In response to a fantastic line of question from valued reader “Rob” – let’s pull a couple of stops here.
It’s Saturday afternoon…my family and friends have now headed home, and it’s back to business “full-time” for Kong. So what better thing to do than “let loose a bit” after a full two weeks more or less “sitting on the bench”.
After suffering a bit “psychological damage” himself ( alongside the rest of us ), with continued effort actively trading markets these last few months, and in light of one my recent posts “Position Size – When Markets Have No Clue” Rob asks how I may have been able to identify this treacherous market dynamic ( chop ), and manage to keep myself out of harms way.
Excellent question Rob. Absolutely fantastic.
My first tip-off, aside from already having been very wary of markets going back several months was the complete and total “disregard” markets showed for the taper.
Knowing full well that the fundamental story in the U.S continues to deteriorate , one would have assumed that the “initiation of the taper” would have been the first clue that “the party is over”, and the “free money is ending” right? Apparently not.
Seeing U.S Equities continue to rally in the face of continued negative/poor data “coupled” with the suggestion and “initiation” of tapering told me almost immediately that the puppet still dances and that the Fed was still just as busy behind the curtain.
I never believed they would taper. I still “know” they have done nothing more but generate a media campaign, and if anything are even harder at work propping this ponzi up.
Recognizing this had me immediately trim positions, get to cash , scrap trade plans, get out-of-the-way as…..if I thought the Fed was controlling things when QE was “hip” how do you think I felt seeing things continue to push higher as QE was “supposedly” being cut back.
Bullshit. Total 100% bullshit.
Nothing has changed ( short of a couple of entries / zeros / ones in a couple of computers ) as QE will continue until a scapegoat is found, and an excuse can be made for the bubble bursting – period. Then QE will be doubled.
As well keep in mind that “I too” got caught” getting long the dollar, posting a loss of a % or two regardless of how many times I second guessed / knew in my gut that nothing had really changed.
I too – took the bait.
Then looking at things from a technical perspective, I didn’t get a decent signal from the Kongdictator on even as small a time fram as a 4 H, looking at pairs like USD/JPY trading flat as a pancake for now the entire last 2 months there’s been no question.
Markets have no clue.
I’ll break this into two post….and touch on another point Rob touched on – how this all plays out with traders “psychologically”: