Month: November 2013

Risk Appetite – You'll Get It "Eventually"

Forex Kong 14 Comments

You know me. I’m a currency guy.

As each of us “eventually” find our specific area of interest, be it options or futures, equities or bonds, currency or commodities, you’d like to think that – over time…..we get better at it.

After countless hours and many, many sleepless nights – finally……finally things start to come together. If you stick with it long enough “eventually” trade ideas and entry signals “literally” – come “leaping out of the computer screen”.

I suggested the other day that I was seeing weakness in the commodity related currencies. Those being the AUD, NZD as well the CAD. I also initiated a trade “short tech” last week – that is now about a “millimeter” from being picked up. The weakness in commodity related currencies cannot be ignored as…these currencies represent risk. Would it just be coincidence if we where to see the “short tech trade” get picked up , and see equities pullback as well?

I think not.

The currency market is like ” a gazillion times larger” than a single countries equities market, and it’s always been my firm belief that “currencies lead”.

You don’t get a “sell off in AUD” for example – because equities markets are looking weak. Equities markets “become weak” as “risk appetite” wanes. Appetite for risk is seen via currency markets “long before” it’s reflected in a silly bunch of stocks.

Take it for what it’s worth as everyone has their own views but…..to ignore movements in the currency markets, in exchange for headlines on the T.V, or perhaps an analysts opinion sounds like a great way to lose a lot of money.

I’ve entered “several new positions” short the commods against a variety of other currencies as my original “feelers” are looking quite good. GBP has been a monster, and CAD and AUD in particular have been taking some decent hits.

Small Trades Initiated – Smaller Expectations

Forex Kong 6 Comments

I’ve stepped into the market with a handful of trades, keeping positions very small – with relatively tight “mental stops”.

Seeing the commodity currencies stall early yesterday, I’ve got to keep pushing in order to continually pull money out of this “labyrinth” we currently call a market.

Not having the “larger time frame stars aligned ” in situations like these,  often what I will do is jump down to the smaller time frame charts “regardless” and apply the same technical know how / skill – only with far smaller expectations, far smaller position size ( if that’s even possible these days ) and with a set % of risk, all-knowing I’m not in the “absolutely best place to place a trade”.

Often these “feelers” turn into fantastic starter positions as I generally “buy around the horn” but….one has to keep an open mind – considering the current market conditions.

That being – nothing is for certain.

USD continues lower, but fairly “unconvincingly” as JPY has shown the “tiniest bit of strength” although again – with little conviction. The commodity currencies are weak, but still hanging in there, creating an overall trading environment fraught with indecision.

I’ve entered long GBP/AUD as well GBP/USD , as well a couple “shots” at commods vs yen.

Screw You Kong! – What Do You Know?

Forex Kong 7 Comments

The commodity currencies are showing considerable weakness here this afternoon. This –  in conjunction with a “late day sell off” in U.S Equities.

Ya well……”Screw you Kong!” “What the hell do you know?”.

Yes yes…..I’m sure there’s more than just a few of you out there muttering “something similar” under your breath. You’ve scoffed at the idea that things can go down, you’ve disregarded any concerns for managing risk, and I can only assume….you’re also “glued to your T.V” looking for some semblance of WTF is going on.

Hilarious.

You have no place in this mess. Let alone “passing judgement” on those of us with “some idea” of its inner workings. In all…..you deserve to have every single investment you currently hold go directly to zero. And that’s “directly to zero” – OVERNIGHT.

Are you prepared? Have you put the appropriate stops in place? Can you imagine waking up tomorrow to find that “overnight chaos in Asia has led to a -450 open on Dow?” Of course not.

You’ve got this all figured out with your “off the shelf indicators” and your “CNBC news feed” right?

It’s no wonder they refer to the masses as “sheep”. I have “zero” sympathy for anyone out there that’s not taken the necessary precautions.

It’s not about “how much you make” these days…………it’s about how much “you’re lucky enough” to keep.

 

EU Zone Trouble – More QE On Deck

Forex Kong 9 Comments

With all the high-flying stocks out there, and the endless promotion of “recovery in the U.S”, it gets harder and harder every day – to believe anything less. The media machines are in full swing, and the general census ( I believe something like 74% of analysts / newsletter writers ) suggest that the sun is shining, the water is warm – common everyone! It’s safe! Jump on in!

You know – I bet the majority of people “actually believe” that “miraculously” – the troubles in the EU Zone have all magically vanished as well! I’ve heard the floating heads on CNBC as well CNN state this as fact. Josh Brown ( a well-known floating head on CNBC ) looked me square in the eye the other day and stated that “the recession in the EU Zone was over”.

Some facts borrowed from Graham Summers:

1) The European Banking system is over $46 trillion in size (nearly 3X total EU GDP).

