China Numbers Fall – The Dow's Smoking Gun

You don’t see it because you’re still pretty much stuck watching the T.V – looking for stock market direction, and perhaps a glimpse into where things are headed next.

I just watched one CNN gal ask “the other CNN gal” – The Dow is down -156 Why is this happening? Mutterings of “lower than expected Manufacturing PMI numbers” out of China, which IS actually the case! I almost couldn’t believe my ears. These gals got it right! Do you care?

Simple enough – above 50.0 indicates industry expansion, below indicates contraction, so with a reading of 49.6 (the lowest reading in 6 months) we’ve found our smoking gun.

China is the global growth engine, and the United States largest creditor. As goes China so goes the United States (not to mention the rest of the planet) as global growth is clearly slowing!

So I’m curious….and would love to get some feedback.

What you plan to do about it? Seriously…..

Are you going to just “ride out the next dip”? What if it’s not a dip?

What would you need to see / hear on your “T.V” that would have you consider making plans / taking action to protect yourself – should things seriously come off the rails?

Are you watching the Australian Dollar get taken out to the woodshed here today? The Nikkei down -360 points! I’m up an additional 4% No wait……Justin Beiber just got caught drinking and driving so…..I’m sure that’s the top story for today. Pfffffffff!

I’d also be very wary loading up on gold here as I expect further USD strength. This would allow for gold/silver to “correct” at the very least.


33 Responses

  1. hf January 23, 2014 / 10:12 am

    Why couldn’t gold and the US dollar both rise ?

    • Forex Kong January 23, 2014 / 10:16 am

      Yes of course Howard – I’d suggested some time ago that indeed “several safe havens” may take a piece of the “risk off move”.

      Since then…..sure enough…USD higher as well gold higher, bonds and even Yen!

      However, I still feel that gold itself will take a “zag” lower before taking off to the moon. It would be a traders decision as those building and holding a position in gold / silver ( also suggested ) may not be concerned with a better entry / trade.

      The big down move in USD today and big “pop” in Gold could just as equally reverse tomorrow.

  2. 2face January 23, 2014 / 10:34 am

    What about Euro? It seems China data release do not impact Euro. It did a lot of damage to Aussie based on Major export partner

    • Forex Kong January 23, 2014 / 10:42 am

      Not sure what charts you’re watching – but the EUR just popped 140 pips vs USD.

      Regardless with EUR and USD being the most widely held reserves, weakness in one generally means strngth in the other so…

      I expect further USD strength.

  3. JSkogs January 23, 2014 / 11:58 am

    nzdjpy weekly looking like some selling pressure. Great week, Kong!

    • Forex Kong January 23, 2014 / 12:35 pm

      Amazing move!

      Closing in on 500 pips combined with mid day adds on EUR/NZD as well a couple others.

      Smokin move….now – will it last two days in a row??????

    • JSkogs January 23, 2014 / 1:38 pm

      Yup great money man. Well if recent history and patterns hold it sort of looks like the SPX is in for one more high. Might lend to a nice set up again for the yen crosses as it looks like new highs won’t be reached in the process… least not on all pairs. The lack of new highs should kick the algos in the right direction. New highs for AUDJPY and CADJPY no way. I’m kinda liking the set up of a marginal new SPX high….which in all likelihood this next time lead to a real stock market correction which will aid the mega yen trade! I think we are almost there!!……if not already. Dare to dream dare to dream.

      I lightened up my yen positions into that last thrust. I can see some dribbling down for another day or so. Who the hell knows if I am actually right though haha.

      • Forex Kong January 23, 2014 / 2:05 pm

        Sounds good to me…as I’m banking fat cash today! And will let the market “do it’s thing”.

        No surprise if tomorrow just pops 100% in the opposite direction so…..

        I too beleive “retail” will still get buying the dip – still convinced it’s no big deal, but ya – the cracks in several JPY pairs are here to stay!

    • Forex Kong January 23, 2014 / 12:38 pm

      I’m still holding this POS!

