forex market analysis

Taking Stock Of Summer – What Comes Next?

Forex Kong 5 Comments

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.

 

Worlds Largest Pension Fund – Buying Japanese Stocks

Forex Kong 1 Comment

The Nikkei has just moved 340 points higher on rumour that Yasuhisa Shiozaki ( who has been advocating for the GPIF to reduce allocation to domestic bonds ), may be appointed the Health Minister ( so what? ) when Abe announces his new cabinet tomorrow.

The GPIF ( The Government Investment Pension Fund ) The world’s largest pension fund ( yes a Japanese fund not American ) is expected to increase purchase of Japanese shares to 20 percent of holdings and reduce domestic bonds to 40 percent.

With the market way ahead of itself here it’s the actual “timing” of said purchases that is still unknown. The fund would need to buy an additional 3.5 trillion yen of domestic stocks to reach the 20 percent target, so the “span of time these purchases would be made over” is key. The fund will announce its new asset allocations in the fall – according to GPIF investment committee chairman Yasuhiro Yonezawa.

Both Gold and the Japanese Yen got absolutely demolished overnight, with fear “once again abated” having the largest pension fund on the planet now suggest it’s ready to “step it up” in support of the ponzi we’ve all come to love.

This comes as tough news for Kong as I’ve been trying to “get long JPY” on the inevitable turn, so it remains to be seen if this will manifest as a simple “spike” or develop into something larger. My initial thoughts are “nothing can save Japan” and that this only goes further to affirm the complete and total desperation currently sweeping the land of the sinking sun.

Regardless – one has to respect that a player as large as The GPIF most certainly has the ability to “ruin your day” should they decide to go all in.

Markets Set To Roll Over – All Things Say Yes

Forex Kong 4 Comments

We are very close here folks.

Aside from the currencies, nearly every other thing I track / read / research suggests that this may not only be a strong area for “correction” – but the start of something much larger.

There has rarely ( if ever ) been a time in history when as many separate indicators / charts / graphs and info has been “this skewed” to suggest such divergence and risk of serious “downside action in global appetite for risk”.

Considering the current geopolitical backdrop and with U.S Equities still “clinging” to the highs, personally – I don’t see a blow off top scenario. To whatever degree that retail investors have “taken the bait” over the past 7 months….I believe they are “already in”.

The situation with Ukraine really only being the tip of the iceberg now as Putin’s “Gazprom” now announces “massive oil deal with China” again…bypassing the U.S Dollar in trade. These are tremendous blows to the U.S system, and make clear The U.S “true intension” in Eastern Europe.

They must save the U.S Dollar as world reserve currency – and will stage a war to do so.

The Nikkei rolled over a couple of days ago, USD looks set to plunge along with equities, and the entire currency market has more or less moved “risk off”, with USD/JPY “not breaking out”, falling back into range and expected to fall further.

The real-time trades in currencies, gold and silver as well U.S Equities, weekly reporting and daily commentary  can be found at the members site: Forex Trading With Kong.

Forex Markets Come Alive – USD Wash Out

Forex Kong 3 Comments

Wow.

A very large “gap up” here in the wee hours Sunday night before markets really kick off, and the U.S Dollar continues to surge higher against the E.U currencies.

One can’t imagine a single USD bear left on the planet.

Exactly as it should be…. before the thing tanks.

It’s amazing to me how public perception continues to view USD’s recent surge as “some indication” of a stronger U.S Economy.

How on Earth can The U.S Governement ( as well the crooks at The Fed – a private held bank ) handle the enormous contribution to the “serviceable debt load” ( remember The U.S is “officially broke”, with a continued rise in the “allowable debt ceiling” now just a given ) brought about by a stronger U.S Dollar?

It’s impossible. The Fed mandate is to “kill USD” at whatever costs, as to keep these balls in the air as long as they possibly can.

A strong U.S Dollar “kills” the U.S economy! As exports tank, and the amount/value of outstanding sovereign debt balloons “past” the balloon we already know to be.

Find me an “economist” who can make the arguement that “a strong U.S Dollar is good for America” and I’ll eat my hat.

A strong U.S Dollar represents everything the U.S Gov and The Federal Reserve fear most so….I encourage you to start looking for signs of reversal – as opposed to getting to excited.

 

 

Kramer Knows Everything – Says Yellen Should Sell

Forex Kong Got something to say?

Your beloved Kramer of CNBC fame just suggested “It’s time for Yellen to ring the register”.

I tune in to CNBC at times to get a good dose of what “home investors” are being fed these days, and was actually quite surprised here this morning.

As CNBC’s ratings and viewership continued to plunge ( to the absolute lowest levels in the history of the channel ) frankly I get “more interested” in what nonsense they are coming up with.