2) The European Central Bank’s (ECB) balance sheet is now nearly $4 trillion in size (larger than Germany’s economy and roughly 1/3 the size of the ENTIRE EU’s GDP). Aside from the inflationary and systemic risks this poses (the ECB is now leveraged at over 36 to 1).

3) Over a quarter of the ECB’s balance sheet is PIIGS (Portugal, Italy , Ireland and Greece ) debt which the ECB will dump any and all losses from onto national Central Banks.

So we’re talking about a banking system that is nearly four times that of the US ($46 trillion vs. $12 trillion) with at least twice the amount of leverage (26 to 1 for the EU vs. 13 to 1 for the US), and a Central Bank that has stuffed its balance sheet with loads of garbage debts, giving it a leverage level of 36 to 1.

The troubles in the EU are far from over, only masked during this “latest attempt” to ensure confidence in a system that is hanging precariously near the edge.

Keep in mind Spain’s currently unemployement rate is 25%!

The European Central Bank is currently considering ( and will soon likely implement ) a QE program of it’s own with bond buying and the works, similar to that of Japan and the U.S

This, coupled with “almost guaranteed” additional stimulus from the Bank of Japan has this currency war shifting gears moving forward, and leaves absolutely NO ROOM for tightening / tapering.

I will continue to complete ignore the media, as with the example sighted above……they are “paid” to keep the puppet show going.

Sunday Trade Planning – Octopus Ceviche, Charts , News

Forex Kong 13 Comments

Sundays are special days for me.

I get up even earlier than usual – and usually start some kind of “exotic food preparation” as the sun pokes up, the birds start “doing their thing” and the wheels start turning.

It’s not unusual to find me in and out of the kitchen for most of the day actually, as an ingredient missed here or there, has me out to the market then back again – all the while “other recipes” dancing around in my head.

Sundays are for planning.

Often what I’ll do on Sundays is – break out the charts on every single asset class known to man, and pretend / imagine that I have absolutely no idea whats “currently happening in the world”, and take a look at everything from a purely technical perspective. Starting with big ol monthly charts, then weekly, then the daily and finally down to the “current action in price”. I’ll then plot some horizontal lines at key areas of support and resistance, and look to identify “how close or far” we currently are from these significant areas of price.

Chop some onions, start steaming the octopus etc….

Then I’ll do the complete opposite.

I’ll start poking around the net at the usual “news haunts” , make note of any significant developments as well any significant announcements due for the week ahead. I’ll re-evaluate / freshen up on interest rates across the board, and do what I can to formulate a general idea of where we are at – “without” looking at, or considering a single chart.

Squeeze  limes, dice tomatoes , wash cilantro…..

Putting it all together in this way, lends itself to keeping an open mind , and often provides fresh perspective where “perspective” is needed. It’s easy to get overwhelmed while you’re in the heat of battle during the week, so the “sunday reprieve” is a fantastic way to just pull back and “re align” yourself with things, get prepared for the week ahead and enjoy some fantastic food as well.

We could very well be in for some big moves here in the week ahead, but for now………lets eat.

Octopus_Ceviche_Forex_Kong

Octopus_Ceviche_Forex_Kong

Silver And Gold – Is Now The Time To Buy?

Forex Kong 17 Comments

The question has never really been “Kong – should I buy gold?” but more so “Kong – WHEN should I buy gold?”

The long-term fundamental case for owning gold and silver is as solid today, as it will be tomorrow – and as it’s always been. You can’t go wrong owning silver and gold  “if” – you’ve got a long enough profit horizon.

Up until now, gold and silver haven’t been a “trade” as the metals have “generally” fallen like mad, and sat consolidating in range for what feels like eternity. Silver is just a touch lower than the price a full 6 months ago. For the most part when any asset consolidates for this kind of “extended period” the move “out of this consolidation” is usually quite powerful. Very powerful.

In fact, in this case it’s very likely that the first move upward in both gold and silver will be so fast, and likely so large – that anyone who “wasn’t already in the trade” will be left chasing. Not to say that “you’ll miss the boat” as the PM’s (precious metals) have miles of upward potential – just that…..you may be looking to buy “EXK” for example at 7 dollars – as opposed to getting started, down here around 4 bucks.

We are very close to where I would suggest “starting to build positions”, and I feel that the “miners” will provide the largest “bang for your buck”.

Forex_Kong_EXK_Silver_Gold_Nov

Forex_Kong_EXK_Silver_Gold_Nov

It doesn’t matter which “silver miner” you look at as…the charts all look more or less exactly the same. I like EXK as a “trading vehicle” to make a play in the space – but a pile of others will also move in tandem when the PM’s move.

Check out “GPL” for a super low value play – currently trading at .76 cents!

