The last two days “rocket ship” strength in the USD , and in turn further weakening of the Japanese Yen pretty much blew my trade plans out of the water – as I had been positioning for the complete opposite. The currency markets are extremely volatile right now – to the point to where I “should” likely take my own advice and step aside.
We all know I’m not gonna do that.
We will wait and see if indeed the USD has any follow through here – or turns back down and continues on its way. In light of this I wanted to show you something interesting. Not as much the USD value vs any number of other currencies – but USD with respect to its actual “purchasing power” in real world scenarios.
I’ve “borrowed” this lovely graphic from friends at Zerohedge, and hope no one will mind:
Decline OF USD Purchasing Power
Inflation is nothing new I know, but it does go to show how “endless money printing” really affects those living within it, as opposed to just looking at USD vs another currency. Fact is, with every Central Bank on the planet doing it’s best to keep up with the devaluation of the USD its difficult to really see it day-to-day.
In not living in the U.S and getting almost unimaginable “bang for my buck” here in Mexico, I can’t say that I know what it feels like either – but imagine that a young struggling new family ( with likely one person out of work ) must be feeling the pinch.
And so the printing continues……. with likely larger QE 5 coming soon.
If a day like today ( regardless of being bullish or bearish) scared the bejesus out of you – you are trading too large!
Volatility is the foe you don’t really know – until he’s got you so deep in a peruvian neck tie (please google it) that you’re seeing stars! In order to “trade another day” you need to take heed of current market conditions and take volatility very, very seriously. Not unlike ultimate fighting – one wrong move and you are truly – hooooooooped!
There is no “explanation”……no cute little “technical analysis” to put your mind at rest, no “CNBC commentary” to make it all go away – THE MARKETS ARE DESIGNED TO TAKE YOUR EVERY PENNY!
Days like today are a drop in the bucket ( in comparison to the -1000 Dow days we’ve seen in the past – remember? ) as the Fed’s printing scheme nears closer and closer to the cliff, you can only look forward to further assaults on your account ( let alone your “psychological being”) as the fleecing process gathers steam.
I’m a friend….and I’m a guy you can trust.
Seriously…….did you really think you could trade this?
Please………bide your time and find something else to do for now. Sitting across the table from guys with 85 billion dollar chip stacks ( and some pretty mean lookin buddies waiting outside) is no place for someone lookin to “have a little fun”.
The sun is comin out, and the fish are biting. If you’re stressed about today – you are trading “far beyond your means”.
You will be liquidated.
We’ve skated around the issue long enough and I’m about ready to get this done. I’m throwin ‘ em down – my gloves are off! Common big boy! – Let’s do this!
They say “don’t fight the Fed! Kong – Don’t fight the Fed!” – well……..this guy can shoot fine, and he’s pretty good with the puck – but can he fight? Can “Big Ben” fight?
I’m cruisin the neutral zone lookin to find out fast, as that good ol Canadian “fightin spirit” comes alive. I’ve had it with this guy. It’s “Go Time”!
He he he…..seriously though – I do find it fitting that hockey is the only team sport on the planet (that I’m aware of) where you are given complete and total reign to “beat the living daylights” out of your opponent while the crowd cheers you on. If it ever happened in American football or soccer, tennis or water polo – you’d be suspended for life.
In any case….to put the “naysayers” to rest – and to alleviate the current bordem on my end – let’s look at it this way.
For every single point higher we see the SP / Dow move higher – I will add “two points” to any number of “bearish currency plays” for as long as it possibly takes – to call this guy out and beat the living daylights out of him.
This has gone past the point of “antagonizing” – and my patience has worn thin.
I imagine we’ll dance a little longer and that’s fine – but we’ve all got our limits. I’m not lookin for any more of these “assist plays” and I’m already a top scorer so……..it’s time to see what choo got.
2% on the day and likely the week – as I’m on the bench here this eve.
Markets got a bit of a surprise overnight as the Reserve Bank of Australia again slashed its key interest rate by yet another 25 basis points. That brings it to a record low of 2.75% – and the absolute lowest I can imagine it going for some time.
The Aussie (AUD) got absolutely pounded across the board overnight – losing ground to practically ever single currency on the planet. With troubling data coming out of China (Australia’s biggest trading partner) “fundamentally speaking” this can’t be seen as very good news. The AUD was only a short time ago yielding 4.75% and has taken a 200 point haircut over the past 18 months .
Short term we can see the selling pressure in AUD is obvious, and will likely provide some trade opportunities on the long side – however, I would be very cautious and not rush into anything there. Looking longer term I see this as yet another sign that the Global Economy is no doubt retracting – and that even the “best of the best” ( as Australia is generally seen to have a solid economy) are making moves in preparation.
I see the USD rolling over again here this morning as suggested and will watch closely – although commodity currencies such as AUD and NZD have also been selling off so once again – a very difficult fundamental background.
It’s been at least 4 days since my last post, and If you missed / ignored it don’t worry – you haven’t missed a thing.
The “hammer formation” in the US Dollar lead to higher values as suggested, as well as higher equity prices ( again as suggested a few days prior ) now trading in tandem with USD. It’s right around this time that many investors feel “they must be missing out” as equity prices “creep higher” against a continued background of deteriorating fundamentals.
Short of being a “master stock picker” ( and perhaps you are ) I can’t recommend chasing this – as the risk vs reward ratio more than favors safety above all else.
I’m back from a wonderful 3 days on “Isla Mujeres” and now back in the saddle. My short-term outlook has not changed a smidge – as I will now look to ” reload” short USD and long JPY as the week progresses.
With “divergence abound” I still favor “risk off” taking hold shortly – and will continue to position accordingly.
See you all out on the field. Let’s play safe.
I remain bearish on USD, but as these things rarely move in a straight line (and considering the past 6 straight days moving lower) – I’m expecting a small bounce. Welcome our ol friend “the hammer”.
Definition of ‘Hammer’
A price pattern in candlestick charting that occurs when a security trades significantly lower than its opening, but rallies later in the day to close either above or close to its opening price. This pattern forms a hammer-shaped candlestick.
This candlestick pattern is not the “end all be all” of trend change – but does suggest that buyers have stepped in and “bearish price action” may take a short break. When looking at this candle formation in light of the current down trend in USD – I would consider a small bounce over the next couple days at best – before the downtrend once again resumes.
The past few days trading has been fantastic with the short USD trades, as well ther long JPY’s paying well. I will likely sit a day here and re evaluate but as it stands – USD should continue lower, and the short term bottom in JPY – looks pretty good to me.
So I finish at the gym here this morning and decide to take a little time down at the beach.
I walk a considerable ways (avoiding the tourists at all costs) and find myself a nice quiet spot about a mile north of the usual “european action”.
No sooner than I’m sat down, I spot a small mexican boy no more than 5 years old (I’m guessing even younger) trudging down the beach – headed my way. Swimming in his oversized shorts, cute as a button and brown as chocolate chips, he plunks down beside me, wipes his brow and asks:
“Hola senior. Tienes 10 pesos por fa vor?”
I wrestle some change out of my side pocket while asking “where are your parents little friend? – and why are you walking the beach all by yourself?
“Gracias Senior! Pero, no tengo tiempo para hablar……….estoy trabajando!”
The lil guy says thanks, but he doesn’t have time to talk………..he’s working!
The market “gong show” continues with even more “bad data” out of the U.S and further indication that recession is likely well in play – but of course markets continue higher as the smoke and mirrors continues a little while longer.
You know – there was a time when this kind of poor data / indicators actually meant something – a time before Central Banks intervention. The scary thing is people start to believe……… that things are actually improving.