Taking Stock Of Summer – What Comes Next?

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.


5 Responses

  1. David September 9, 2014 / 12:47 pm

    What do you propose can/will cause this Kong? Outside of some type of news pointing to the Fed significantly delaying interest rate hikes, I can’t think of anything else. Scotland “No” vote will at least give the GBP a break though.

    • Forex Kong September 9, 2014 / 1:10 pm

      The ebb and flow of normally functioning markets has most certainly been “stretched” via Central Bank intervention – no question.


      Last time I looked “human beings where still human beings ( however ape like these days ) and The Central Banks can’t change that.

      I can imagine any number of things happening to generate the “needed kick in the ass” this market needs to make this move lower, but “what it will be”? is anyones guess.

      Scot “No” will certainly get GBP back on it’s feet.

      Otherwise…..there are a ga zillion “newsworthy items” circling just underneath the surface from China’s recent moves in FX / Yuan, to new war action in Ukraine, to further “tanking Japanese economy” / you name it…..they’ve got a million choices / reasons that this thing couls turn in a heartbeat.

      • Michael Penthouse September 9, 2014 / 2:47 pm

        Hi Kong, we were just witnessing the “needed kick in the ass.” I would even call it the black swan we’ve been waiting for. It’s the Apple watch. The stock market was all about Apple today. Just look at the volume! IPod was a great gadget, a must have, the iPhone was even a greater gadget, definitely a must have and now the Apple watch. What a crap product. Now all the little YENs have to travel back home.

        • Forex Kong September 9, 2014 / 3:24 pm

          Im not sure its the Apple watch , as thats pretty “tiny” considering where we are at with global markets / future GDP estimates etc but hey – Whatever !!

          I’ll take it!

  2. Freddo September 9, 2014 / 11:24 pm

    Disagree with your general Idea that big correction is happening 2014. It won’t because the media keeps warning of it happening. Never happens when the media are selling it

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