January 2013 - Page 2 of 3 - Forex Trading With Kong

Todays Markets – Trading What I See

Forex KongJanuary 17, 2013 8 Comments

Stepping away from the markets for a day or two can be a mixed blessing. Sure the sunshine is great, the beer cold and the fishing fantastic – but what about work? These days 2 (or god forbid 3) days away from the markets – and you could just as well be looking at a completely new game! War may have broken out, stocks may have crashed, some nutjob may have launched his own missile, man…..my buddies from the planet Nibiru may have returned to pick up more of their gold! You just don’t know what the hell’s gone on until you start digging back in.

Top of my list – several of my beloved commodity pairs are showing relative weakness against both the USD and JPY. At this point it’s just too early to tell, but as it stands I would still be sitting on my mits here this morning regardless of the holiday, as things have more or less traded as expected – sideways. Price action has more or less remained steady/flat in risk in general, but I give a touch larger weighting to these “dips” as opposed to seeing much of anything “blowing through the roof”. I dare say “getting short risk” has poked its head around the corner – but still have considerable reading to do here today.

The moves in both silver and gold appear “healthy” but as per the usual these days – nothing to write home about.

I will spend the majority of my morning reading/reviewing Central Bank statements/news as well getting back up to speed with the planet at large before making any drastic decisions but in “trading what I see” – current trading conditions look a touch cloudy with a small chance of showers in the afternoon.

Glad to be back everyone – lets get out there and make some money.

Over Trading – Not A Good Plan

Forex KongJanuary 13, 2013 5 Comments

Considering the recent run with respect to the short JPY trades , as well recent gains made short USD – Im taking this opportunity (being 100% in cash) to wish you all the best – and get out of dodge.

Markets are nearly some relative near term highs ( with DOW around 13,600 looking like solid resistance ) so I find it highly unlikely that I will miss any “upward action” in coming days. As an active trader, these opportunities rarely present themselves so…..I am “obliged” to take it when I can get it.

Often traders will get caught in the moment when “everything is going up” – push their luck – and do run the risk of overtrading. Too commonly resulting in losses and significant psychological wear and tear.

When stars align and you find yourself sitting with significant profit and absolutely “zero” market exposure….one really can’t look a gift horse in the mouth.

This gorilla is going fishing!

Ill do my best to get a post in tomorrow evening and be back on track for the rest of the week. Good luck everyone!

Forex KongJanuary 12, 2013 5 Comments

A subtle reminder for those of you who have been with me for a while – and an important post for newcomers. In considering the fundamentals “first” – please take note of the date of the original post. Nearly a full month of downward action in the Yen, and well into the trade. 600 pips in USD/JPY alone – and equally large moves in AUD/JPY.

Learn To Trade – Or Die

Forex KongJanuary 11, 2013 25 Comments

I still hear some of these “old school” guys on the net – talking about “investing”. Good luck with that.

You see – for those of us who got started in this game around the time of the crash in 2008, the word “investing” has more or lost its appeal. Considering the current environment, and the forecast for the future – anyone considering investing in anything (for any extended period) should most certainly have their head examined.

I wish it was still that easy.

I pull up charts on any number of things, going back some 10 odd years or so – and laugh. These guys still think they know what they are doing because of their experience back in 2005 when it didn’t matter if you bought ” day old cake”. Every morning you woke up – called your broker – and your stock went up.

This is fantasy land now. This will likely never happen again.

If you are not willing to spend an extra hour or two studying the company you just invested in, or following a couple of charts, or tuning in to the current news (and I’m not talking about CNBC) to get an idea of what’s going on day-to-day – I can assure you….you and your hard-earned money will “all too soon” be parted.

You don’t have to become a “day trader” – as I don’t day trade either, but you should at least come to understand that there is nothing wrong with selling when you see a profit – and buying back again when your favorite stock dips. Trust me – you won’t miss a thing.

Markets today (more than ever) are designed to rid you of your cash – designed with “alien type precision” in fact…..for that very purpose. If you don’t learn to “trade” – I have some very bad news for you.

For all your efforts….and all your hard work……you will most certainly end up with zero.

Learn to trade – or……….

Dollar Takes A Fall – Markets Busy

Forex KongJanuary 10, 2013 10 Comments

As we’ve all seen outlined in the previous series of posts – the value if the US Dollar against other currencies/other assets clearly has a direct correlation to the “price of things” ( or commodities ). In its simplest form – if the USD is worth less, then you are going to need a lot more of them to purchase that barrel of oil , and those lean pork bellies getting loaded in the back.

Domestically ( if indeed you live in the United States) this obviously starts to become a problem, as the cost of things you and your family need, continue to climb higher – because the dollars in your pocket are worth less and less. Oddly, in the current “repressed” economic environment you are somehow going to need to make more money – a lot more money.