      Freakin NZD has been the biggest pain in the ass man……crack already!

  4. Deano January 23, 2014 / 4:03 pm

    You’ve hit it on the head as usual, China is deliberately trying to slow its economy (if you can truly believe the data) to prevent inflation – just means their burgeoning middle class will take a little longer to take over the world than first thought. But careful it doesn’t correct to 50+ next month, whatever suits the Chinese suits.

    What to do about it? Well I’m changing my trading style, broadening income streams and also looking at tax effective overseas investments (I just don’t trust the government anymore). Trading wise I’ve always been a trend trader but I think the markets are changing (interested in feedback on this) – trending even less than previously, lower volatility, and ATR’s have steadily trended lower on almost every currency pair since 2009 – markets are proving harder to move as information flows improve and speed up, so more time in stasis means fewer opportunities for good trends, although still happily sitting on short AUDUSD, AUDNZD and long GBPAUD over 1000 pips.

    I just see fewer of these cash cows moving forward. Solution for Deano is to adjust my trading plan and trade a little more on shorter timeframes probably 1 hour; smaller lots but more trades and higher R:R – get in on price action and out before the news.

    • Forex Kong January 23, 2014 / 5:15 pm

      Wow Deano – fantastic run down, and sounds like some awesome AWESOME trading as well!

      I’ve seen exactly what you speak of with respect to ATR and these “never ending churns/chops” as opposed to any sustained trend.

      Last “real one” was the JPY devaluation like a year ago now!

      I’m obviously keeping things super nimble these days, as much as I’d like to jump on and catch a good ride screw it! I’m out again today with a full 5% done like dinner! And will just look to slug it out on the smaller frames – jumping on again where I can.

      Great stuff Deano. So pleased to hear you’re doing well.

      • Deano January 23, 2014 / 5:27 pm

        Great Kong, I clipped the ticket on 2% myself EURAUD long. Out now but not for long, AUD is heading for 0.8630 short term once it breaks the bottom of the long term channel at 0.8730, cheers.

  5. JSkogs January 23, 2014 / 4:19 pm

    Just noticed that bearish rising wedge (SPY) that people have been following for the last 5 or 6 months was just pierced today. My assumption is that this base will get bought…….and then its effin party time!

  6. JSkogs January 23, 2014 / 4:54 pm

    Somewhat stronger reversal daily candle USDCAD. not sure yet the relevance in the face of a risk correction. But its now on my watch more seriously as a short.

    • Forex Kong January 23, 2014 / 5:32 pm

      I’m not touching this firecracker til I see very clear signs / signal of FULL reversal as…..

      It’s been ripping heads no matter what the dollar does! CAD really smoked here.

      She’ll come back around – I’m confident of that but man…….what a rinse out.

  7. brosbhos January 24, 2014 / 3:23 am

    Hi everybody.

    I just want to make an analogy. I feel like the market is like the ocean, a giant surf spot. You guys are experienced surfers, knowing how to ride big waves, small waves, be patient, paddling around to get the best entry for each wave. I’ve never surfed before, or barely, i feel like i’m in the boat where the crew stay safe and film the session, you know what i mean?
    Sometimes i use the virtual account of my broker, and i try to ride the same waves, it’s like i’m going into a swimming pool reproducing artificial waves, but i get desperately crushed against the walls of the pool, which is obviously not conforting me as to riding the real waves in the ocean.

    I understand the fundamental reasoning. I do, it makes a lot of sense. 24-36 hours ago Kong you were saying “USD Strength!” Well sure enough i set a foot in the water, selling the lowest lot you can imagine of EUR/USD. And just like that, BOOM, i get crushed. Today i hear on the radio on my way to work: the rise in Euro is most likely due to money going out of emerging markets. The argentinian peso and the south-african whatever-its-ame-is were particularly crushed yesterday, thus inflow of money back into europe. Sure, why not. At this point i don’t even care.