Could it be that they are actually leaning more towards telling the truth with hopes of staying on the air?

You’d have to imagine a room full of executives praying to god they will still have jobs come Christmas time thinking “hmmmm……perhaps we should do something about the format….we’ve gotta save this thing!”.

Not like they really have much choice in the matter, having their headlines / scripts / stories spoon fed to them from the “boys upstairs” ( the media big wigs who are also Central Bank big wigs, corporate America big wigs etc…) but to what ever degree they can – perhaps a bit of “reality” can creep in.

Kramer says “Yellen should sell” with respect to the now “4 Trillion Dollar Balance Sheet” The Fed is currently holding. That’s a whole lotta stocks n bonds isn’t it?

So the question begs regardless…….

If not now……..then when?

And even more so – How?

 

USD/JPY – This Market "IS" USD/JPY

Forex Kong 9 Comments

Some snippets from conversation on the currency pair USD/JPY from the Members Site, as I see it as valuable information for all.

**Watch it trade along side risk here as……USD/JPY has only managed to make it “back to the top of it’s range” while the SP 500 as well Nikkei have rallied to complete a total retracement of the move lower last week.

If that’s the best USD/JPY can do….”now” with markets back near the all time highs….you’ve got to question what it’s got left in it.**

 

**USD and JPY both represent the two “base currencies” currently being printed at alarming rates.

These are considered “funding currencies” as money is borrowed on the cheap…and in turn “invested” in assets ( U.S Stocks for example ) where “yield can be found”.The comparison of the two throws many for a loop….and as a currency pair it’s a tough nut to crack without broader understanding. The last piece of this puzzle rests with JPY.

As risk comes off ( I don’t care if it’s tomorrow…but in general ) all those investments “funded” by cheap JPY bust…..and the money flows back home.

Like a tidal wave….all the “free money” suddenly comes out of “all easy assets funded by it” – and comes racing back to it’s place of origin.**

 

**Nothing can stand in the way of this as the trade is “so massive” that it’s movement overtakes / over shadows all other movements in markets. U.S Bonds are sold, U.S stocks are sold, Australian and NZD Dollars are sold….EVERYTHING funded by cheaply printed JPY is sold as the elastic band “snaps back” and JPY is repatriated back home. The BOJ has printed , devalued , intervened MANY times before this ( although not on such a desperate scale ) and every single time…..I’m talking EVERY SINGLE TIME – the same result.

It doesn’t work….it won’t work this time.

Only thing is…..with such desperation – it’s already gone on far longer than one would imagine…..hence.

The disaster / BANG we’ll eventually see when she “once again”….does what she always does.**

 

**USD/JPY “IS” the market ( as per my entire trading thesis since you’ve followed ).

Seeing it “top out” back in January “WAS” the top of the market and this entire summer has merely been “retail distribution” as the big boys ( and myself of course ) plot our way towards the next “real move”. Watching USD/JPY fall thru 101.20 will mark ” the beginning of the end ” in global risk…..as ALL THINGS will follow suit.

A valuable observation / consideration for one to take forward.**

Obviously much more info available in at the members site, should you be so inclined to “broaden your horizons”.

Upside Targets Met – Thoughts On Jackson Hole

Forex Kong 10 Comments

Well that has my upside targets in both The Nikkei (15,499 ) as well SP 500 ( 1668 – 1678 ) more or less met so…….

Give or take another couple of points over the next day or so, this certainly creates an interesting scenario moving towards Jackson Hole – and the expected “chatter” out of The Fed.

It’s been my believe that “this indeed will be the time” where markets are given “some kind of clue” that perhaps the time has come to buckle up / take profits / begin taking precautions as to coming changes in monetary policy etc but…..I’ve obviously been disappointed by Yellen in the past.

Lining up the fundamentals as well technicals would have both USD as well as Equities take a turn lower, with JPY ( as well gold ) moving higher ( and obviously the commodity currencies falling off along side risk ) so…..the question obviously begs……

Will The Fed do it or not?

One has to keep in mind that, as much as a strong USD ( in at least one way ) creates an impression of a stronger economy, it also represents a tremendous burden on the American Governments debt load. For every single point that USD moves higher…..the amount of outstanding Government debt also moves higher – having to be repaid in USD.

It’s been The Fed’s plan since all of this began to “keep a cap on USD” ( well actually to drive it into the basement ) with the thought in mind of “exporting inflation” and keeping the “service of outstanding debt” at a bearable level.

One has to keep in mind that The American Government and The Fed NEED a weaker dollar in order to keep the ponzi going so…..it’s difficult to imagine USD “shooting for the moon” before at least another solid move lower, as changes to monetary policy ( and the supposed “end of QE” ) take root here in October.

