Author: Forex Kong

USD Expectations – Trade Ideas For Bears

Forex Kong Got something to say?

The normal correlation of  “dollar up = stocks down”  and visa versa – has been on its head for some time now. As you’ve likely seen over the past few days while stocks have staged a small rebound, the USD has also continued higher. The two have been trading in tandem.

I’m expecting the dollar to turn downward tomorrow or very early next week – with full expectation that stocks will also make another leg lower.

Something else to watch in coming days will be the currency pair USD/JPY, as the BOJ’s recent efforts to further weaken the Yen has spurred buying across markets with carry traders (as suggested month earlier) clearly taking advantage of the easy money. Weakness in USD/JPY will now correlate with weakness in risk, and markets in general.

I don’t imagine the BOJ has much more to  add ( here at their meetings over the weekend ) and in turn – expect this would be a great time for a bounce in Yen, and a further move toward “risk aversion”.

 I’m looking to get short USD and “long” JPY ( at the same time – which some months ago would have been sheer lunacy as they are both considered “safe havens” – and I would never have had opposing trades including these currencies) giving you further indication how significant the moves out of Japan have been for markets in general, and add further credence to the study of fundamentals in trading.

Stock guys…..I would look for hedges, or short-term plays in some kind of inverse or  “bearish” ETF.

Intermarket Analysis – Questions Answered

Forex Kong 9 Comments

Lets go through these one at a time.

Some time ago I had you take a look at the symbol “TLT”  which tracks the value of the 20 year U.S treasury bond. When we start to see bond prices falling – it’s likely that stocks are not far behind. Keep in mind this is a WEEKLY chart, so the trend demands considerable respect.

Please remember – these “big ships” take weeks to turn – and this kind of macro intermarket analysis does not produce an immediate “buy or sell” signal.

It would be my view that regardless of short-term action/volatility – it would take a “considerable move” to actually reverse the weekly downtrend in TLT. Hence – the required “precursor” to lower stock prices No?

TLT_Forex_Kong_April_20

TLT in Weekly Downtrend

Lets look at the Commodities Index.

We’ve taken a real beating here – but this sets things up quite perfectly for another “intermarket dynamic” we’ve come to learn. When the “price of stuff” starts climbing higher ( or possibly “rockets” higher ) – what direction is USD moving ? (as commodities are priced in USD) You’ve got it – Commods up = USD down.

Commods_Forex_Kong_April_2013

Commodities Set To Rise

Here is a previously posted chart of the SP500 – and the obvious area of resistance. I can’t really add much more in that – I believe the easy gains in U.S equities have now passed and for the most part from here on in – it may trade flat to down, with little chance of doing more for your account than grinding it to pieces.

Stocks will get volatile and create the illusion (many times over) that further gains are in the cards, drawing in as much new money as possible while grinding sideways. Short of being a “master stock picker” like the fellows over at Ibankcoin.com – I can only suggest being cautious…very, very cautious.

Stock_Market_Top

Stock_Market_Top

Finally the U.S Dollar.

DXY_Forex_Kong_April_2013

The U.S Dollar Also Set To Fall

Not much else to add here as the intermarket analysis above pretty much outlines the direction for the U.S Dollar. I feel we will likely see a time very soon, when U.S bonds, U.S stocks as well as the U.S Dollar all fall together.

Ideas on how to play it? Let’s look at those next.

Weekend Wishes – Kong Comes Up Short

Forex Kong 4 Comments

Its been a long week. And aside from the smashdown in gold – a very boring and frustrating week.

I could post a couple of charts, show you some levels and again point out that “the topping process” is often a long and arduous affair but frankly – what’s the point? Here we are. Here we “still” are. And “here we may be” for several more weeks, as the struggles between bulls and bears play out at the highs. Short term squiggles are pretty irrelevant, as currency markets continue grinding away at traders accounts ( more so my patience) with nearly everything (short of JPY) trading virtually flat for the week.

For the most part I couldn’t place a  trade worth more than a couple of tacos if my life depended on it….and it does depend on it!

I wish I had more to share with you. Some amazing trade strategy, or some “top-secret insight”  into a potential market move – materializing over the weekend. I wish I had for you the “investment tip of the century” – something to make you rich, something that would change your life forever.

Sadly no – I don’t.

I’ll keep digging here over the weekend, and hopefully plan to “wow you” in coming days. For now I hope you have a wonderful weekend, and we’ll see back here Monday.