However, if you are currently living outside the United States and are holding currencies such as the Euro or Great British Pound, the Loonie or the Kiwi – everything at the farmers market is on sale! Goods and services for sale in our “global commodities market” become far less expensive ( when you come to see Kong at the currency exchange window out front) because the money in your pocket is worth more!

This is the double-edged sword of the Fed’s current QE plans – as further money printing puts the crimp on people living in the U.S , but in turn promotes exports to those living outside the U.S (due to the “incentive” given with better exchange rates and the perception of value therein.)

A person from Australia very well may book a flight to go on vacation in the U.S with the knowledge that their currency is worth considerably more – and with the perception that “things are cheaper over there”.

I don’t see QE creating jobs at all, but if the desired effect is to increase exports and “incentivize” foreign money to be spent in the U.S well…….you can now see that other countries can get in on that game as well.

It’s called a currency war.

This may seem like common sense to some of you but I thought it important to point out with the analogy of the farmers market and the significance of the U.S dollar exchange rate around the globe.Imagining yourself outside my exchange window, standing next to a group of people with happy smiley faces – ready to go in and buy – with a lot more money than you.

Intermarket Analysis – In Real Time

Forex KongJanuary 9, 2013 25 Comments

Lets start with the currency and work our way backward through a couple of charts to see if we can put this all to use.

The US Dollar continues to exhibit a pattern of “lower highs” coupled with the current fundamentals (the printing of 85 billion new dollars per month) suggesting to me – further downside is certainly in the cards. A lower dollar leads to higher prices in our commodities market right? – which in turn puts pressure on bond prices and interest rates.

(Short of looking at individual currencies vs USD specifically – $DXY will suffice for this example.)

The entire commodities complex clearly bottomed in June, and has taken a nasty pullback to an extremely solid level of support. As the USD rolls over – we can expect higher prices in commodities.

The $CRB after bottoming in June is now at support.

The symbol “TLT” tracks the price of the U.S 20 Year Bond. As the price for bonds falls the rate of interest paid rises (the price of a bond and its yield are inversely correlated).

20 Year Bond prices appear to be falling

Lastly in this wonderful chain of events we look at the SP 500 (or futures symbol /ES) and see that if indeed the intermarket analysis holds any water – a falling dollar creates rising commodity costs, in turn leading to inflationary pressures pushing interest rates higher and bond prices lower – eventually spilling over ( as businesses begin to feel the pinch of higher borrowing costs) and lastly effecting equities.

SP500 Futures are nearing levels of resistance.

Now please keep in mind that these things don’t all happen “on the turn of a dime” – but all things considered it would appear that this is the scenario currently playing out in markets – as the dollar printing continues, commodity prices start to rise, bond prices turn lower (and interest rates higher) – and lastly we will see a reversal in equities.

I am still sticking with the timeline of late Feb to early March where I envision the stock market to start making its turn, as we can clearly see that the chain of events unfolding is leading us in that direction – likely sooner than later.

I don’t necessarily expect stocks to “crash” as we have to keep in mind that the FED will do anything in its power to keep prices elevated – but as the forces outlines above begin to take hold – “sideways to down” looks far more likely than any type of rocket to the moon.

Intermarket Analysis – Putting It Together

Forex KongJanuary 8, 2013 6 Comments

Imagine if you will the “Global Commodities Market” much like you would your local farmers market. Vendors from far and wide, there with their goods on display and priced to sell. You’ve got corn, sugar, coffee, wheat, beef, gold, silver, copper, oil and even some live cattle there in the back. Everything a person (or a nation) could ever need, all there in tidy rows – neat and organized, ready to go.

Only thing is – you’ll have to make a quick little stop to see me at the “foreign exchange window” before heading in……….. as you guessed it – all items are priced in U.S dollars.

With global trade in the trillions of U.S. dollars every year – and this “market” paying taxes to the U.S. government. It’s a pretty good system for the U.S don’t you think? – Not to mention my little “currency exchange” on entry – (I’ll save this for another post and topic entirely).

The U.S. dollar and commodity prices generally trend in opposite directions. As the dollar declines (relative to other currencies) the reaction can be seen in commodity prices.

Commodity prices have a direct effect on bond prices. As commodity prices escalate in an inflationary environment – so in turn interest rates rise to reflect this inflation. Rising interest rates and bond prices (TLT) fall. When bond prices begin to fall, stocks will eventually follow suit and head down as well. As borrowing becomes more expensive and the cost of doing business rises due to inflation, it is reasonable to assume that companies (stocks) will not do as well.

