Lets entertain a hypothetical situation for a moment…I mean – why not right?
Let’s say “what if”………
What if I’m correct in suggesting that the 15,000 area of The Japanese Nikkei Index marks the top, and that indeed ( as seen in the past ) this “top” will soon be mirrored in U.S Equities as well?
Now I’m not talking about a “mid-term top” or a “short-term top” – I’m talking about the “top of all tops”. The kind of top you can only imagine / dream that you may have been fortunate enough to have identified, and in turn – traded accordingly.
Yes….”that” kind of top.
So…..What if I’m right?
Can you imagine having yourself positioned not only “before” a major turn in the markets but for a “bearish turn” at that? Allowing your trades to move into profit based on market dynamics “driven by fear and panic”?
How bout letting those trades sit ( much like an investment ) for several months, or even ( in timing it correctly ) “several years” considering what might be coming down the pipe in a longer term “global macro” sense?
What if these levels in stock market valuations ( in both Japan as well U.S ) reflect levels that may “never be seen again”, or at least not for several years to come?
What if?
It’s fun to think about, especially as these past months have been so tricky.
I keep coming back to that 20 year chart I posted the other day, considering that “wow you know Kong……you might just be right”.
Nikkei_Longer_Term
You might just be right.
The Currency Tsunami That Follows Stock Market Collapse
Here’s what most traders miss when they’re staring at the Nikkei hitting that 15,000 ceiling — the real money isn’t just in shorting stocks. It’s understanding the currency bloodbath that follows when equity markets implode at generational highs.
When Japanese equities roll over from these levels, the yen becomes the most dangerous carry trade unwind in modern history. Every pension fund, every hedge fund, every retail punter who borrowed yen to buy risk assets globally gets margin called simultaneously. That’s not a correction — that’s financial Armageddon.
The Yen Carry Trade Death Spiral
For two decades, the world has been short yen and long everything else. Real estate in London, tech stocks in Silicon Valley, emerging market bonds — all funded by borrowing the world’s cheapest money from Tokyo. When the Nikkei cracks, this entire structure collapses in reverse.
The mathematics are brutal. Every 1000-point drop in the Nikkei forces billions in yen buybacks. Every yen buyback forces more deleveraging. Every deleveraging forces more asset sales globally. It’s a feedback loop that doesn’t stop until everything finds a new, much lower equilibrium.
This isn’t theory — we’ve seen glimpses during every major risk-off event of the past decade. But this time, the leverage is exponentially higher, the positions exponentially larger, and the potential for central bank intervention exponentially more limited.
Dollar Strength Becomes Dollar Destruction
Initially, USD will spike as global panic sets in. Flight to safety, dollar shortage, the usual playbook. But here’s where it gets interesting — that initial dollar strength becomes the very mechanism of its longer-term destruction.
A screaming dollar makes every emerging market debt crisis exponentially worse. It makes every corporate borrower in foreign currency insolvent. It makes every commodity crash harder, faster, deeper. The Federal Reserve will have no choice but to print, swap, and intervene on a scale that makes 2008 look like practice.
When that pivot comes — and it will come fast — the dollar doesn’t just weaken, it collapses. Because by then, the world will have learned that the “safe haven” currency is actually the most dangerous asset on the planet when the system it supports is imploding.
Gold’s Moment of Truth
Every great financial crisis has its ultimate beneficiary, and this one won’t be different. When both stocks and bonds are falling, when currencies are racing to the bottom, when central banks are printing in panic mode, there’s only one asset that matters.
The metal doesn’t care about your Nikkei levels or your S&P targets. It doesn’t care about your technical analysis or your fundamental research. It just sits there, storing value, while paper assets burn around it.
But here’s the key — positioning has to happen before the crisis, not during it. When the bottom falls out, bid-ask spreads explode, liquidity disappears, and retail investors get locked out of the very trades that could save them.
The Timeline Nobody Wants to Discuss
Market tops aren’t events — they’re processes. The Nikkei might kiss 15,000 a few more times. U.S. equities might grind higher for weeks or even months. But the underlying structure is already cracking.
Corporate earnings are fake, propped up by buybacks funded with cheap debt. Government balance sheets are exploding. Pension funds are buying assets at 40-year highs because they have no choice. The system is running on fumes and financial engineering.
When it breaks, it won’t be gradual. It won’t be orderly. It won’t give you time to adjust your positions or hedge your exposure. It will be violent, fast, and unforgiving to anyone caught on the wrong side.
The question isn’t whether this scenario plays out — it’s whether you’ll be positioned correctly when it does. Because once the avalanche starts, there’s nowhere to run except the positions you built while everyone else was still celebrating new highs.
Lol, this market is loopy..The Minutes come out and right away the market decides we are “risk on” again. The buying of Yen stops, the USD continues to sell off, and Aussie appreciates…Equities up too! Fantastic stuff, thank you Janet and the Fed. Looks like I will have to reign in some of my Yen longs, or at least bring up some stops, as we might be back in “print more, buy more, the Fed has your back mode.”
Hope all is well Kong.