Kong………………….gone.

 

Poor Decisions – A Trade Gone Wrong

Forex Kong 7 Comments

NASA announced today that Kepler (its alien world-hunting spacecraft) has discovered two previously unknown planetary systems, including three super-Earth size planets in the much-coveted “habitable zone”  – capable of sustaining human life.

It’s really only a matter of time now (with such advancements in technology ) that we finally put to rest the age-old question of our human origins, and make the “connection with the stars” as did our ancient ancestors.

Putting things in perspective – there are more stars in our universe ( each with their own planetary systems ) than the combined total of every single grain of sand on the entire plan Earth. The discovery of these two “Earth like planets” is only the beginning – as we continue to reach further and further out. We will find life – and we will find it soon.

It’s things like this that keep me small, humble. We get wrapped up in our day-to-day lives, the decisions, the stress, the pressure we may put on ourselves, when in the grand scheme of things – we’re not just a tiny grain of sand, but one of billions of tiny people – on that tiny grain.

Consider the significance of a poor trading decision. One decision….. in a day filled with decisions, in a life filled with decisions.

I’m pretty sure you’ll be O.K.

 

Markets – We Are Going Down

Forex Kong 9 Comments

I won’t reference my previous posts. I won’t tell you “I told you so”, or tell you again….to pull your head out of the sand. I will give you the quiet time needed (perhaps crying into pillows or smashing into walls) to reflect and evaluate….. ” what the hell did I do wrong?”.

We are going down people – exactly as suggested.

It’s also been suggested by several of you that I should “pep it up” and try my best to “write something positive”. While this is excellent advice (should I choose to  start a “day care” – or perhaps get into grief counseling) – the day I tailor my writing to appeal to some cry baby, sad sack – is the day I poke pencils in my eyes, run down the beach naked, yelling  I’ve now seen Jesus!

Trust me – ain’t gonna happen. It will never, ever happen.

We all make decisions in this life, and we all hope they are the right ones. We all do the best we can, and we all hope that when “all is said and done” – we’ve lived our lives with some level  of integrity, dignity, decency and respect.

If you’d rather I lie to you – perhaps you need to consider the same.

If you don’t like it – don’t read it.

We are going down.

There will be spikes, and there will be large moves in both directions as we crawl our way through 2013, but as per my latter posts – if not  for “one more pop” higher” I am a firm believer that the highs are in. I mean”the highs” in general – like…..not seeing the SP500 at these levels again – period…..end of story, as wel roll over late 2013 / early 2014 on the road to “zero” as the U.S completely collapses – stocks, bonds, housing,  currency and all.

No Trade – Is A Good Trade Too

Forex Kong 4 Comments

You can’t rush the trade. If there is no trade – then so be it.

No trade – “is” the trade.

I know it’s hard, especially when you are starting out. You want to get back out there, you want to see some  action, you want another shot at making some money. But an important skill to learn (actually a very important skill to learn) is to be able to access the current environment, and evaluate whether a trade is even warranted at all.

Capital preservation needs to take priority over new opportunities for added profits – and when the markets are crazy – finding a  trade (and I mean a good trade) – gets increasingly more difficult. You have to learn to include “not trading” in your trade plan. Embrace it, and consider yourself a better trader for it.

When you can’t find a decent trade (certainly consider that perhaps there isn’t one) and tell yourself “Gees! – Thank god I don’t have any of my hard-earned cash tied up in that mess! – I can’t find a decent trade if my life depended on it!”

As you get better at this – you start to trust yourself. The feeling of “not trading” starts to become a feeling of relaxation and confidence, rather than anxious or stressful.

There will always be a trade….just maybe not today.

For what it’s worth – it’s no picnic out there for me these past couple weeks either. I am still looking short USD with a couple of irons in the fire – but am patiently waiting for a move of some substance. The markets are proving difficult as I suggested 2013 would, and regardless of  smaller / less profitable trades as of the past – I am thrilled to have very little exposure.

 

 

 

Goldbugs – You Just Don't Get It

Forex Kong 4 Comments

I’m going to try and go easy – as I know many of the readers here are very much so invested in Gold. As well please keep in mind – I too believe in the long term story.

But with such macro forces at work –  it absolutely pains me to envision you sitting there at home, considering every little tick up and down, gaps, bollinger bands, cycles, COT, and the most ridiculous of all – “selling on strength and buying on weakness numbers”  – on “paper gold” through GLD!