Trading it is a nightmare as…….one stands to take a substantial hit getting caught leaning to hard in either direction – with these types of “risk events” best viewed from the sidelines.

As it stands I will continue to hold the few “short USD” irons currently in the fire, and let the chips fall where they may, with continued focus on JPY vs the commodity currencies setting up for the larger trade at hand “post Fed”.

Continued divergence across several currency pairs still see USD moving lower….before higher.

Trading The Week Ahead – Fed Speak Looms

Forex Kong 12 Comments

The raft of geopolitical concerns out there ( in particular Ukraine ) are finally starting to influence markets. The largest “current concern” now being what effect Russia and it’s supply of natural gas ( or “lack there of” – should things continue down this road ) will have on The European Economy, which is in a sad enough state of affairs as it is.

This isn’t going away anytime soon, and will likely be the catalyst ( or at least via the main stream media ) where blame can simply be placed on Russia for all problems in Western Economies wherein these problems have just been papered over – having been there all along.

My original post back in February “U.S Wants Ukraine – No Matter What” on the subject.

Of particular interest as it pertains to our trading here, take note of any “1 Hour Chart” containing JPY ( AUD/JPY for example ) from Friday, and see the “blatant and obvious” currency move on news that Ukraine attacked a Russian military convoy.

Japanese Yen is going to absolutely “explode higher” given any type of “black swan event” aside from its continued strengthening on safe haven flows.

Trading The Week Ahead

Our charts for both The SP 500 as well Nikkei have played out almost literally “to the letter” – having taken the anticipated bounce and now looking like they are ready to roll back over.

For more detailed trading, real time trade alerts and daily commentary please consider the Members Area as September is setting up for some of the largest opportunities we’ll have seen over the past several months.

 

Fourth Time's A Charm – The Market Decides

Forex Kong 2 Comments

Obviously you can’t win if you don’t buy a ticket, and at times….these tickets can cost you a pretty penny may it be psychologically, financially or both.

So when things are trading sideways ( as with the example of EUR/USD for example ) how long does a trader choose to hang on before considering the trade a wash / scratch or even a loss?

It’s always up to the individual, as no two traders have the same “threshold for pain”, each with their own set of rules / factors influencing their decision-making but ideally…the decision is made “sooner than later” – as there will always be another opportunity.

One particular “dynamic of price action” I like to use ( in order to help with this decision-making process ) is what I call the “fourth time’s a charm”.

When any asset price has tested an area of support or resistance for a fourth consecutive time over a span of perhaps a few days – it’s time to take note – as the next move is likely going to be the one that counts.

Breakout or breakdown, one can usually “make it or break it” on the fourth time an area of support or resistance is tested, suggesting that the asset has “done all it can” to either push through the area of resistance overhead or succumb to the pressure, finally falling through support below.

And so we find ourselves in the case of the U.S Dollar vs a number of currencies, currently testing the “fourth time’s a charm”-  not to mention both our patience and our discipline.

Which way does she go from here?

The fourth time’s a charm so…….we’ll just have to let mother market decide.

 

Long EUR/USD at 1.34 – Low Risk Entry

Forex Kong 2 Comments

Likely a pretty slow / sleepy to start to the week considering the slow summer months so…

Long EUR/USD still looks like the most reasonable play here for a bounce in risk / move lower in USD.

The JPY pairs are behaving “exactly as expected here” so for those interested in taking a shot ya…..just look to get your stops below those “prior near term lows” and let it be what it will be.

Commod currencies ( AUD / NZD and CAD ) would usually bounce along side risk as well but from what I can see / consider here these past days – they aren’t looking to make any major moves.

With AUD now “finally” showing its hand I think it’s safe to say these currencies have already began the larger “longer term move” in selling off / making the turn.

Sure we can expect a bounce but I really don’t think they’ll get to far.

We’ve identified that AUD has now rolled over on has high a time frame as the 4H – taking months to do so.

This kind of thing is not just “quickly reversed” so again……please consider any further “upside” in AUD to be “counter trend” and trade it accordingly.

I’m adding a couple contracts long EUR/USD here today, and will trade it actively should we see some volume and a solid move.

The benefit of staggering small orders over time should be noted here….as EUR/USD still sits around 1.34 – now going on a full week.

There is “no benefit” in jumping into a trade with your full position / max commitment during times like these, as you tie up capital that essentially just “sits there” – grinding you to shreds.

Forex moves a lot slower than most short-term traders initially understand ( getting caught up in the smaller time frame volatility / chop ) when “in reality” – price is going nowhere.

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