It’s one of the most counter intuitive trade concepts out there….and not surprisingly – also one of the most lucrative as the vast majority of retail traders continue to find themselves on the wrong side.
The Japanese Yen has been one of the largest contributing factors to the seemingly never-ending rally there in the U.S , as the Bank of Japan ( some time ago ) obeyed their master ( The U.S Fed ) as always…..printing Yen like mad and taking some heat off USD.
Yen then borrowed at 0% – and used to pump U.S Equities. It’s called the Carry Trade….and the big banks love it.
Until it’s time to unwind of course. Fast and furious, leaving the majority of retail traders in the dust…The Yen literally “takes off into the upper atmosphere” when risk ( U.S Equities ) is sold….and all those little Yen head back to Japan.
You are seeing a small example of that this morning with AUD/JPY trade now well in profit ( hey! Wasn’t that suggested a few day ago?? ) as well as nearly every single JPY pair making reasonable moves.
If you take anything away from this blog short of the odd chuckle – put this in your tool box. It will make you some serious coin.
Members! – The site is still down as these morons just can’t get it figured out ( hosting is so difficult right? GRRRRR!! ) Pick up here in the short term and we’ll be back up and running pronto.
Excellent work sir.
Great work as usual; I am wondering if you follow natural gas and would like to hear your take on it – it’s been beaten down almost 90% since it’s peak.
I do follow it……and as with oil ( and anything else denominated in U.S Dollars ) I expect ALL to bottom very soon – as USD tops out.
It’s all very counter intuitive these days as many fail to recognize the relationship.
A strong dollar is “killing U.S exports” and will ultimately take a real bite out of U.S multi national profits.
I expect that one of the larger “shifts” we will see in general market dynamics will be a large scale move “out” of risk assets…….and IN to the beaten down commodities. YES!
Thx tons for the analysis. I agree with your take on commodities being the next ones to see serious buying. Its amazing to see that something like oil & gas – things that we need for everyday lives – have lost over 70% and 85% of their peak values respectively. Just does not make any sense. I guess when these things will turn up, it will be sights to behold.
It does put one thing in perspective…the amount of money large multi nationals ( and the U.S Fed ) “have” been charging common hard working folks…..when reality is….85% of the “perceived value” of these commodities can go up in smoke overnight – and nothing really changes!
In any case….I’m very confident that oil will never see 100 bucks a barrel again.
Who will be able to afford it?
Kinda makes you wonder eh? We are all willing to pay the 127 bucks a barrel at one point….now the same commodity ( just as precious ) 70% less? Yet gas prices go up??
And the world keep turning. Consumers get absolutely hosed. It’s outrageous in my view but again…what can ya do!?
Hi Kong,
Great calls – Hope you’ve been rakin git in.
Risk off has been coming of nicely since the ECB last Thursday 🙂 Even Draghi’s attempted stick save on Friday with, ” no limits to ECB’s balance sheet” (complete BS by the way) has been undone. All that BS just provided a higher opportunity to short the Dax and S&P 😀
Like you, I too have been looking at the commodity complex and trying to work out a good way to play any rebound. What instruments do you trade commodities through? ETF’s or the underlying futures?
I think at present, I am in two minds. Yes I agree that a US$ top should result in a lift off for commodities but I believe this will be temporary. Until Economic fundamentals really improve (ie Chinese manufacturing starts firing again, Europe and EM’s start to improve as well as US) I still believe we could see a lot more downside to any industrial commodities ie. Copper/Iron Ore).
I think we still need a period of low base area range trading from which to launch up from. At present, all bases have been temporary hence why I believe we have still to find a bottom in commodities.
Anyway, I digress, I guess my main question was which instruments do you use to trade commodities.
Thank you.
Hey Madness….
Its a long time coming….but commods are “starting” to carve it out. There very well could be further lows – very possible.
I cherry pick specific stocks that are commodity related as well as trade futures…but more so as a sideline hobby.
I get the big moves on the “pure plays” via Forex for the biggest returns.
Having trading every asset under the sun at one time or another……forex words best for me.
Thanks Kong.
I am attempting to see if I can buy something for a “buy and hold” type scenario that will pay off handsomely when commodities ever catch a bid. Trading is all good and well but I guess it be nice to hold on to something for the long-term aka like an Apple stock.
Wishful thinking maybe but I guess commodities have been beaten down pretty bad. Whilst Oil may be abundant now with fracking etc, copper/ore etc still are not and it’s these commodities that I am looking at. Perhaps miners are the best way forward but I know companies like Rio Tinto and Anglo American have been having real issues as of late and their share prices have been hit hard.
Obviously once miners start to recover, then AUD, NZD (maybe CAD as that’s primarily an oil play) would be the in play currencies.
Thanks again.
If you stagger orders over time ( in this case……perhaps “considerable time” ) I imagine you will be alright.
Me? I’m really just going to wait until we see some kind of “fundamental shift” and with something like this ( if I’m correct about a major shift into Commodities ) at some point I think it will be quite obvious.
I imagine it will only take one HUGE weekly candle to tip us off.
Actually, reading about Anglo American and Rio Tino today, both have cut dividends further this month and Anglo is also shedding some 85,000 workers. This perhaps is an indication that there is yet worse to come for industrial commodities so perhaps there is a lot more downside than most are anticipating.
Just something to bear in mind.