intermarket analysis

Forex Markets, Risk In General – Amber Light

Forex Kong 4 Comments

With no “specific driving forces” in markets here this past week ( and “seemingly not” this week as well ) it’s been a relatively tough environment to trade, as well get your head wrapped around in any fundamental capacity.

We get the usual flow of news and data from around the globe, siting an “improvement here”, and then a “disappointment there”, an “uptick in this” and a “downturn in that”, but nothing we can consider “earth shattering” and certainly not “market moving”.

It almost appears that markets are stuck in slow motion, or possibly “waiting for something” in order to make a move. This makes sense considering that “risk” is generally back at the old highs ( via the SP 500 – the riskiest of all ) stalling at these lofty levels while the U.S Dollar “barely” struggles to shows any signs of life.

So what are we waiting for then?

I could bore you to death with a million different “data points” affecting any number of countries specific currencies – but I’ll spare you the details. Looking at U.S equities as well the Japanese Nikkei Index (as well the currency pair USD/JPY) is really about all one needs to do at a time like this as USD/JPY has been stuck in a tiny “half penny” range the entire month of February.

That just about says it all.

You don’t make any bold calls when things continue to grind sideways….you just “get all Zen”, let the market make its own mind up, and be ready to jump on board when she does.

I’m “still” waiting for a larger move up in USD as this grind has been a touch frustrating to say the least. These are times when a trader is best to just “get outside” and not let it get on your nerves. The market is obviously setting up for “some kind of move” but as it stands…..still hasn’t tipped us off.

If I could pick a color to describe it…..I’m staring at an amber light.

Forex_Kong_Face_Book

Forex_Kong_Face_Book

G20 Says Yes – Just Print More

Forex Kong 8 Comments

Sydney-Australia (Feb 23)   The world’s biggest economies vowed Sunday to boost global growth by more than $2 trillion over five years, shifting their focus away from austerity as a fragile recovery takes hold.

Finance ministers and central bank governors from the Group of 20, which accounts for 85 per cent of the world economy, also agreed to pursue greater transparency about monetary policy after rifts about the US taper.

They expressed “deep regret” that reforms to the International Monetary Fund have stalled, because the United States Congress has yet to ratify them.

After their meeting in Sydney, the G20 ministers issued what host Australia called “an unprecedented” and unusually brief two-page statement to drive “a return to strong, sustainable and balanced growth in the global economy”.

“We will develop ambitious but realistic policies with the aim to lift our collective GDP by more than two per cent above the trajectory implied by current policies over the coming five years.”

In other words……the “powers that be” have more or less thrown the towel in on any kind of “real growth” and have pretty much opened the “global door” wide enough to accommodate any number (or size) of printing presses.

We’ll see how markets react but perhaps the can will just get kicked “around the globe” a little while longer……an obviously “bullish signal”.

I’m looking for whatever additional USD strength we see this week to bank profits , and then prepare for further desecration. On the back of this news it looks “relatively obvious” that those with printing presses have been given the global green light so…..if you can’t beat em you might as well just keep making money.

 

Fed Pulls USD Strings – Puppet Show Goes On

Forex Kong 4 Comments

How long have I been going on about “tapering impossible”, U.S recovery a sham, QE to continue, Fed to destroy the Dollar, blah, blah, blah, you’ve heard it all before, a thousand times again, over n’ over n’ over, yes Kong we get it , by all means why not tell us how you “really feel” – right?

Ok.

So we’ve seen Bernanke make his exit, and now we’ve got Yellen at the helm.

Keep in mind, the position of “Chairman of the U.S Federal Reserve” is likely one of the most, if not “the most” economically and financially influential positions on planet Earth, akin to “god” – or at least to you humans so……changes in U.S Monetary Policy effect each and every country on this planet – in some way or another.

With two straight months of “-10 billion dollars” in supposed “tapering” – why aren’t stocks falling? Why aren´t bond yields ripping higher? Why hasn’t the US Dollar shot to the moon on safe haven flows?

Because it’s never gonna happen that’s why! And to my absolute shock and surprise…the market already knows it!

