intermarket analysis

Japanese Candles – Our Ol Friend "The Hammer"

Forex Kong 1 Comment

I remain bearish on USD, but as these things rarely move in a straight line (and considering the past 6 straight days moving lower) – I’m expecting a small bounce. Welcome our ol friend “the hammer”.

Definition of ‘Hammer’

A price pattern in candlestick charting that occurs when a security trades significantly lower than its opening, but rallies later in the day to close either above or close to its opening price. This pattern forms a hammer-shaped candlestick.

This candlestick pattern is not the “end all be all” of  trend change – but does suggest that buyers have stepped in and “bearish price action” may take a short break. When  looking at this candle formation in light of the current down trend in USD – I would consider a small bounce over the next couple days at best – before the downtrend once again resumes.

 

The Hammer

The Hammer

The past few days trading has been fantastic with the short USD trades, as well ther long JPY’s paying well. I will likely sit a day here and re evaluate but as it stands – USD should continue lower, and the short term bottom in JPY – looks pretty good to me.

Mexican Entrepreneurship – Start Young

Forex Kong 3 Comments

So I finish at the gym here this morning and decide to take a little time down at  the beach.

I walk a considerable ways (avoiding  the tourists at all costs) and find myself a nice quiet spot about a mile north of the usual “european action”.

No sooner than I’m sat down, I spot a small mexican boy no more than 5 years old (I’m guessing even younger) trudging down the beach – headed my way. Swimming in his oversized shorts, cute as a button and  brown as chocolate chips, he plunks down beside me, wipes his brow and asks:

“Hola senior. Tienes 10 pesos por fa vor?”

I wrestle some change out of my side pocket while asking “where are your parents little friend? – and why are you walking the beach all by yourself?

“Gracias Senior! Pero, no tengo tiempo para hablar……….estoy trabajando!”

The lil guy says thanks, but he doesn’t have time to talk………..he’s working!

The market “gong show” continues with even more “bad data” out of the U.S and further indication that recession is likely well in play – but of course markets continue higher as the smoke and mirrors continues a little while longer.

You know – there was a time when this kind of poor data / indicators actually meant something – a time before Central Banks intervention. The scary thing is people start to believe……… that things are actually improving.

Implications of JPY Bounce – Risk Off

Forex Kong 12 Comments

You can’t just “write off” the Japanese Yen based in the recent weakness – and the massive efforts put forth by the Bank Of Japan. No matter how you slice it – the Yen “still represents” a safe haven currency based in fundamentals that will likely persist for many years to come.

When things get “tricky” the Yen is gonna get bought hand over fist – no matter what the BOJ wants.

Now…..in looking to draw some kind of intermarket correlation here…it’s simple – JPY bought = risk off.

As bizarre as this may all appear to newcomers – I am currently positioned “long JPY”…..so……

JPY going up = risk off. You can watch any number of currency pairs as well as the symbol “FXY” for further indication.

Eyes open people!

 

Stay safe for now.

Intermarket Analysis – Questions Answered

Forex Kong 9 Comments

Lets go through these one at a time.

Some time ago I had you take a look at the symbol “TLT”  which tracks the value of the 20 year U.S treasury bond. When we start to see bond prices falling – it’s likely that stocks are not far behind. Keep in mind this is a WEEKLY chart, so the trend demands considerable respect.

Please remember – these “big ships” take weeks to turn – and this kind of macro intermarket analysis does not produce an immediate “buy or sell” signal.

It would be my view that regardless of short-term action/volatility – it would take a “considerable move” to actually reverse the weekly downtrend in TLT. Hence – the required “precursor” to lower stock prices No?

TLT_Forex_Kong_April_20

TLT in Weekly Downtrend

Lets look at the Commodities Index.

We’ve taken a real beating here – but this sets things up quite perfectly for another “intermarket dynamic” we’ve come to learn. When the “price of stuff” starts climbing higher ( or possibly “rockets” higher ) – what direction is USD moving ? (as commodities are priced in USD) You’ve got it – Commods up = USD down.

