Stocks And Currencies – Major Shake In 2017

It clearly looks like this will stretch into the new year…….before we see a major turn in both currency and equities markets. Money is pouring into silver and gold with the gold miners ( and gold complex in general ) finally showing us not only the daily cycle low….but quite possibly the “yearly” cycle low as well.

 

Gold_Miners_Bottomed

Gold_Miners_Bottomed

This makes for some pretty solid trades as……The EUR will bottom along side gold and silver, the U.S Dollar slowly rolls over for extended losses and equities make a solid correction.

Sound about right? This is EXACTLY how I am positioned with short trades in USD/JPY, long silver and gold miners ( GPL bought at 1.27 ) as well limping into further “long JPY” ideas / shorting the commods ( AUD,NZD and CAD ) with marijuana companies holding tough.

End of the year selling, and who knows what other “market shenanigans” playing out these last days of 2016. I see a large-scale correction first half of January 2017.

Falling Oil Prices = Slowing Global Demand

With readership here at Kong now doubling “again” over the past few months – I struggle to understand what “new information” people are looking for.

You do understand that the recent fall in oil prices ( well …actually not so recent considering it’s been falling like a rock since June – down from 110 to now 58 bucks a barrel ) is a blatant and obvious indication that “global growth” and “global demand for oil” is falling off a cliff right?

Seriously…….if you don’t see the connection between “supply and demand” in something this blatant and simple well…….one has to wonder “what you do see” – if anything relevant at all.

Finally something “other than The Fed / mainstream media bullshit” to get you off the couch and start asking yourself?

Could it actually be? You mean all this Kong talk of “global slowdown” over the past months ( despite the ridiculous rise in equity pricing ) is actually for real?

Give your head a shake. The world outside your tiny bubble of plastic wrap and pizza boxes is selling off like hotcakes and you still think Apple looks like a buy here at 110.

Oil related currencies such as The Canadian Dollar as well The Mexican Peso are getting creamed even as The U.S Dollar is falling hard, and The Japanese Yen enters “lift off stage”.

Debate over the next couple weeks and “what ever miniscule points are left” in the general propping up of both Japanese and American markets is a dead mule.

Step back and imagine oil at 30 bucks…perhaps that will get your attention.

 

Watching Commodity Currencies – What Can Be Learned

It’s pretty common knowledge that the currencies of countries with “commodity related economies” such as Australia, New Zealand and Canada are seen as the “darlings of the currency markets” during times when investors feel safe.

Simply put, large institutional investors are able to borrow money such as U.S Dollars or Japanese Yen at extremely low rates of interest, then use these funds to invest in currencies / countries where higher yields and greater opportunities can be found. Australia with its mining / gold related businesses, as well Canada with its oil as a couple of good examples.

The trouble is, as attractive as some of these investment’s may appear during times of economic expansion and loose monetary policy ( with both The Fed and The Bank of Japan flooding the planet with cheap money ) the currencies of these commodity related economies are not widely held, lack liquidity and are not generally sought during times of contraction and tightening.

To a certain extent you can almost consider them the Twitters and Facebooks of the currency markets. Relatively large, fast moves higher when times are good and investors feel safe – but equally the opposite movement when things start to go south.

Think of it like this. If suddenly the world fell into chaos and you were trapped on holidays in The Caymens, unable to return home to your family and friends. What currencies would you look to have there in your pocket / bank account? A handful of Aussie Dollars likely won’t do the trick.

So what can be learned by following these currencies? Can they give you any indication of future movements in global appetite for risk?

Lets have a look.

Australian_Dollar_During_Risk_Aversion

Australian_Dollar_During_Risk_Aversion

As an extreme example we can see prior to the crash of 2008 that the Australian Dollar had enjoyed a fantastic run while times where good – only to then wipe out six years of gains in a matter of months. Commodity related currencies across the board got completely hammered as fearful investors did all they could to get back to the “relative safety” of the currencies originally borrowed – those being the U.S Dollar and Japanese Yen.