Global QE – Currency Wars 2.0

Forex Kong 19 Comments

The Japanese stock market has ripped higher the past two consecutive days – pushing through overhead resistance and seemingly broken out, on the back of Janet Yellen’s last two days testimony ( I’m not holding my breath but very often these “inital moves” are the “fake out” only to be reversed days later ).

As the new chairman of the Federal Reserve, Mrs Yellen made it “all too clear” that she is indeed the “dove” everyone was expecting – and that further monetary stimulus was most certainly her “tool of choice” in the ongoing battle to right the U.S economy.

I am even more confident now that the Fed will “increase” its QE programs in the new year, and that further destruction of the U.S Dollar is all but a given. Simply put “those of us in the biz” know pretty much for fact that Japan is planning to increase its stimulus come April, and it now looks like “only a matter of time” before the European Central Bank throws their hat in the ring as well.

Given these circumstances, and the continued unemployment numbers and poor data coming out of the U.S – any idea of tapering is ridiculous, as “if anything” the Fed will need to “step it up” in order to remain competitive with the currency wars now headed for the next level.

With such an “unprecedented scenario” playing out over the coming months / year it’s pretty fair to say we’re going to see more of the same – this being the most hated “risk rally” in history. A difficult situation for “fundamental traders” as clearly the fundamentals play no role with the continued “pump of liquidity” so……..we take it day by day – rely on our technical no how , patience and experience to navigate the waves and continue to profit.

Having my longer term views yes…I could care less which way this thing goes short-term as…..which ever direction the money goes – I’ll be going there too.

I’m sticking to my guns here through the weekend and into next week, still looking at this as an excellent area to start looking “short”. The Naz short still in play, the weak USD considerations still in play, and the “inevitable turn” in JPY has only gotten juicier here as….when it does make it’s turn – its’ gonna be a whopper.

 

A Quick Look At Oil – USD Correlation

Forex Kong 13 Comments

In case you hadn’t noticed – the price of oil has been falling precipitously since September.

With the simple mechanics of supply and demand, larger U.S stock piles have been reported while U.S drivers (feeling the pinch of still “lofty prices at the pump”) are driving less. As of late we’ve also seen a strong U.S Dollar so that hasn’t helped much either.

I don’t feel we’ve got much further to go until oil reverses, and reverse hard.Perhaps another dollar or two max – with reversal coming in a matter of days.

Refiners may have already made moves on this  – with symbols such as “WNR” already popping huge over the past week.

Forex_Kong_Oil_Refiners

Forex_Kong_Oil_Refiners

I’d expect that “this time around” we’ll likely see the price of crude reverse here around 91.70 – 92.00 dollar area, with the usual correlating weaker USD.

I’m going to start running short term technicals on stocks here soon, as well hope to offer those of you who “don’t trade forex directly” additional options and trading opportunities.

Dig up “oil related stocks” over the weekend and plan to get long.

Trade Alert! – USD "Almost" Swings High

Forex Kong 18 Comments

As per usual – you can take it for what it’s worth but..( I’m sure by now you’ve followed long enough ) The U.S Dollar is literally ” a single point ” from its swing high – and subsequent reversal lower to follow.

The U.S Dollar without question “is now being sold along side of risk” as opposed to taking inflows as a safe haven. THIS HAS CONSIDERABLE LONGER TERM IMPLICATIONS.

Risk off related trades are well within reach here as several including GBP/AUD entered yesterday morning – have already started taking off.

This will further validate the “short Nazdaq” signal issued here on Friday, with the holiday and low volumes of Monday and Tuesday – the entry is still very much “right on the money”.

I suggest getting in front of your screens over the next couple hours, as I feel we are on the cusp of another “reasonable sized move” here as of this morning.

Markets Standing Still – Forex, Commodity Recap

Forex Kong Got something to say?

You can’t “make” this stuff move any faster.

As much as I wish I had a “new signal” every couple of hours – unfortunately that’s not the way it works. Here we are “yet again” looking at for a catalyst, with nearly every single thing under the sun – trading “oh so perfectly flat”.

  • Gold is currently trading at the same price as it was back in July (1270.area) once again touching the low-end of the range – 5 months running.
  • Pull up any forex chart involving the Yen / JPY and see that for the most part “they too” are currently at the same price going back as far as May! – 6 months later……same price today.
  • Oil has taken a trip over the past 6 months alright…up from around 92.00 back in May to 110 – and now? 92.00 again.

If you’d have been abducted by aliens in May, and not been returned back to Earth until this morning – you’d not have missed a single thing. As a trader it’s been a grind,  as an investor it’s been “time travel” of the worst kind, with 6 months spent going absolutely no where.

For anyone who has managed to squeeze a “single penny” out of this thing over the past 6 months – you should certainly count yourself as having some skills. I congratulate you – as you must be doing something right.

If this is what it means to have “markets screaming to all time highs” then I’m not entirely sure we’re all looking at the same things. Looks like flat to down to me.