Putting this all together does take some time – but by monitoring even just the USD and the major currency pairs, a couple of commodities such as gold or silver, the SP 500 and the 20 year bond (TLT) – the average trader at home should be able to get a handle on “what’s really going on”. I spend my time in the currency window as I strongly believe that moves in other asset classes are first seen here – as the fx market is the largest and most liquid on the planet – dwarfing the daily volume of the NYSE by well over a 100 times.

We can look at a real world example next……..

Intermarket Analysis – Watch These Too

Forex KongJanuary 7, 2013 2 Comments

So far we’ve seen that obviously I take a concentrated look at the major currency pairs, and look to find trends / movements within. The other “futures market symbols” listed yesterday give me the goods on the major commodities such as oil, gold and silver – as well a good look at what I refer to as my “risk barometer” being the SP 500 and the Dow.

Other Things I Monitor:

APPL (As a market leader – I always keep an eye on movement here).
XLK, XLE, XLV, XLB, XLI and the entire family of U.S Market Sector ETF’s in this series.
EWA,EWC,EWD,EWZ and the entire family of MSCI Ishares ETF’s in this series.
$TRAN – I watch the transports.
FTSE – I watch the London Exchange.
TLT – Ishares 20 Year Bond Fund.

Considering that I use two separate charting platforms (one for currency trading and another for stocks and options) this is pretty simple to follow – as the majority of these are listed in separate “watch lists” within the Think or Swim platform. A quick “click and a glance” and one can easily see movement across a wide range of asset classes.

I spend the majority of my time with the currencies on Metatrader 4, but this is the full list of most “anything and everything else” I make sure to keep an eye on day-to-day.

Next we can have a quick look at how to put some of this information together in order to formulate a reasonable idea of where the market is at – and possibly going next.

Intermarket Analysis – Things I Watch

Forex KongJanuary 6, 2013 7 Comments

Intermarket Analysis:

The analysis of more than one related asset class or financial market to determine the strength or weakness of the financial markets or asset classes being considered. Instead of looking at financial markets or asset classes on an individual basis, this type of analysis looks at several strongly correlated markets or asset classes such as stocks, bonds and commodities.

I thought it might be of interest to some of you to get an idea of which symbols /markets / indicators / areas I monitor – in coming up with my overall market analysis. Trust me, if you are only watching one asset class or concentrating on a particular sector or a single market, you might as well put a blindfold on, tie an arm and a leg behind you – and head down to the beach for a swim – you are sunk.

Currencies:

I follow the following pairs religiously and could likely quote you the given price and recent price action summary without looking at the screen.

USD/JPY, USD/CHF, USD/CAD
AUD/USD, AUD/EUR, AUD/CHF,AUD/JPY
NZD/USD, NZD/EUR,NZD/JPY
EUR/USD, EUR/JPY
GBP/USD,GBP/JPY
CHF/JPY
CAD/JPY

These pairs are constantly monitored on every single time frame (from the monthly all the way down to the minute to minute action) – and a trade will be initiated in any one (or all pairs) at a moments notice. These pairs are viewed on the Metatrader 4 Platform that is available 100% free from many brokers online.

Futures:

These symbols may look a touch cryptic to some as they are not as commonly seen / used. Please look them up – and yes..use them.

/GC – (gold futures)
/SI – (silver futures)
/CL – (light sweet crude futures)
/ES – (SP 500 futures)
/YM – (Dow Jones Futures)
/NKD (Nikkei Stock Exchange Futures)
/DX (US Dollar Futures) – I beat alot of people up about watching this specifically as I trade/observe the USD against the majority of currencies on an individual basis – but yes…it’s on my screen.

I use the “Think or Swim” trading platform for all of my futures, stocks and options charting and would suggest you do the same as it too is 100% free and provides some incredible tools.

Other Symbols:

This is getting a little long so I will break it into two posts, as I still havent explained much as to “what I look for” and how all of this comes together. Not to mention the 30 or 40 more symbols I need to list. So….watch for part 2.

A Golden Hammer – Has Gold Bottomed?

Forex KongJanuary 4, 2013 3 Comments

Hammer: Hammer candlesticks form when a security moves significantly lower after the open, but rallies to close well above the intraday low. The resulting candlestick looks like a square lollipop with a long stick. If this candlestick forms during a decline, then it is called a Hammer.

Has Gold Finally Bottomed?

I’ll be the last one to call it as I am relatively new to the world of gold – but can tell you it’s been a complete and total grind for the past few months. This particular candlestick formation is usually a pretty good sign that buying interest has started to creep back in. Usually a trader will wait for an additional days candle to form (ideally closing above the high of the hammer) before entry.

If it provides any relief going into the weekend – I for one have considerable confidence that we should see some higher prices moving forward.