Commods_Forex_Kong_April_2013

Commodities Set To Rise

Here is a previously posted chart of the SP500 – and the obvious area of resistance. I can’t really add much more in that – I believe the easy gains in U.S equities have now passed and for the most part from here on in – it may trade flat to down, with little chance of doing more for your account than grinding it to pieces.

Stocks will get volatile and create the illusion (many times over) that further gains are in the cards, drawing in as much new money as possible while grinding sideways. Short of being a “master stock picker” like the fellows over at Ibankcoin.com – I can only suggest being cautious…very, very cautious.

Stock_Market_Top

Stock_Market_Top

Finally the U.S Dollar.

DXY_Forex_Kong_April_2013

The U.S Dollar Also Set To Fall

Not much else to add here as the intermarket analysis above pretty much outlines the direction for the U.S Dollar. I feel we will likely see a time very soon, when U.S bonds, U.S stocks as well as the U.S Dollar all fall together.

Ideas on how to play it? Let’s look at those next.

Weekend Wishes – Kong Comes Up Short

Forex Kong 4 Comments

Its been a long week. And aside from the smashdown in gold – a very boring and frustrating week.

I could post a couple of charts, show you some levels and again point out that “the topping process” is often a long and arduous affair but frankly – what’s the point? Here we are. Here we “still” are. And “here we may be” for several more weeks, as the struggles between bulls and bears play out at the highs. Short term squiggles are pretty irrelevant, as currency markets continue grinding away at traders accounts ( more so my patience) with nearly everything (short of JPY) trading virtually flat for the week.

For the most part I couldn’t place a  trade worth more than a couple of tacos if my life depended on it….and it does depend on it!

I wish I had more to share with you. Some amazing trade strategy, or some “top-secret insight”  into a potential market move – materializing over the weekend. I wish I had for you the “investment tip of the century” – something to make you rich, something that would change your life forever.

Sadly no – I don’t.

I’ll keep digging here over the weekend, and hopefully plan to “wow you” in coming days. For now I hope you have a wonderful weekend, and we’ll see back here Monday.

Kong………………….gone.

 

Markets – We Are Going Down

Forex Kong 9 Comments

I won’t reference my previous posts. I won’t tell you “I told you so”, or tell you again….to pull your head out of the sand. I will give you the quiet time needed (perhaps crying into pillows or smashing into walls) to reflect and evaluate….. ” what the hell did I do wrong?”.

We are going down people – exactly as suggested.

It’s also been suggested by several of you that I should “pep it up” and try my best to “write something positive”. While this is excellent advice (should I choose to  start a “day care” – or perhaps get into grief counseling) – the day I tailor my writing to appeal to some cry baby, sad sack – is the day I poke pencils in my eyes, run down the beach naked, yelling  I’ve now seen Jesus!

Trust me – ain’t gonna happen. It will never, ever happen.

We all make decisions in this life, and we all hope they are the right ones. We all do the best we can, and we all hope that when “all is said and done” – we’ve lived our lives with some level  of integrity, dignity, decency and respect.

If you’d rather I lie to you – perhaps you need to consider the same.

If you don’t like it – don’t read it.

We are going down.

There will be spikes, and there will be large moves in both directions as we crawl our way through 2013, but as per my latter posts – if not  for “one more pop” higher” I am a firm believer that the highs are in. I mean”the highs” in general – like…..not seeing the SP500 at these levels again – period…..end of story, as wel roll over late 2013 / early 2014 on the road to “zero” as the U.S completely collapses – stocks, bonds, housing,  currency and all.

Fiat Currency – Paper Money Is Debt

Forex Kong 14 Comments

Fiat currency is money that derives its value from government regulation or law. The term fiat currency is used when the fiat money is used as the main currency of the country. The term derives from the Latin fiat (“let it be done”, “it shall be”).

The term fiat currency has been defined variously as:

  • any money declared by a government to be legal tender.
  • state-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard.
  • money without intrinsic value.

While gold or silver-backed representative money entails the legal requirement that the bank of issue redeem it in fixed weights of gold or silver, fiat money’s value is unrelated to the value of any physical quantity. Even a coin containing valuable metal may be considered fiat currency if its face value is higher than its market value as metal.