Taking the bait, and again “trading what’s in front of me” sure…I’ve spent a good 3 or 4 days looking at “long dollar strategies” ( as much as it’s pained me ) then BAM!

We pretty much saw the USD fall out of bed over the past two days, crossing significant areas of support and signalling / suggesting “considerable downside” ahead. Can you believe it? Already?

It looks pretty plain to me that markets have absolutely “no faith or belief” that the Fed will stick to its guns and continue with tapering, and that if anything “yes indeed” more QE and money printing await – just around the bend.

That being said, it’s quite likely the U.S Dollar will take a bounce here sure, but – I will now “reframe” this as a “bounce” and NOT a fundamental change – reflecting “any change” in my long-term views being that the U.S Dollar is toast, and that the Federal Reserve will continue to print / devalue until the absolute end.

I’ll likely use any strength in USD next week to “gracefully exit” a couple of positions, so if it gets another “zig before the zag” I see the good ol 200 Day Moving Average up around 80.80 as good a place as any.

We’ll need to take another day or two to see what it means for stocks and “risk in general” but as it stands…and as hard as it is to believe well…..ya you know.

Reversal Across The Board – USD And JPY Back In Demand

Forex Kong 40 Comments

It’s a funny thing really.

You can make light of a particular currency pair’s price level (such as AUD/JPY yesterday afternoon), as well point out its general connection / relationship / correlation with “risk appetite”, and BAM!

Perhaps it’s a touch too early to say, but I’m seeing reversal’s in just about every single pair I track with respect to a reversal in “risk appetite” – with both USD as well JPY showing strength here overnight.

Did I need to wake up and check SP futures? or perhaps tune into my local financial news this morning to get an idea of where U.S stocks may be headed here today? Nope.

Obviously I’m short AUD/JPY from yesterday, and will be adding a couple more long JPY ideas here today. The long USD’s I’ve got will be added to as well.

I can’t imagine another “triple digit gain” here in the U.S today, as this counter trend rally peters out.

Forex_Kong_Face_Book

Forex_Kong_Face_Book

Hold Or Fold – U.S Job Data To Disapoint

Forex Kong 15 Comments

I was going to wait until “after” the jobs report here this morning, to see if we get a better idea of direction moving forward. Why bother.

The number will be a disappointment as I expected, with the media suggesting that the poor employment numbers are largely due to “poor weather” (I don’t think I’ve ever heard “that one” before).

Markets continue to question “if indeed” Yellen will stick to the plan of tapering, or even as soon as next week – make suggestion otherwise. I’ve been hearing that The Fed feels they need to see “a little more data” before considering flipping the switch and “tapering the tapering”, so mid March still looks like a reasonable time frame to expect “something big”.

We’ve bounced a little bit here this week, with AUD also moving up with “risk appetite” as the ol standard correlation goes, but all in all, it still only looks like a “bit of a counter trend move” in a fairly well-defined down trend.

I’ll be off to Belize here this morning, currently holding several pairs and frankly not that thrilled about it. The entire week trading flat ( and I mean really flat ) generally puts me on edge, as I hate holding anything for too long. I’ll let the jobs data hit, then re-evaluate holding,or possibly dumping a number of positions before I head out on holidays.

Forex_Kong_Face_Book

Forex_Kong_Face_Book

 

Clues To The Correction – A Graphic Tale

Forex Kong 9 Comments

Did it really matter if the economic data was “so so” these past 6 months – as the continued efforts by both The Fed and The Bank of Japan just kept pushing equity prices higher and higher regardless?

I don’t know how many times I pulled up charts, pointed out facts, figures, levels etc suggesting these last “several hundred” SP points where merely a “last-ditch effort” to keep the spin “positive”, and keep the story “believable” just a little while longer. Did it matter?

Absolutely not.

Regardless of any of the underlying “fundamental factors” suggesting slower global growth, until it’s “in the news” and the media machine, The Fed, and the Wall Street algorithms switch to “sell” – the data doesn’t matter one hill o’ beans.

The contraction phase has clearly begun, with the Fed sticking to its guns ( for now ) and stock price set to “re adjust” reflecting prices a little closer to those of us down on Earth.

