Seriously.
The U.S Federal Reserve just made 5.1 BILLION DOLLARS in treasury/bond purchases today alone…….5.1 BILLION DOLLARS worth of straight up “funny money” injected into the system today alone.
Markets tank.
Short and sweet here this morning.
If you’re buying this I’ve got some primo swamp land in Florida I’d love you to take a look at!
I’m up 4% on “risk off” here.
How you stock bulls makin out?
Getting smashed….and don’t let’em tell you otherwise.
The Fed will not start tapering its bond purchasing program in September, just as they will likely find reason to continue or even “expand the program” come December. You’ve spent a considerable amount of time contemplating this as suggested by your local T.V / media / CNBC / clowns but now please….just put it to rest. There is not a single shred of data that could support the Fed stepping away from markets as soon as Sept or Dec for that matter.
Take today for example where the Fed has made 1.5 Billion dollars in outright treasury coupon purchases, and the freakin market can barely even keeps its head above water. 1.5 BILLION DOLLARS JUST TODAY!
Here’s the Fed’s “purchase schedule” link – you can see for yourself.
http://www.newyorkfed.org/markets/tot_operation_schedule.html
If Ben had called in sick this morning, and was unable to make it down to the exchange with his suitcase of 1.5 BILLION DOLLARS in bond purchase confetti where would the market be today?
There is NO ONE ELSE BUYING!
What remains to be seen is what investors reaction will be “now” when the Fed announces “No Tapering”.
Personally – I’d “like” to see the true reflection of such continued actions and would look for markets to interpret this as “things are still 100% totally screwed” and sell like mad but I’m likely dreaming.
Anyway you cut it – it’s bad for USD. It’s bad for USD short term….and it’s very bad for USD long term. Medium term?? – You’ll really need to be careful there.
Kong……..certainly not long.
More horrible data out of the U.S this morning as orders for U.S “durable goods” fell further than expected.
Of particular note Aircraft orders were off 52.3%, for example after rising 33.8% in June. How ridiculous can you get? Orders for new aircraft “up” 33.8% in June then “down” 52.3% in July. I guess when you’re only selling 3 planes one month then 1 the next your numbers might vary so wildly. No…..I guess it would be 2 planes sold in June and only 1 in July for a 50% reduction. Who cares – the numbers mean nothing as the entire thing is still just sitting there……stuck in the mud.
I need to make light of a prior post, and a graphic illustrating the “complete and total disconnect” of actual macro data , and the current levels in U.S stock markets. Again – ridiculous.
https://forexkong.com/2013/05/19/the-fed-gold-stocks-and-usd-explained/
These kinds of situations are always tough on a fundamental trader as you “just can’t step on the gas” when you don’t have these fundamentals lined up as straight as you’d like. This summer’s trading has been at considerably lower levels of exposure, and with modest expectations so – I’m most certainly looking forward to the fall.
U.S debt ceiling talks are up next as “once again” (short of an extension) the U.S is officially broke.
I remain short USD here as of this morning – looking for another solid leg down.
The value of the U.S dollar (USD) is currently at the exact same exchange rate with the Japanese Yen (JPY) as it was back in April.
So, in case you hadn’t been back n fourth to Japan several times over the past 5 months – you wouldn’t have a clue as to the fluctuation in these two currencies value ( in relation to one another ) in that, absolutely nothing has changed.
Broad stroke….a person holding USD “hit’s the currency exchange window” at the airport, lands in Tokyo and buys a chocolate bar for the exact same price as last time – 5 months earlier.
Now if your business partner was Australian, he wouldn’t have had it quite so easy. Back in April the “Aussie” could be exchanged for 1.05 Yen ( JPY) and those chocolate bars at the airport appeared “cheap” – where as today ( only a short 5 months later ) that Australian dollar only yields .89 Yen (JPY). That is a pretty massive change in such a short time don’t you think??
Let’s stop and think about this for a moment.
