Emerging Markets – Signal A Trade

Forex Trade Signal – October 22, 2013

You can visit a thousand different financial websites, each evaluating the markets using a different sets of tools, each with their own “take” on where things are headed next. More often than not I find the majority of  these sites generally have a steadfast view either “bullish or bearish” – and tend to just stick with that. Each looking like “heroes” for a time then taking their turn getting wacked when the market turns against them.

Staying objective and working to “trade both sides” can be challenging no question.

I wanted to draw your attention to a chart and concept I had posted on some weeks ago “EEM” the Ishares ETF tracking emerging markets. Take note that we are now at “the exact same spot” as some weeks ago, as U.S equities have continued to reach new highs.

We had discussed how “lots of those freshly printed U.S Dollars” find their way into investments in emerging markets ( as the yield on anything U.S related is nil) and how when “risk aversion” comes into play – these dollars are repatriated back to the U.S and converted “back into USD.”

Why no breakout in “EEM” then? We’re at all time highs everywhere else?

EEM_Emerging_Markets_Forex_Kong

EEM_Emerging_Markets_Forex_Kong

Perhaps I’ll eat my words here, but to see this turn downward “again” in light of the fact that “everything U.S” is apparently headed for the moon certainly warrants interest.

Tomorrow’s “highly anticipated employment report” may prove to be the catalyst either way.

I remain focused on AUD and NZD as well ( and obviously ) USD here as “yet again” we find ourselves in a precarious position. It’s tough to argue with the continued “ramp” in risk assets but my analysis suggests we’ll see pullback before heading higher.

22 Responses

  1. Blackswan007 October 21, 2013 / 5:04 pm

    Another great post on this great blog ! I have been patiently waiting for 2 weeks to short AUD, NZD and equities. Finger on the trigger to take down these reckless bastards like a sniper…

    • Forex Kong October 21, 2013 / 5:07 pm

      NZD in particular has been an absolute stubborn pain in the neck!

      It’s been tough ( and lonely ) out here seeing these guys top out , in this current “environement of glory” where everyone and their dog is dead set that things will go up forever.

      Stay safe, but ya – get that trigger finger ready……..

      • Blackswan007 October 22, 2013 / 2:36 am

        I think NZD strength is a little bit “understandable” since the central bank was hinting about some rate hike in the future (before all this US mess), but AUD… I am shorting AUDNZD for sure, still waiting for AUDUSD. Another one I am looking at closely is AUDJPY…

  2. GTFO October 21, 2013 / 5:44 pm

    B/c people don’t prefer investing in countries run by corrupt dictators (though the US seems to be controlled by one now). Give EEM time. It will follow your Wilshire 5000. FWIW, I’m long USD against EUR and CAD and will be shorting AUD and NZD shortly though it likely will be short lived pullback.

    • Forex Kong October 21, 2013 / 5:50 pm

      Hey Andrew.

      I like where you are at “trade wise” as I’m lining up for the same.

      I also just got a complete kick out of the “irony” in your comment and your thoughts on U.S! Hilarious…but I guess not so funny.

      As hard as it is to believe / accept – I’m also with you as “this thing will pullback” – but likely push higher.

  3. GTFO October 21, 2013 / 6:03 pm

    By the way, why do some think China will thrive if the U.S. suffers? Who will buy their crap? They’ve been depressing their currency at least as much as U.S. and likely worse (which really is stealing from the people just as the US and the rest of the world are doing). What would happen to China’s economy if they let the Yuan float on the free market (not that anyone really does that)? Would anyone buy their exports? From what I understand, China’s government is as corrupt as they come. Question them (as a citizen) and become an involuntary organ donor (or if your’re rich you might be lucky enough to get life in prison). It’s amazing that regime has lasted as long as it has. Their aristocrats sure love their first growth Bordeauxs though.

    • Forex Kong October 21, 2013 / 6:26 pm

      Hmmmmm…….

      I see the two countries intertwined / connected in a bizarre situation where there is certainly a “co dependency thing” going on.

      But didn’t the U.S “sell out it’s entire manufacturing industry” “to the Chinese” though?

      In “order” to “sell it’s own citizens/consumers” cheaper products? Isn’t it “U.S corporate greed” that essentially pays the way for the many in China who “are willing to do the work” for less?

      It’s hard to knock a person who’s willing to work hard in order to feed their family, and the fact is – many in emerging markets ( including Mexico ) are “more than willing” to get their hands dirty/work hard to better themselves.

      Corruption abound of course, but this is the world we live in. Drones and wiretaps, crooked cops , corrupt politicians.

      • GTFO October 21, 2013 / 6:29 pm

        I can’t disagree with any of your comments.

