I assume you’ve all got a certain number of “economic indicators” and likely as many “technical indicators” flashing on your screens to alert you to those “specific things” you find most important to your trading. You have yours, I have mine and the key for anyone is to “just find something that works for you”.
Recently my “framework” ( as I assume many others ) has been put to the test, pushing a number of “specific little things” about as far as they could possibly go before consideration that “perhaps I’ve got this wrong” or “maybe this isn’t going to work out”.
Markets have a tendency to do this “no matter what” and at one time or another “everyone” will be pushed to question if “they really know what’s going on out there” or if their “beliefs” will actually come to fruition.
You must have a certain degree of conviction in order to see some of the larger trade ideas realized, as they often play out over weeks and even months.
- I’ve always suggested that The Japanese “Nikkei Index” would be the first place to look for trouble, and that Japan should lead the charge lower, posting this almost a full week ago then seeing U.S equities have one of their toughest weeks in a while. Coincidence? Of course not.
- I’ve always suggested that The Japanese Yen has served as the “principal fuel” for the massive rally in U.S Equities, as cheaply printed Yen is converted to USD in order to purchase assets priced in U.S Dollars, while the majority of “U.S printed toilet paper” just sits with the big banks.
- As well let’s not forget my long-term “short trade” on The Australian Dollar now -700 pips from its high at the beginning of September.
A bottom in Japanese Yen ( and in turn a near term “top” in USD ) appears to be upon us, as The Nikkei has now “double topped” and been handily rejected.
I don’t expect higher prices in Japanese stocks. Period.
I also don’t expect USD goes any higher here, before making a swift ( and likely very painful ) move lower. Considerably lower.
Yen strength means bad, bad things for U.S Equities as well The U.S Dollar, as both are essentially sold on repatriation of Yen back to Japan. The 200 billion printed per month “had to have gone somewhere” right?
Perhaps now they are headed home.
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You’ve really got to love the media.
The following headlines captured here this morning:
- Japan’s Nikkei 225 Posts 7-Year High on Weaker Yen
- Nikkei 225 – Offers Great Breakout Pullback Setup, Bullish Bias
- Nikkei 225 Set for Further Gains
I guess we’ll see about that now won’t we?
Think hard, then ask yourself – what possible reason would there be to buy anything “Japanese” as the stream of economic data continues to go from bad to worse, then to even worse? Oh ya……then there’s Fukushima. Oh ya that….just the largest “human disaster” in recorded history….ya that. We’ll thats no big deal or at least……that’s what they say on CNN.
We’ve got our “lower high” in Nikkei, and the current framework ( however long and drawn out) remains intact. All exactly according to plan – short of taking “forever”.
We could “literally” be hours away, as USD tops out, Nikkei rolls over, Yen pops and U.S equities turn lower.
Thursday’s generally seeing the pivot/move, so no trades for today but I encourage all to “man their battle stations”.
We should see some action here soon.
We’ve all heard the saying “you can’t win if you don’t buy a ticket” right?
Well…as far as trading is concerned, this expression / process comes into play many, many times per week / month or even “per day” depending on your strategy.
You can’t win if you don’t buy a ticket – and I like buying tickets.
For some time now, I’ve been eyeing a large move lower in “global appetite for risk” which ( for the most part ) has eluded me thanks to our friendly neighborhood Central Bankers.
Day in day out – the “balls just keep tumbling” and the numbers just keep going round and round in what’s now become one of the longest running “lottery draws” of the century.
So the question begs – What if you miss this one? What if you don’t take a shot? Or more interesting…what if you nail it and win? Is it worth the ticket price to have tried?
In this case……with every single asset / price / elastic band stretched about as “far as it’s been” in human history, the purchase of another ticket ( then perhaps another ) looks very appealing.
I expect to be purchasing a ticket “short” mid-week, and just let the chips fall where they may.
Hey you never know right? And it certainly can’t hurt holding a ticket.