Japan has embarked on the largest “Quantitative Easing Program” known to mankind in efforts to “devalue” Yen (JPY) and lower the prices of its export goods ( if Yen goes down in value then “you” with your Canadian or U.S dollars would be “incentivized” to buy Japanese goods as they appear more affordable) yet EVEN AT THAT – THE AUSTRALIAN DOLLAR HAS LOST CONSIDERABLY MORE VALUE!?!
That is some serious , SERIOUS , business in the land of currencies where at “one time” the Aussie dollar was considered the “go to currency in times of risk appetite”.
Some “major players” have been sneaking out the back door here over the past 6 months selling AUD aggressively, and this stuff just doesn’t exist in a vacuum.
…………..more over the weekend.
Getting away from your computer and the markets for a day or two, can provide much-needed perspective and a fresh outlook on return. It’s easy to get caught up in every little squiggle the market makes, not to mention the never-ending stream of “massive headlines” – threatening to take you out at a moments notice.
As well ( and very much like fly fishing ) you need to be able to read the current conditions and evaluate where “and when” to cast your line, as we wouldn’t all rush down to the river in the middle of a rainstorm right?
Forex_Kong_Fishing_And_Trading
Markets are no different. I don’t try to wade across rapid flowing water well up over my knees, just as I don’t go “all in” on some silly headline during the last couple weeks of summer. Years and years of experience, and countless hours of practice have it that I may not go fishing as often – but I most certainly catch more fish.
Leading into the Fed Minutes here around 2 o’clock – I see that very little has changed here in the short-term, and will likely let the dust settle then “re-enter / add” to a few existing positions – still centered on further USD weakness.
If by some absolute “bizarre shift in the universe” Bernanke actually “says taper” or actually “says” what the plan will be moving forward (as opposed to just sticking to the same ol puppet show) I will most certainly re-evaluate.
I see little to “no chance” of this happening.
The symbol “EWJ” is the Ishares Japanese Index Fund tracking the movement of a handful of Japan’s most popular stocks including Toyota, Honda, Hitachi and a host of others. The ticker itself acts as a reasonable “surrogate” for trading the Japanese stock index the “Nikkei” much like the symbol “SPY” closely tracks the U.S SP 500.
I don’t trade these ETF’s but understand that for those of you who don’t trade forex directly – a list of these types of “equity products” could prove valuable, as a number of my trade ideas/concepts can be mirrored through these “surrogates”.
The Ishares “family” of these “country related” ETF’s include a wide range including:
These ticker symbols track a handful of the “top companies” in each countries stock index – not the currency!
Often ( but certainly not always ) the correlation between a particular countries currency and its “stock values” exists as an “inverse correlation” as the value of a given countries currency moves lower for example – the “price” of its stocks inversely reflect “higher prices” and move upward.
For a real time example – you may see that I am looking to “get long” JPY , where a corresponding/inverse trade would be to “short the Nikkei” via the ETF “EWJ” ( which trades at just $11.52 )
Keeping a watchlist of these “country related” ETF’s is a great way to get in touch with some “big picture” movement, while still being able to place an affordable trade through your average day-to-day brokerage.
SHORT TERM TRADE TIP:
I am still looking at further weakness in USD and see opportunities to enter “short” via several currency pairs here again today ( if you’re not already in the trade).
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As well I see the recent “drop” in Yen as providing several low risk entries “long JPY” if indeed risk comes off here.
It’s no secret.
I can’t imagine anyone being too surprised. I’m looking to get short USD here yet again.
I’ve initiated starter positions long NZD/USD as well AUD/USD, short USD/CAD as well USD/CHF.
The Yen strength can’t be overlooked here either, as any trade “long JPY” is also in the cards.
Over night the Nikkei has yet again pumped into its overhead DOWNWARD SLOPING trend line , as well the SP 500 is “still” hanging around this 1700 level.
I sound like a broken record I know – but this is the trade I’ve been working towards for some time, looking for the fundamentals to continue paving the way.
I’m pretty sure by now – everyone has fallen under the “Bernanke spell” and is more or less convinced that stocks will go up forever. As a currency trader this is really of no consequence to me “directly” although I’ve always maintained a measure of “risk” via the SP500 – in my week to week analysis. Looking at the index unto itself it would be hard to argue that “risk is off” as U.S equity prices “appear” to just keep going up and up and up.