It’s Ridiculous! Stop it! Stop it right now!

I’ve even heard some of you consider that Uncle Ben’s 85 billion dollars a month could in some way be “good” for gold prices??  Have you lost your mind? Seriously! It’s 100% completely the opposite!

Ask yourself this: Who on earth could believe the dollar’s exchange rate in relation to other currencies if the dollar was seen collapsing in value in relation to gold and silver?

This would completely defeat the money printing effort of the Fed – and completely undermine the bond buying!

The Fed is a private bank! with one goal and one goal only – to profit! They can’t possibly let the value of gold skyrocket if they intend to kill the U.S dollar! Think about it!

So……The Federal Reserve uses its dependent “wallstreet bank buddies” to short the precious metals markets. By selling naked shorts in the paper bullion market against the rising demand for physical possession, the Federal Reserve is then able to drive the price of gold down.

Bullion prices take a big hit, bullishness subsides and the flow of dollars into bullion is stopped….and the money printing can continue.

As long as the Fed continues to print ( and soon looks to print more ) I am at odds with any suggestion that gold will do anything more than trade flat at best.

In any case – bring it on then……I’m ready.

Work Hard – Stick To Your Roots

Forex Kong 1 Comment

It’s funny you know….the stories we’ve  heard from our parents.

The stories they told of  “how hard it was” and of the struggles they faced. Stories of  “the way it was” and the sacrifice needed…..if only just to survive.

As a child I likely didn’t listen much. Only now in this “attempt at adulthood” am I truly thankful to have learned many, many important things from my parents. Among other things, based in the fact that they never had it easy.

There was no family money. There was no house to inherit, no business to take on, no riches stashed away for the future purchase of additional “silver spoons”. My parents worked hard.

I work hard.

Without these “stories of struggle and sacrifice”, without these “tales of triumph”, these examples of “strength in the face of adversity” – who would I be? What would I have become?

Well…….I have my own stories now. And as my parents may grow “equally disinterested” as I may have been as a boy – I guess it all comes around full circle.

Trading is the most difficult challenge you will ever face – for reasons you are currently not aware.

Word hard……………………stick to your roots.

Fiat Currency – Paper Money Is Debt

Forex Kong 14 Comments

Fiat currency is money that derives its value from government regulation or law. The term fiat currency is used when the fiat money is used as the main currency of the country. The term derives from the Latin fiat (“let it be done”, “it shall be”).

The term fiat currency has been defined variously as:

  • any money declared by a government to be legal tender.
  • state-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard.
  • money without intrinsic value.

While gold or silver-backed representative money entails the legal requirement that the bank of issue redeem it in fixed weights of gold or silver, fiat money’s value is unrelated to the value of any physical quantity. Even a coin containing valuable metal may be considered fiat currency if its face value is higher than its market value as metal.

Another interesting point, when we consider how money functions” in our society as a “debt instrument”.  The Central Bank creates money out of thin air, then exchanges that “new money” for  “interest bearing instruments” such as Government Bonds.

You purchase the bonds with an expectation of making some kind of return on that bond (and where do you imagine that “extra few %’ points” come from over time?)

Your taxes go up – that’s where.

Round and round we go as governments keep spending – and you keep paying for it.

It’s been a slow week here and I apologize for the “lack of interesting copy”, but when I’ve not actively trading there usually isn’t a pile to say. I imagine things will pick up here again soon.

Forex Blog – This Is A Forex Blog No?

Forex Kong 3 Comments

This is a forex blog – isn’t it?

You know – I’m a little hurt. As hard as I try, it still appears that our beloved friends at Google still don’t seem to think this is a forex blog. I type “forex blog” and all I get are a number of websites looking to sell you some “forex trading system”, or a couple of videos showing me “what is forex”, or “how I can make money trading forex”….and poor, poor Kong  – still nowhere to be seen.

If this isn’t a forex blog – I’m not really sure what to do about it. Ideally – the gang at Google (who I’m sure “must” have an interest in forex) would be thrilled to have a look into the real life “trials and tribulations” of a real life forex trader…although seamingly – such is not the case.

Oh well..I will continue to do the best I can, and look forward to the day, blessed with a “front row seat” in the listings……….recognized as a  “forex blog”.

Scuze the plug you guys…..but I gotta swim with the sharks here – and every post can’t be a “doozy”.