Nikkei hasn’t even flinched – and neither have I.
Funny money out of the U.S hits the The “Fed’s buddies bank accounts on Wall St” – and that’s about as far as it goes, funneling into the “MOMO stocks” as to move the entire indicies / keep the illusion alive.
Japanese “funny money” gets converted from YEN into USD “then is used to buy stocks”, as we’ve seen many times with both USD rising as well U.S stocks rising simultaineously.
With so many large scale extraneous factors influencing USD movement ( including as well…Russian and possible China influence “unseen with the naked eye” ) – the net “push and pull” is near impossible to pin down.
Fed to raise rates sooner than later…..Fed to remain accomodating longer…Fed to do this….Fed to do that.
I’ve stopped listening, as it’s complete puppetry.
Last I looked – stocks are down lower than they where on April 4th ( several hundred points down ) but of course “everyone sees what they want to see” right?
I’m not moving a muscle, as USD/JPY as well “risk” isn’t buying this either.
got it. I like where your head is at as I am holding my yen longs at the moment. lets see what happens.
Agreed! USD is crazy again
Now waiting another major event today- AUD employment change and unemployment rates. AUDUSD is a new high now. Not sure this 2 events wil bring AUD down?
Up down, up down, as we continue to grind traders accounts to dust.
This will be sold if you ask me……and is 100% expected / typical when looking at the U.S ponzi on it’s last legs.
Fed will say anything, as this is entirely engineered to transfer “your account balance” to “their account balance”.
This will be sold.
Yeah AUDJPY has been up and down. My eyes also upside down too haha. Well just hope the data from Australia will be bad later. Good luck to all of us
Ya kind of annoying but you gotta just roll with it and expect to get outta positions here and there or keep it super light. i’m looking to re-short in a day or two. My week has seen a decent short trade via usdjpy….a flat audjpy short….and a month long usdcad trade that went way into profit only to see me hold through a bunch of poo only to come out flat haha!.. Oh well…time for a beer in the sun…now that its back.
I know you don’t like USDJPY Kong and for good reasons. But it might be worth a small amount of capital again soon. Sort of looks like its setting up for a whopper fall.
You bet – and with it should fall “risk in general” so……
Believe me ol pal…..I’m more than ready / positioned / salivating.
The pair unto itself? At this junction – why the hell not!
Good luck to all.
Aud new high again. 2 weeks up and up. Good numbers in unemployment rate.
AUD jobs data ,, r u fucking kidding me ,, and when we expected it to drop it got really high ,,
Kong your views on this little shit AUD movement ,, as now we can safely say .9500 is coming ,, fuck this shit
jusst read a comment ,, it wont see 9500 as the yearly pivot is 9450 ,, there is a yearly pivot too ?? :
9448 is a very strong resistance for AUD. I’m waiting aud get soften but need to wait for confirmation. I will hold my AUDJPY until 91/92.
Kong look at the daily candle in AUD/USD . i see a possible reversal here ,, as it has touched the November high and in November from this level price started to drop ,, waiting for your view on this ..
plus if you put a daily chart and zoom out and from November till today i do see a head and shoulder pattern so this double confirms a reversal ??
No confirmation “yet” Farhan but I’ll tell you……
This sure looks like it.
Unreal eh?
I can’t see it too. Well aussie surely will fall but before it fall what level it will go i really can’t say. As well as kong can’t say too. It much depends in china now, see when they will push down aussie. China just pumped in loads of capital.
CHina data last night was TERRIBLE:
The main overnight event, was China’s trade data which was a disaster. March numbers turned out to be well below market consensus with exports falling 6.6% YoY (vs +4.8% expected) and imports falling 11.3% YoY (vs +3.9% expected).
Wow….that is some massive SLOWING wow.
I really don’t think the small incremements of Chinese stimulus is going to do much but “stablize” or provide for a “softer landing” as opposed to really boosting any “new growth” Carey.
Still waiting on Aussie, not to mention ALL THINGS in general!
ahan ,, gonna watch today’s close on daily and may b then may b at last then it will fall ,, thank God i hedged or else i would have been sitting in a dark room drinking vodka and abusing this bitch (AUD)
Have a been a lurker of this site for ages, EXCELLENT read and really fits in with my thinking too 🙂
Farhan:
May I ask, how did you hedge your AUDUSD? I have a position too and would be useful to know in case I need to do same.
well i sell from a major resistance and set a pending order above the resistance so that incase it breaks i ll start buying ,, and i only take 10 15 pips from both entries , i buy with a little bigger lot than sell so that in case it breaks and price moves up over all net of both positions will be positive , and i close em ,, and i try to close my short entries with less pips so that when price moves up i ll only have a long position , and later when i close both positions my balance increases gives me more balance to survive if it moves up ,,,
hope you ll get it ,, and ignore any mistakes in grammar and spellings ,, 😛
i know its a strange strategy but ,, so far working for me ,, 🙂
but a little confuse about the top dont want a long trade to stuck when it roll over and goes down .:
Farhan.
Thank you. I thought perhaps you were hedging with another pair.