Although If you removed the banks ( and their reported profits in the 2nd quarter – thanks to the “Bernank”) you’d be left with an entirely different picture. Heavy weights like Apple, IBM and CAT all down, down ,and down some more.
The SP500 is now about as far stretched above its mean price ( the 200 Moving Average ) as it’s ever been in the history of the index and has taken on the characteristics of a large, thin membrane , floating translucent object. You’ve got it – a bubble.
SP500_Aug_2013_Forex_Kong
Gold on the other hand is also stretched about as far from the mean as it’s been in a very long time, and has recently shown evidence of bottoming. As we’ve discussed earlier – since the massive liquidity injections / stimulus provided by both The Fed as well The Bank of Japan there really hasn’t been a “need” to own gold, as investors have had little need to seek safety.
Gold_Aug_2013_Forex_Kong
TIming trades on these longer time frames is difficult for the newcomer, as well not exactly what one considers “exciting trade action” but it’s important to get a lay of the land before stepping out on the field. With “all things” as stretched as they are – the elastic band will always ALWAYS snap back. It’s important to weigh the odds of “risk vs reward” – and even more important when things are pushed to these extremes.
Could the U.S stock market continue to climb forever? as Canada’s market still can’t break higher? As Japan has just put in a “lower high”? As EU Zone continues to struggle? As the U.S dollar continues to grind lower?
I suppose anything is possible, but generally speaking – non of this exists in vacuum. I assume that Gold and the precious metals in general “should” take a large part of the “safety trade” when we do finally see the turn.
Will it be next week?
The graphic below outlines the basic economic cycle.
Please read each of the individual captions / summaries as to familiarize yourself with the characteristics of each – then do what you can to put your finger on the portion of the graph that you think best describes our current environment.
The ask yourself where on the graph is makes the most sense to be “buying” and where on the graph it makes the most sense to be “selling”. Regardless of your asset class – this outline has been repeated over and over and over – providing an excellent “simple explanation” of the standard economic cycle.
I want you to fill out and submit comments on this – as to open discussion on this topic. This is the kind of “macro idea” one needs to put in their back pocket and carry with them at all times.
forex_kong_economic_cycle
We can throw this around all day – as the disconnects in our current market place grow larger by the minute. Anyway you cut it – the bulls have their day, then the bears……then a gorilla squeezes off a trade or two, then back to the bulls then the bears . Round n round it goes.
We knew this was going to be the case. We knew months ago that this “scenario” (of massive Central Bank intervention and manipulation) was going to present some very difficult trading conditions. When you boil it all down – over the past few months everyone has been right………and everyone has been wrong.
Timing is everything.
If you don’t have the mindset to sit and watch your computer screen daily, or even “check in” on any number of indicators/news/charts daily ( even hourly ) you’ve really got no business being involved with this thing at all.
“Buy and hold” is some kind of “strategy from the middle ages” considering the volatility and manipulation in markets as of now. And for those without the experience / ability – “active trading” has also proven to be a real account killer in the past few months.
Timing is everything.
If you’re not “aware” of specific price levels, certain areas of support and resistance, general intermarket dynamics, and maybe even a couple of standard “chart patterns”, let alone willing to physically “do the work” it’s highly HIGHLY unlikely you could have much expectation of making a buck.
Timing is everything.
Ask yourself this – If everything was “O.K” ( I mean seriously…..O.K ) why the hell is every single Central Bank on the planet looking to print money like it’s going out of style?
If you think you can “pick a direction” then just “put your cash on red” and go to sleep at night oh boy……this is exactly what you’re expected to do.
I’ll likely be called nuts but……..as per my own macro analysis and the fact that I monitor several markets and their relationships to one another. I’m inclined to think this “USD pop” has about run its course! In as little as two days!
I’m 100% cash and am “already leaning short USD” if you can imagine how fast / nimble one needs to be to keep pulling profits outta this thing. As per usual I will exercise patience, patience and even more patience – looking to redeploy funds sometime next week.