (such as Caterpillar Inc) should also look to do well.
The continued theme of “staying long the commodity currencies” should prove to be a strong strategy in the months ahead.