Since Central Banks have been printing money like mad since 2009 investors have enjoyed nearly 6 years of bliss, borrowing said funds at extremely low rates of interest and investing where yields can be found.

I’m not suggesting you’ll see another 2008 scenario play out tomorrow, but by keeping an eye on the commodity currencies you may certainly get a bit of lead time – should things turn.

War, Silver, AUD, Putin, China = Fun

I feel I’ve gotten a little soft here during the past few weeks.

In not being as “overly thrilled” with the market as I normally am – the blogging has suffered as……if you don’t have anything good to say well……you know.

This tiny blip / risk aversion based on “at least two” of the black swans we spoke of last week restores some faith in the fact that markets are still markets, people are still people, and emotions are still emotions.

The Central Banks do all they can to lull you to sleep but in reality are relatively powerless against the “true forces” of fear and greed – where human emotion will always take the front seat.

Take for example the massive printing efforts in Japan – propping up the Nikkei. It’s all going to look pretty ridiculous as “only a matter of days” can erase “1000’s of points” in a heartbeat. Imagine when things really turn? ( as they will ).

Russia has put Obama back in his bunker with suggestion ( if not action already ) dumping U.S Treasuries as well US Dollar reserves alongside their good buddy China – essentially holding the capability to “level the U.S economy” without the use of a single missile. You gotta love that eh?

As suggested earlier Putin will not let these tyrants in Washington get their grubby little mits on Ukraine without a fight….and rightfully so (if you understood anything at all of the importance of Ukraine, and its massive network of natural gas pipelines that feed Europe).

Obama can kiss my ass. He’s beyond desperate, and essentially “toying with war” as Russia merely protects what it already has.

Me…..I’ve got important things to take care of over the next couple of days – “very” important things…so I will look for WWIII to start Monday at the earliest ………..and “never” at the latest.

Have a good weekend all – keep your eyes peeled late Sunday.

Short AUD – killer, and the long list of gold and silver miners entered “weeks ago” doesn’t hurt either.

Kong……..gone.

JPY Surges – Weakness In Risk Appetite Showing

Big surge in JPY ( and we all know what that generally means right?) as commod currencies ( in particular AUD he he he… ) make a pretty dramatic turn – downward.

The Nikkei has also fallen “below” it’s bear flag / sideways pattern from the last 2 months so…..what’s left?

Good ol U.S Equities broke trendline a couple of days ago….now backtesting and wait for it…….wait for it…..

We may have to “wait for it” a little longer as one really can’t say for certain here but – weakness across the board.

 

Seeing Any Cracks People? – Copper Demolished

For as many years as I’ve been trading and analyzing markets I’ve been told time and time again….watch copper.

If you want to get a good bead on global growth / demand just make the simple connection between “that” and the obvious need for copper.

You can’t build a building without it, you can’t build a car without it, and you can´t produce anything “electronic” without it so…..I guess that about covers it.

It’s been widely correlated with “China’s growth” as a general bellweather for continued expansion and development.

Nice chart below. I guess the default of China’s Chaori Solar Energy may have caught a couple of peoples attention. Smart people anyway.

Copper_Forex_Kong_March_2014

Copper_Forex_Kong_March_2014

The Aussie Dollar ( my synthetic “short China” play from a few days ago ) getting hammered as we speak.

And who’s saying that saying a keen eye on the fundamentals doesn’t do much for their trading?

Not me.

My AUD Move Explained – No Big Thing

With the dollar “finally falling out of bed” I’ve scratched a couple trades for a 2% loss.

USD has given us more than enough chances to “ditch” and in all honest I hung in there with a couple smaller “much longer” than I should have, suggesting some days ago that “I’m not interested in catching a falling knife” not having much conviction in hanging around “long USD”.

And so it goes.