    Most of the time when you make calls Kong, and they seem to be consistently good, even great calls judging by the comments, here are the questions i ask myself:
    – How big of a move is he expecting? I understand the concept of a currency moving against *something*, therefore aud/usd does not equal aud/nzd. So for each pair i’m left there, staring at my screen, wondering “how far?” I try to sketch supports and resistances, zooming in, starting monthly to weekly to daily to h4 to even h30.
    – in what timeframe? As stated before trading is a side interest, for now, i have a promising job in the food industry. I can’t just be there and cash in any moment. If i set a trade or an order, i probably won’t be able to come back to it before several hours later. I could use my mobile but again, how big the move is? It happened once that the move happened, and then retraced back to its original position, and i was like: “when the hell is this move supposed to happen?!” because i just wasn’t there to see it happen in real time. Obviously i lost money that time. Too.
    – what kind of air should i give this trade to breathe? In trading words: how far should i set my stop loss?

    And the thing is, i’ve not even trying to make solid money, i’m just trying to be green more often than not. Lot size and leveraging will come later. Much later. I’d be happy to make 1% a month, when you make 5% a day.

    The more time i spend here, i read you daily, even twice a day to try and catch as much as possible, i realize i just don’t have the skills to do what you do. I obviously need the basics. So here is a question to you guys, the experienced surfers: can you guide me, do you have a general direction to give me, a training website to recommend, a book to read, anything?
    I read sometimes that some of you during the waiting periods just jump in and out on smaller timeframes based on technicals, just to stay sharp. Would this be good practice for me? Can i learn? Where?

    I know what you’re gonna say Kong: it takes time. I know it does. But spending a few minutes in the morning and between 30 to 120 minutes in the evening probably won’t cut it, but that’s what i can give to it for the moment. And maybe just maybe someday in the future i’ll make a living out of it, allowing me to be location independent. I’ll just need some wifi. And that day Kong, i’ll promise, we’ll drink beers and tequila together. And they’ll be on me.

    • illutionz January 24, 2014 / 4:17 am

      Won’t answer all your question but EUR/USD and USD/JPY are my least favorite pair to trade with Kong as they are generally more volatile and does not have a distinctive “bucket” that they fell into. What I mean by that is, EUR might go down due to risk off condition in general but what if the Fed is saying they are continuing the QE? Then there is another arguably greater force influencing this pair against this trend. Same thoughts goes for USD/JPY pair. Hence I rarely ever trade these two. Yes they are the top 2 most traded pairs but not my cup of tea.

      Consider AUD and NZD for example, they are generally move with their economics data (obviously) but also, influenced greatly by Chinese economy as well as just a general risk tolerance in the market. When market is on risk off, commodity currencies such as these two usually move down with them. Right now my best performing open pairs are AUD/JPY short.

      Hence my favorites (and top 5 pairs last year) all involved at least one AUD or NZD. But hey that’s just my preference!

    • Forex Kong January 24, 2014 / 4:25 am


      It’s very early morning here, and I’ve got to re load a number of trades / really get to work catching this move.

      I want to “and will” respond to you here in much greater detail – so please… for me throughout the day. Let me get this “trading part” done here this morning – and I’ll get back to you man.

      We’ll get something straight – and make sure to get you on the right path.

    • Babbelarsch January 24, 2014 / 5:27 am

      If I could short your account, I would go all in with maximum leverage

      • Forex Kong January 24, 2014 / 6:01 am

        I hope you guys are buddies – and you’re just joking around Babbel.

        Otherwise ( unless I’ve got this wrong ) that’s not exactly “cool” around here.

      • Babbelarsch January 24, 2014 / 8:26 am

        Kong, I am just serious and honest. I am sure, you as a pro, you know the statistics about people trading in the forex market and their success rate.
        Brosbhos is a beginner, still dreaming the dream to set up an order in the morning before he leaves the house, earn some forex-money while he is in his full time job and to retire with 33 years.