I’m starting to run the risk of being called a “top caller” as the Alibaba I.P.O stirs further “bullish euphoria” across markets here this morning.I can live with that – if people are willing to consider this a ” 7 month topping process”.
The fundamentals clearly suggest global growth is set for a significant downturn moving forward, and it’s impossible to argue that. Trading is trading and investing is investing. You make your own choices.
I’ve traded through it as we all have – with some fantastic wins, a couple of losses but most importantly with caution. The time to step on the gas will come, and even while “pumping the break” 400 pips short AUD there and ( just over the last 48 hours really ) another 300 or so long GBP/USD as suggested some days ago.
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Obviously another day with markets at all time highs, and the media blast right along with it. Buy,buy – you must buy now!
I’m not buying it. You know this by now.
The Japanese Yen is a “hair away from bottoming” as USD soon looks to take its “intermediate journey” lower, and there along side it will be U.S equites. It “is what it is” for another day here with very few irons in the fire, patiently plugging away and taking the trades that come.
Re entry ( or your first ) here long GBP / USD around 163.00 looks fantastic, as USD slooooowly runs out of gas.
More in the weekly report Sunday evening, and via “real time market commentary” during every trading day at www.forexkong.net/register
If you haven’t taken notice recently…..U.S Bonds have tanked over the past few days, with TLT ( the 10 year bond ) falling hard from 119 to 113 in a pinch.
Bonds “price” and bond “rates of payment” are inversely correlated so as bond prices fall…..bond “yields” ( the amount of interest paid out to you as a holder ) increases so…..the lower the price of the bond…the higher the interest the U.S Gov needs to pay out.
The U.S Gov cannot afford to pay out higher interest on these bonds because ( as you remember from the “debt ceiling debacle of days past” ) The U.S is already 100% completely broke.
100% completely and totally broke. Period.
For every single point that bond yields rise,The U.S Gov falls deeper into the abyss – as default looms.
Absolutely nothing has changed since the last “debt ceiling debate” as unemployment continues to plauge any idea of a “real recovery” – but now with stocks near all time highs!
You don’t see a problem with this?
After 5.5 years up, everything that “can be done” HAS been done, and there is no other direction for a responsible trader / investor to do look……………….. other than DOWN.
You are a fool to consider that “this time it will be different”.
Bonds…..the currency and finally stocks.
When she goes……it’s all gonna go.
This morning looks about as dead / flat / boring as most these days with “yet another” doji type candle expected in U.S Equities.
The Nikkei hasn’t done a thing overnight but most certainly looks tired here, with JPY now looking like it’s found a low. Check out the “waning” MACD as well RSI ( on your own chart ) on the weekly. This thing has been getting by on a lot of hot air and “funny money” as no one in their right mind is “actually” buying Japan.
Keep in mind that the correlation of The Nikkei and USD is nearly 100% , and USD is now as overbought as it’s been in years. I think you get the picture.
The next “decent move” should have JPY, EUR and GBP ( as well gold and oil ) moving higher while USD, AUD, NZD as well CAD move lower.
We can also see the inverse correlation and completely “oversold” conditions in EUR.
I can’t suggest getting into anything new here today as it’s Monday ( and we all know how Mondays go ) but things are certainly falling in place for the larger trade at hand.
You gotta love the headline, and I can see it now…..
Every “kool-aid drinkin Fed head” on the planet convinced The U.S Dollar is “on the rise” due to strong U.S economic data – biting my head off here in days to come.
How dare you suggest The U.S Dollar is going down hard! How dare you Kong! How dare you!
I’m actually amazed that The Fed and U.S Gov have allowed the thing ( USD ) to get this far out of the basement as it is so……..yes I’m saying it – I think a whole lot of USD bulls are about to get taken down the river.
The boat looks about as loaded as need be.
Let’s tip this thing.
A quick update for those who’ve been following and have come to understand the “extremely large” position I’ve been building “short” The Australian Dollar.
