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Chinese Stocks – Largest One Day Fall Since 2009

Forex Kong Got something to say?

It’s all too easy for investors to get caught up in the hype of the current “western media spin”, going about their daily business with the general belief that everything is moving along nicely – as U.S stocks remain elevated.

But one has to remember ( and especially these days ) that we live in a “global economy” where the puzzle pieces are so interconnected “planet wide” that even the smallest ripple in “other markets” can have a sizeable effect on things closer to home.

Last night ( on the heels of recent moves by The People Bank of China to actually “tighten monetary policy ) The Shanghai index fell 5.4%, registering the largest one day fall since 2009.

More from The Wall Street Journal:

 China’s stocks, currency and corporate bonds suffered their largest tumbles in years Tuesday after Beijing took fresh steps to rein in growing risks in the country’s debt-laden financial system.

The selloff started in the bond market, as traders rushed to sell and raise cash after a regulator banned investors from using low-grade corporate debt as collateral to borrow cash. The turmoil then spread to the yuan, which recorded its biggest two-day tumble ever. Later, the benchmark Shanghai index slumped 5.4% to record its biggest fall since 2009.

The sudden moves serve as a reminder to global investors about the country’s shaky finances, just as China opens up its capital markets more to overseas cash. Policy makers gathering in Beijing this week for a key summit are signaling to the investing public that they should prepare for a lengthy period of slower economic growth after years of amassing debt to fuel high growth levels.

It should come as no surprise that both The U.S Dollar as well U.S Equities enter “free fall mode” here this morning – with the current global economy resting like a house of cards built on pillars of sand.

There has never been a time in our history where the “global economic picture” has been so fragile, after the crash of 2007/2008 and the last 6 years of Central Bank driven “pseudo recovery” the “tiniest little breeze” has the potential to push that house cards “way out ” into the surf.

Life preservers and floatation devices now being checked and re-checked, as Gorilla’s are generally pretty shitty swimmers.

 

 

 

Waiting On Yen – Waiting On USD – Waiting Waiting…

Forex Kong 15 Comments

As contrarian as it may sound – you all know I’m looking for an intermediate “top” in USD –  leading to a much larger decline.

The immediate reaction ( obviously ) to the “official end to QE” resulted in a huge spike in USD, sending EUR/USD and GBP/USD lower as well USD/CHF higher.

Today’s “candle” in $DXY ( pin bar ) is now looking prime for reversal, as it will take very little price action tomorrow – to close under today’s low.

This would fall right in line with a bottoming in JPY, and our expectation of “risk aversion” to continue.

JPY_Futures_Forex_Kong

JPY_Futures_Forex_Kong

If you’ve had any doubts of my continued view of both JPY as well The Nikkei – I hope this “blatant example” can finally put them to rest.

The correlation  of “JPY down = risk on” and “JPY up = risk off” could not be more obvious as The SP 500 has done “the exact opposite” over the past week and a half.

Exactly.

I suggested some time ago that the currency pair USD/JPY  “is the market” as Yen is borrowed on the cheap , then converted to USD to buy stocks. This could not be more obvious in viewing the correlation over this last “massive V-shaped move” in both Yen as well The SP.

USD reversal “lower” ( any day now ) and JPY confirming reversal “higher” will put a stamp on the end of this upward correction – and the beginning of our next leg lower.

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.

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.

Citi Sells All USD Positions – No Really?

Forex Kong 2 Comments

Again….you generally need to be “ahead of these moves” in order to take advantage ( note yesterdays post- please scroll down ).

Gold, & Silver Jump As Citi Sells All USD Positions Fearing “Squeeze”

I envision a time ( in the not so distant future ) when “all things American” ( USD, Stocks and most certainly the bonds ) are sold.

I’m sure you’ve noticed the correlation of USD strength = U.S Equities strength so…..one would have to imagine the complete and total “inverse relationship” as well right?

Or they just all keep going up forever. RIght.

Little chance of that.

Other than the few short USD positions already in play I’m more or less “cash ready” for the large positions “long JPY” ( against most every other currency on the planet ) kicking in here soon.

No shorts in SP 500 as of yet.

More at the Members Site: Forex Trading With Kong