        Somebody should wake him up before its too late..

        With all the respect to you and your homepage.

        • Forex Kong January 24, 2014 / 8:42 am

          Ok…..I appreciate you getting back.

          Yes of course success with forex is extremely difficult, but I feel that with proper guidance ( if I only had more hours in the day ) beginners “can” make progress here – so I don’t want to discourage anyone.

          Bros is a loyal and valued reader here, and I only hope that he “improves” and “gains something” from participation here.

          He knows where he’s at with it.

      • brosbhos January 24, 2014 / 9:42 am

        That would be poor money allocation/management from what i understand. But i’m just a beginner, what do i know. 😉

        • Forex Kong January 24, 2014 / 9:46 am

          You just stick with it Bros….and keep learning / watching even if you’re not even trading real money!

          At times…when I don’t see a trade developing etc – I still follow the charts…I still follow the news, and look to put more or the pieces together.

          Go man go.

      • brosbhos January 24, 2014 / 9:56 am

        Dear Babbelarsch,

        you say: “Brosbhos is a beginner, still dreaming the dream to set up an order in the morning before he leaves the house, earn some forex-money while he is in his full time job and to retire with 33 years.”
        I wonder what lead you to believe this. Yes, i’m interested in forex, so much that i even mentioned actually making a living out of it and being location independent, meaning i could work from London, Brazil, Thailand, or wherever the hell i want. I never mentioned retiring at 33 or making some side money while at work. I appreciate your concern though.

        If i can consistently make some greens because i know what i’m doing and not because i read a blog on the internet, then i’d be ready for the next step, increasing the lot sizes, the leverage, the frequency of the trades and maybe just maybe make a living out of it. Is this the wrong approach? It certainly feels like what you’re saying is: “since you’re a beginner you know shit and you should therefore basically just stop right now before you harm yourself”. Thanks again for your concern. Seriously. I naively thought everyone had to start somewhere, somewhen.

        I don’t think you come across this website, and stick with it, if you’re just a naive newbie, dreaming to make it when the M5 chart touches the upper Bollinger Band and a resistance from H1, plus if you’re lucky the right fibonacci ratio.

        Read again my comments, and not just those from this post, but also the old ones, and tell me i have the wrong approach to this. Do I? Really? Please be as brutally honest as you can, but either way explain why.

        • Forex Kong January 24, 2014 / 10:05 am

          Guys seriously……there are MANY readers here contributing / reading that won’t likely be to interested in a “one on one” type thing

          So…..take it outside.

          My suggestion – Babbel says “ya you’re right Kong – maybe I didn’t need to poke this guy” and we all get back to work.

          Be nice.

          • Forex Kong January 24, 2014 / 10:09 am

            UPDATE: CNBC now quoting Kong with suggestion that “the Fed may need to look at “pulling back” on tapering!! But….I thought it was “pulling back on QE! – Give me a break!

            What an absolute joke.Like chickens running around with their heads cut off.

  8. illutionz January 24, 2014 / 4:30 am

    Buddy Kong… Look at AUD, JPY, and NKD.

    Holy smokes

    • Forex Kong January 24, 2014 / 4:36 am

      I’m all over it.

      My screen is as green as it’s ever been!

      • Forex Kong January 24, 2014 / 6:07 am

        For all reading…….BIG pullback / rinse / correction in USD but…..I’ve seen 80.20 on $dxy so many times I’ve got it permanently scarred in my brain.

        This “extra day” of USD weakness took us to exactly that…and “appears” to be bouncing. This would be where I’d lay odds on bottom / further move higher, and for whatever reason “not” – wow…….I’d be dropping any long USD ideas and be back at the drawing board, or “re considering” the idea of USD getting sold hard ALONG with equities but……I don’t think Ill need to go there now.

        • Forex Kong January 24, 2014 / 6:21 am

          Yup…..think I got it.

          Gees….can you tell I’ve been at this a while er what?

          80.20?? Common….seen it a million times.

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