forex market analysis

Global Appetite For Risk – SP 500 To Fall Hard

Forex Kong Got something to say?

So the SP 500 ( and global appetite for risk in general ) has got a couple more points left, before she turns and makes the next “larger leg” lower, then even lower still. I hope you’re prepared for a couple of ugly months.

Here is what we are looking at for The SP 500 and “global appetite for risk” over the coming months:

SPX_Oct_21_Forex_Kong

SPX_Oct_21_Forex_Kong

I know you don’t want to hear it but…….unfortunately after the countless number of posts, the never-ending supply of supporting data, and finally the “exit of The Fed” – you’ve had ample warning. This market has no possible chance of holding up on its own, and its VERY LIKELY that come late January The Fed will make reference to “QE 5” or which ever “QE” we’re on to next.

Survival here is key, as there will be significant buying opportunities come February – pending that you’re not so deep underwater with current positions that perhaps you’ve got a little cash to deploy AT THE LOWS.

Let’s imagine that markets “scream back” after this correction leading into late January, and by April of next year you’re “almost break even”.

Lots of pain to endure in the meantime, let alone profits to be booked ( if you currently have any ).

This thing was built on pillars of sand – you knew that.

Now the waves are coming in.

 

 

 

 

Stay In The Trade – Or Re Enter On Momentum

Forex Kong Got something to say?

When you are actively trading a given asset or currency pair, you often run the risk of “missing out” on large movements in price, as you’ve taken profits and then try to find the best way to get “back into the trade”.

Obviously I would generally “look for a bounce” in order to re-enter the trade at higher prices when shorting, but what if that “bounce” doesn’t come? You’ve booked profits on only a small portion of the move, and now run the risk of “missing the crash” as you sit on the sidelines “hoping for the ultimate level” to re-enter the trade.

It’s always a tough spot. And I can’t tell you how many points I’ve missed over the years, exiting a trade then watching it go “much further” without me. You can’t catch every single one, and you can never go wrong taking profits.

I employ a simple strategy of “getting under the asset” – placing orders several pips “below current price” when shorting ( and obviously “above” current price when getting long ) with hopes that my orders will get picked up on “further momentum” in said direction. It’s really all you can do.

If you just sit patiently waiting for a bounce, there are times ( such as these last few days with our general position long JPY ) that you may just miss the bigger ride lower, so having a couple of orders in the system “below or above” the current price “should” allow you to participate further, should the move continue.

It’s always tricky looking to “actively trade” as opposed to looking at larger time frames and holding trades longer, and it’s really a matter of preference, but I can say from experience – It’s almost “always” more profitable if you are able to just “stay in the trade”.

 

Selling The Rip – Earnings To Disappoint

Forex Kong 2 Comments

The SP 500 has now broken below a critical area, suggesting that further losses ( over the next several weeks ) will be seen. But of course, right around the time you figure that out – markets also look set to bounce.

This “bounce” ( however great or small ) will only provide greater opportunity to continue shorting – just at higher prices.

Dip buyers will unfortunately be met with “the dip that turned into a dive”.

Regardless of near term price action over the next couple of days, what people need to understand is that we’ve turned a corner, and that as per The Nikkei in Japan ( leading us lower for several days prior to The SP finally rolling over ) any idea of a “new string of higher highs and higher lows” is very likely out of the question.

I don’t expect higher prices in Japanese stocks period so……as nearly every single index globally has now broken below significant lines of support it’s fair to say that indeed – a significant top has finally been reached.

“Selling the rips” now, not “buying the dips”. That’s the road we’re on.

Sinking below 1904 has solidified a much larger and more serious correction ahead, so investors / traders need to be aware that we’re on the other side of the mountain now. This earnings season is also expected to bring disappointement so look ahead to lower stock prices in coming weeks.

 

JPY Center Stage – Reversal Complete

Forex Kong 6 Comments

The near term bottom in Japanese Yen ( JPY ) marks the top in Japanese Equities, and subsequent fall in “global risk for appetite”.

Wouldn’t you say?

Down -420 points in Japan,with U.S Equities falling past “any idea of near term support”, and fast.

This would only make today “Day 1” in a new investors cycle in JPY ( generally playing out over many weeks ) so one can only imagine the trade implications here.

You can get under just about anything JPY related and short.

 

Risk moves lower from here.

The Top Is In – In Japan That Is

Forex Kong 7 Comments

It’s been interesting to see how currencies have been doing very little, all the while The Nikkei as well SP 500 – continue to weaken.

We’ve now got a “weekly swing high” in Nikkei ( where this weeks “low” takes out the low of the previous week ) which is ( in general ) a pretty solid suggestion of future direction, although still no “reversal” in Yen.

The top in Japanese stocks looks to be “confimed”.

It’s interesting to note “the degree” of selling in risk, and it’s effect on any individual currency as with the example of Nikkei and Yen….it appears we “really need to see some selling” to get that  Yen up off it’s bottom ( jumping a little bit this morning ).

USD continues to push at it’s near term highs…high’s that are “far higher” than they should be at this point as the USD / EUR / GOLD / COMMOD cycles are all ( as they are all so connected ) completely stretched “past” stretched.

I’m holding short USD on first round of entries – currently only a couple pips in the red.

Volatility ( all the way around ) is DEFINATELY picking up, and it would be my thinking that the degree of selling we are seeing “increases” – considering that most of the Major Indexes are again in the red / weak.

A turn in USD has to factor into all of this here soon, and Yen so close to finding it’s low.

You don’t want to be on the wrong side of a rising Yen.

My Trading Framework – Put To The Challenge

Forex Kong 11 Comments

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.

More real-time trades, weekly reporting and daily commentary at the members site : www.forexkong.net

 

 

 

 

 

 

You Can't Win – Only If You Buy A Ticket

Forex Kong 1 Comment

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.

 

 

 

 

 

Short Entry Of The Century – All Things American

Forex Kong 3 Comments

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.

 

 

 

Calm Before The Storm – Market Update

Forex Kong 1 Comment

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.

Nikkei_Sept_15_Forex_Kong

Nikkei_Sept_15_Forex_Kong

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.

USD_Sept_15

USD_Sept_15

We can also see the inverse correlation and completely “oversold” conditions in EUR.

Eur_Sept_15_Forex_Kong

Eur_Sept_15_Forex_Kong

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.

AUD Falls Out Of Bed – GBP To The Moon

Forex Kong 10 Comments

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.

AUD_Sept_10_Forex_Kong

AUD_Sept_10_Forex_Kong

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.