Another interesting point, when we consider how money functions” in our society as a “debt instrument”.  The Central Bank creates money out of thin air, then exchanges that “new money” for  “interest bearing instruments” such as Government Bonds.

You purchase the bonds with an expectation of making some kind of return on that bond (and where do you imagine that “extra few %’ points” come from over time?)

Your taxes go up – that’s where.

Round and round we go as governments keep spending – and you keep paying for it.

It’s been a slow week here and I apologize for the “lack of interesting copy”, but when I’ve not actively trading there usually isn’t a pile to say. I imagine things will pick up here again soon.

Forex Blog – This Is A Forex Blog No?

Forex Kong 3 Comments

This is a forex blog – isn’t it?

You know – I’m a little hurt. As hard as I try, it still appears that our beloved friends at Google still don’t seem to think this is a forex blog. I type “forex blog” and all I get are a number of websites looking to sell you some “forex trading system”, or a couple of videos showing me “what is forex”, or “how I can make money trading forex”….and poor, poor Kong  – still nowhere to be seen.

If this isn’t a forex blog – I’m not really sure what to do about it. Ideally – the gang at Google (who I’m sure “must” have an interest in forex) would be thrilled to have a look into the real life “trials and tribulations” of a real life forex trader…although seamingly – such is not the case.

Oh well..I will continue to do the best I can, and look forward to the day, blessed with a “front row seat” in the listings……….recognized as a  “forex blog”.

Scuze the plug you guys…..but I gotta swim with the sharks here – and every post can’t be a “doozy”.

 

 

 

If You Can't Trade It – Blog It

Forex Kong Got something to say?

I’ve been in and out all day, and again return to my computer – only to find the same. It’s a freakin gong show out there! So if I can’t trade it – I might as well blog about it.

One of the most popular articles I’ve written “2013 – You Will Never Trade It” comes to mind.

The markets have more or less been grinding up a day, down a day for the past 2 weeks – and the direction continues to be questioned. Granted the overall trend is still up, but we’ve seen some relative short-term damage – and many factors have come in to play to suggest a correction is needed. The last week has had the Canadian “TSX” erase the entire 2013 gains to date, “Bank of Japan” has now become a household term ( a little late considering we’ve been talking about it forever) , and earnings are set to kick off with Alcoa after the close today.

If there was ever a time that one would be thankful to be safely sitting in cash – I’d say this it.

I made out like a bandit on the huge JPY slide over the past few months but admittedly – have 100% completely missed the latest ( and most massive ) move. It’s too bad – but its a part of trading, and so is life.

Forex has a funny way of “kicking your ass” so….when anything has travelled so far/so fast – you really can’t go chasing it. You get back at it….you apply what you know – and you find the next trade.

As it stands….and as boring a read as it may be for you guys – I still sit (for the most part) 100% in cash….taking the odd “little trade” here and there to keep the moss from growing.

Be safe – and don’t worry – things will get really, really exciting here soon.

This I can promise.

 

Trade or Invest – Things To Think About

Forex Kong 12 Comments

It’s crazy out there.

Currencies are literally “all over the map” with several of the usual correlations giving traders/analysts a good run for their money. Eur up and stocks down, continued JPY strength in the face of risk aversion, and the British Pound (GBP) on a tear.

In equities the transports ($tran)  have taken it on the chin, with Fed EX pummelled over last several days, and the massive market leader APPL having  lost 200 billion in market cap. 200 billion! – Poof…gone.

Earnings will likely disappoint, we’ve got seasonal selling ahead (“sell in may?”), tensions in North Korea moving higher, terrible employment numbers (again) in the U.S , and of course –  and any number of “unforseen events” far more likely bad than good.

So…..Is it a dip or a turn?

Time to trade or invest?

I’ll have to leave it up to you decide the best course of action, as you’ve all seen my charts and read my views. Regardless of any short-term action ( as the possibility of another “pop higher” in risk  always remains ) seriously….

If a broker/trader  hasn’t picked a top, or the area to sell and book profits – what possibly likelihood would there be in timing a “scoop buy / dip” for a few more points?

For the most part – by the time retail is convinced the water’s are safe, the move has already passed – and you’re once again caught……buying the top.