They say that “good things come to those who wait” and believe me……I’ve been waiting.
If you can imagine, The Australian Dollar has traded sideways / flat for an incredible 24 weeks, until just yesterday smashing lower -250 pips in a matter of hours.
We all know that “in general” The Australian Dollar trades along side risk, moving higher with stocks so it is worth noting that with yesterdays “tiny fall” in U.S Equities we certainly got a reaction out of AUD.
If / when a larger correction unfolds one can only imagine profits generated “staying short” AUD as I plan to.
On a side note – I don’t believe for a second that Scotland will vote “yes” to separate from The U.K, and that long GBP here is looking very, very good.
Long GBP/AUD anyone? Kinda makes sense if you actually take a minute and think about it.
GBP going up….AND AUD going down. These are the trades that pay.
These past summer months had to have been the “absolute worst trading environment” I’ve experienced in my entire life.
A virtual “dead zone” with many currency pairs barely fluxtuating in tiny ranges, extremely low volume and a continued stream of “every conflicting data” flying directly in the face of any realistic fundamental analysis. Many a trader threw their charts out months ago, choosing to either sit on the sidelines until volume returned or possibly adopt the attitude of “oh to hell with it – let’s just buy stocks and everything is going to be fine”.
I haven’t really heard much from many “perma bulls” since the correction back in July wiped an entire 6 months worth of profits in a matter of 10 days, and wonder how the “let’s just buy” strategy has really worked out. Hats off to those nimble traders who may have not only sold at the correct time, but possibly even caught the next leg up. Fantastic trading.
So September is now upon us, and it finally appears that markets are starting to come alive once again, only that “volume” seems to be returning on the “down days” and not so much on “the up”.
- Both gold and silver have been taken down to test the near term lows made back in June, with silver in particular testing the “ultimate low” around 18.00.
- The Japanese Yen ( which trades in tandem with Gold as they both generate “safe haven flows” ) has now reached it’s most oversold level of the past 2 years.
- The U.S Dollar ( inversely ) has now reached the most “overbought levels” of the past few years.
- U.S Equities as seen via The SP 500 have recently made “all time highs” around 2011 level.
Call me crazy but, would one not agree that each of these correlated assets are just about as stretched to extremes as we’ve seen them in a very long while?
Does it not make complete and total sense that “this would be the case” just prior to a sizeable move being made in the opposite direction? Of course it does….as this is how markets function.
Get the boat as “loaded to one side” as you possibly can – “just” before tipping it.
We’ve seen it over and over, and over again and this time it will be no different.
Amber lights flashing ahead.
So Draghi actually did something but…..so far – not really.
The European Central Bank’s plan is to buy “repackaged debt” to help boost lending and the euro zone’s lagging economy. What’s important to understand is that the program is designed to encourage banks to increase lending by allowing them to “repackage loans into bonds” and sell them to the ECB and other investors – freeing up their balance sheets to make further loans.
It’s my view that until the euro zone banks “know” how much the ECB intends to buy ( which at this point they do not ) there will be little movement in this area, and that for the most part banks will likely just hang on to these assets ( considering the costs of selling them ) and continue to “choke” lending – essentially killing the programs intended effect.
We’ll get more information early October but for the most part I still see Draghi’s actions as “lots of talk and no action” and assume ( perhaps after another day or two ) markets will also come to this conclusion.
The Euro vs USD scenario appears pretty self explanatory as the “Central Bank ponzi ping-pong” continues, with The Fed essentially “ending QE in October” and The ECB cranking it up. I find this somewhat ironic if one didn’t already have the broad understanding that it’s all just a part of the same coordinated effort.
The United States looking to come out as “the shining winner” as both The BOJ and now ECB look to carry the weight of the world on their “balance sheets”.
Is this the “new normal” as Central Banks continue to run the show? or will the natural forces affecting human decisions making / behavior again be reflected in markets, as they have been in the past?
Will humanity prevail?
So we’ll see here soon.