Otherwise, I’m highly suspect of the “sudden surge” in commodity related currencies hence initiating some “short AUD” ideas over the past 48 hours.

It’s not often you’ll “ever” see a currency trade sideways a full month, then drop “lower” and out of the range…..then come screaming back to highs, near or even above the range highs.

A full “rinsing” if you will – and unlikely a sustainable move.

AUD_JPY_200_Forex_Kong_Trading_March

 

As much as the short term action would have one thinking that “AUD is on fire” – it’s really only now bumped into well recognized areas of overhead resistance in a number of pairs.

Seeing something like this “scream 300 pips higher” in a matter of a few short days, generally has it retrace a large portion of the move, coupled with ideas from my previous posts ( suggesting that “short AUD” essentially works as a play on China as well ) I’ll have no trouble holding / adding to these positions as things develop.

AUD/JPY And The 200 SMA – Just Can't Get Along

So you’ve been pushed to your limits “technically” and the majority of you’ve been pushed off the field.

Hungry bears trading “too big too fast” crushed in the recent upswing and “right around now” eager bulls feeling that it’s “safe to buy the dip”.

Has anything changed?

AUD_JPY_200_Forex_Kong_Trading

AUD_JPY_200_Forex_Kong_Trading

Last time I looked ( 15 minutes ago ) this Yellen chick (now heading the U.S Federal Reserve) is sticking to the plan and the “taper talk” continues so……check your “fundamental heads”.

U.S equities “still” pulling the wool over your eyes perhaps?

The Australian Dollar ( which generally trades” along side risk” ) just had a brief meeting with its old friend the 200 Day Moving Average and guess what?

Same old story. These two just can’t get along,and yet again part ways – unhappy.

Things setting up for a nice lil “reversal” here if you ask me.

Waterfalls In Australia – AUD Going Down

I’m not going to get into all the details here at the moment as……I imagine the majority of you could really care less.

“Just give us the trades Kong – what’s the trade Kong??”

The Australian Dollar is in real trouble here.

Considering that the RBA is opening “talking down” AUD as the currency is considered “overvalued” (and in turn hurting Australia’s economy), coupled with the fact that “it’s been a nice run” on the back of massive expansion and development of China – it could very well be time for some serious downward action.

AUD has already come down considerably but…..I might see a “waterfall” coming – in the not so distant future.

Trades short in AUD/JPY would likely make the biggest move, as well for stock traders short “FXA”.

Risk Appetite – You'll Get It "Eventually"

You know me. I’m a currency guy.

As each of us “eventually” find our specific area of interest, be it options or futures, equities or bonds, currency or commodities, you’d like to think that – over time…..we get better at it.

After countless hours and many, many sleepless nights – finally……finally things start to come together. If you stick with it long enough “eventually” trade ideas and entry signals “literally” – come “leaping out of the computer screen”.

I suggested the other day that I was seeing weakness in the commodity related currencies. Those being the AUD, NZD as well the CAD. I also initiated a trade “short tech” last week – that is now about a “millimeter” from being picked up. The weakness in commodity related currencies cannot be ignored as…these currencies represent risk. Would it just be coincidence if we where to see the “short tech trade” get picked up , and see equities pullback as well?

I think not.

The currency market is like ” a gazillion times larger” than a single countries equities market, and it’s always been my firm belief that “currencies lead”.

You don’t get a “sell off in AUD” for example – because equities markets are looking weak. Equities markets “become weak” as “risk appetite” wanes. Appetite for risk is seen via currency markets “long before” it’s reflected in a silly bunch of stocks.

Take it for what it’s worth as everyone has their own views but…..to ignore movements in the currency markets, in exchange for headlines on the T.V, or perhaps an analysts opinion sounds like a great way to lose a lot of money.

I’ve entered “several new positions” short the commods against a variety of other currencies as my original “feelers” are looking quite good. GBP has been a monster, and CAD and AUD in particular have been taking some decent hits.