Macro Intermarket Analysis – Stocks, Gold, Risk And All

My feelings are that…..we’ve reached a major low in the U.S Dollar.

With this in mind, some major “MAJOR” questions come to mind as to the near term direction in markets, but much more importantly – the longer term view.

U.S equities have been stretched “beyond stretched” on the seemingly never-ending “Fed pump” but as we’ve seen recently – are most certainly showing the “final signs” of exhaustion.

What happens in the next two weeks is 100% completely irrelevant as to the forward direction of markets.

My take is…….we’ll see “some kind” of relief rally in risk, when the U.S finally get’s its act together ( if you can even call it that ) – but that’s all it’s gonna be. A relief rally.

If “incredibly” equities stretch to make a “higher high” ( which I seriously doubt but don’t rule out ) it will be “blow off” in nature and extremely short lived. New retail investors will undoubtly believe that “all has been saved” and buy the top with reckless abandon – as Wall Street hands off the bag.

We know interest rates can “go no lower” so……anyone with half a brain in their head should recognize –  we are entering a time of contraction – not expansion!

Quietly, behind the scenes several other countries are already “hinting” at possible rate hikes ( Great Britian as well as New Zealand) as the writing is cleary on the wall. The big boys are preparing……as it’s now painfully clear that the U.S.A money printing efforts have done nothing to bolster a “true recovery”, and that the U.S government itself….is in no position to “govern” much.

What we are seeing unfold is a considerable shift in “investor sentiment” – and sentiment drives markets. People are now losing faith that “even the never ending printing / easing” can pull the U.S out of it’s current downward spiral.

I feel very stongly that at “some point” the Fed will print more – but the kicker will be…the markets just won’t buy it.

Charts and more in part 2.

4 Responses

  1. schmederling October 6, 2013 / 12:31 pm

    Hey Dr. Kong….. nice write up…..
    I would say we are pretty close to markets not drinking from the punch-bowel much longer…. Just like every party there is a beginning-middle- & end…… Once you have over-filled on party favorites eventually the effects of party stimulants ” no pun intended” have little to no effects people start to leave….. yes there are the party animals that hang around a little longer but that’s usually a small %……. I kinda of this that’s where we are today….. the punch bowel is there for all, has been spiked & will continue to be spiked but the flavor is now starting to taste nasty, sour & losing it’s attraction!!! As usual these things take longer to surface & play out then we all expect but I think there are lot’s of surprises in store for us all Even with a rising DXY….. although I am still in the mind-set that we are only seeing a bounce in the dollar before we move lower….. the bottom just does not feel like a panic stag just yet in the DXY!!

    • Forex Kong October 6, 2013 / 2:11 pm

      The plight ( or rise ) of the U.S Dollar is certainly at a “crux in the road” – no question.

      USD has been the #1 “question mark currency” over the past 6 months, and a real bitch to trade.

      As we’ve still not seen a “true flight to safety” ( a dip in equities sure , and a couple “engineered scares” as well )It still remains to be seen as to what might happen with USD. I think what some may still overlook ( in not getting “macro enough” ) is that some 87% of global trade is “still” settled / transacted in USD – “despite” the move away from the currency as a reserve.

      True “risk off” should most certainly see USD rise in my view. Regardless of it’s recent decimation, relatively speaking other currencies have fallen considerabely as well so…….it’s the “safety play” that still remains to be seen.

      If indeed we’re at a “yearly low” around this area in USD…..and we look ahead to “contraction” in the business cycle with inevitable rising rates etc…

      Could be a face ripper.

      • schmederling October 6, 2013 / 11:23 pm

        Hey Kong… your most likely 100% correct here – I am just following my weekly squeeze which is all that is left…. the 8hr did not provide much in the way of a move….. however with this little bounce it has almost re-set the 8hr again & the daily is now moving into position here….. should set-up in the near future….. I don’t often see weekly set-up fire & reverse quickly but these day anything can happen!!! If the weekly is going to reverse then it’s going to need to do it NOW as any continued movement downward will certainly product a Neg fire in the weekly TF……. a reversal here would not surprise & continue to set-up for possibly months further….only time will tell now… the trading range is between 84-80 running 16 weeks now,,,,,, jumping back to 84 test is more then possible here……

        • Forex Kong October 7, 2013 / 6:36 am

          It’s a little stubborn as usual though – gees….

          I like where you’re at Schmed.

          Lets “crawl along” here for another couple days.

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