      • ezyfx October 22, 2013 / 6:48 pm

        I brew my own… Apple Cider (9% alc), Beer (4.5% alc) and Vodka (cut to 40% alc)

        The Vodka I mellow with Oak chips to make a fine tasting Whisky. I steep lemon rinds in the Vodka to make Limoncello… delicious.

        • Forex Kong October 22, 2013 / 6:54 pm

          Sounds amazing…..maybe we need to get some of that stuff shipped!

  4. GTFO October 21, 2013 / 6:18 pm

    So Kong, in your honest opinion, what is the best tequila (you seem well qualified to opine)? I enjoy bourbon very much and am always looking for recommendations if you happen to have one.

    • Forex Kong October 21, 2013 / 6:28 pm

      Top of my list as ” the special stuff” would be “Herradura Anejo”.

      Second for day to day drinking / not busting the bank – “Centenario Reposado”.

    • Forex Kong October 21, 2013 / 6:29 pm

      The Herradura Anejo will convert you / have you a tequilla fan for life.

    • GTFO October 21, 2013 / 6:40 pm

      Absolutely!

      • Forex Kong October 21, 2013 / 6:48 pm

        Excellent – I consider the Herradura a real treat.

  5. schmederling October 21, 2013 / 6:42 pm

    Taking a trade I often don’t even look at more the 1-2 times per year…… that is the EUR/USD pair…… going long on this pair for what’s its worth…… I am looking for a top somewhere in the 1.39 to 1.40 range as crazy as that might sound here…. while the DXY enters it’s final leg lower…… I have a Daily & Weekly DXY squeeze’s poised to fire NEG driving the final nail in the coffin for this DXY bottom over the next 1-2 1/2 weeks…… How far the DXY moves lower will be the driving point in my view…. if $ .78.50 is broken very quickly & easily then we can expect fireworks in the time period I have mentioned above…… Will be interesting to see how the commod currencies react to this final move lower in the US dollar…. but with my squeeze tech on the Cliff of Neg fires it’s almost a shoe-in to go lower!

    Cheers Schmed,

    • Forex Kong October 21, 2013 / 6:53 pm

      Wow Schmed!

      For the first time in quite some time – we are most certainly on opposite sides of the trade! Short term at least….as I’m lining up to take a crack at a reasonable “dollar bounce” here “before” another leg down.

      I’ve got it moving against EUR as well GBP then of course all of my “proposed AUD short suggestions” are also somewhat “USD long” synthetic.

      Tomorrow’s stupid “NFP or whatever” likely the catalyst but even now with a few starter trades….things “appear” to be headed in said direction.

      I assume “up” before “down more” still fits into your long term analysis, as a short term squiggle.

      • schmederling October 21, 2013 / 7:42 pm

        correct – we will see how this plays out….. Will for sure bail-out if I am wrong…… nothing worse then holding onto a losing trade…. but will cut out if that’s the play…. right at the moment this is my only currency trade…… my short FB is not panning out as expected…. will bail out on this one soon if nothing moves in my direction soon…… the 50% remaining short Tesla looks to be bearing more fruit – did not add further shorts after the first bounce – I suspect there is still some meat left on the bone to be taken…. 🙂 NATGAS is becoming an interest as well along with Oil…… broke below $100 today so we will see…… PM’s should provide another move higher over the same period I mentioned running with the DXY bottom…….. we should then see a B-wave move before the next major C-wave advance begins….. will this be the final C-wave in this PM bull? Taking us into 2016 marking a 16 year bull run or will it drag out to 2018? all questions still up in the air….. with Bull runs historically running between 16-18 years on average either ways we are slowly coming up to the end of this one respective to PM…. 🙂

        I’ll be looking @ my tech squeeze’s in play for AUD/CAD/NZD & JPY – I’ll post these later on if it’s worth while..:)

        As always – a great wealth of knowledge to be found here & swapping ideas is one of the great tools of this site IMO…… thanks as always Dr. Kong…..

        • Forex Kong October 21, 2013 / 7:52 pm

          Great stuff Schmed and yes……I’m pleased that we’ve “finally” attracted a larger group of investors/traders here with solid views/opinions/knowledge and experience.

          As of late there have been some fantastic contributions by a wide range of people, and it’s great.

          Hopefully this will spawn more conversation / and better trading for everyone.

          Precious Metals have truly been doing their best to dump the very last of the weak hands. I can’t imagine they’ve got “much further” to go until finally making the solid move higher.

          Hang in there gold holders! Hang on!

  6. Power Corrupts October 21, 2013 / 8:23 pm

    always a pleasure to hang with you, Kong!

    • Forex Kong October 21, 2013 / 8:36 pm

      And there he is! Power Corrrrrupts!

      He he he…..have a good one there!

Leave a Reply