If you didn’t know back “then”…………where in the graph below do you think we are “now”?

forex_kong_economic_cycle

forex_kong_economic_cycle

Remember this beauty?

US_Macro_Data

US_Macro_Data

And this one, with respect to the movement of supposed “smart money” ( the big boys) vs “dumb money” ( retail investors )….essentially suggesting “selling” the entire last year and a half.

Smart_Money_Forex_Kong

Smart_Money_Forex_Kong

It’s really no surprise at all that markets are finally making the “obvious turn” lower, considering everything we’ve learned / seen over the past couple of years.

When you consider they’ve had no business being this elevated in the first place.

If we aren’t on the other side of the mountain now ( after 5 straight years of Fed induced stock prices ) resulting in essentially “zero” new economic growth, and now entering a macro phase of “tightening and contraction” I really can’t wait to see what they pull out of their hats next.

Watch for the next “retail bounce” likely already here, and if I was doing anything ( other than trading currency ) I’d be using the opportunity to sell.

Forex, Gold, The Fed, USD – Trades Next Week

Forex Kong 9 Comments

With all the talk of “collapsing emerging market” currecies, and the now “global move” towards risk aversion, we are starting to get a good idea as to how the Fed’s massive liquidity injections ( which spilled out of the U.S over the past 5 years ) have fueled spending / investment in these countries – and now the effect of that “hot money” being pulled back out.

As you’ve come to understand, huge amounts of freshly printed U.S Dollars invested “elsewhere” in search of better returns ( as if you can imagine..U.S banks / investors groups would rather invest in an “emerging economy” that their own “sinking” econmomy) are now pouring back into U.S holdings accounts in fear of much further downside risk.

The Fed’s commitment to tapering ( or at least until they freak and double QE) has triggered a rise in interest rates “planet wide” as many of these “emerging economies” now scramble like mad to adjust.

Keep you eyes on gold and silver for buying opportunities ( I like EXK as well ANV ), as well be prepared for some “serious letting of air” in U.S Equities as from a technical perspective we’ve not even made a dint yet, and the fundamental trade is pretty much clear as day.

Fed sticks to tapering – and planet goes down hard. Fed boots up QE ( and more ) band-aid gets put back on. I’m really curious to consider “how far they will actually let things slide” , as even another 1000 SP points doesn’t really look to scary on a weekly chart. Things could easily fall much further over the coming months.

Forex wise, we’ve finally come into the shift and volatility needed to pull “serious profits” in a very short time as these things always move “much further and faster” when moving to the downside.

A complacent buyer is one thing……..but a “freaked out seller” is another animal all together.

We gorillas stand to do very well in times of “correction”.

Exactly the same trade idea’s setting up for the following week, short of a couple days (perhaps late in the week for a breather / bounce ( and slightly lower USD ). We are clearly in a proven “up trend” in USD both technically and more inportantly fundamentally so…..I will continue to press until proven otherwise. Fed POMO running once on Monday and then “Double POMO” on the 5th then virtually NO POMO for nearly 2 full trading weeks! Let’s see how markets hold up…..or not.

Forex_Kong_Face_Book

Forex_Kong_Face_Book

I’ve been updating / tinkering with my Face Book page as well if anyone is interested in “liking” or following etc…. Forex Kong on FaceBook

There It Is! – Profit Taking All Around!

Forex Kong 19 Comments

Finally! After a pretty grueling couple of days, bobbing in and out, hovering around my trade terminal like a spy drone…There it is! Nearly every single pair / trade well in profit and time to take profits.

You’ll need to pull up charts on many, many pairs to see the end result of trades entered ( then re entered etc ) in NZD/USD, AUD/USD, EUR/USD, GBP/USD, USD/CHF,AUD/JPY,CAD/JPY and a big winner in EUR/NZD to name a few.

Forex_Kong_Blue_Hole_Belize

Forex_Kong_Blue_Hole_Belize

I will plan to take the majority off the table here either this morning, or let a couple of run through the day but……in all – I now look at monthly charts to see just what’s happened here over the past few days and the message is clear.

This is very likely only the “first leg” down in what will shape up to be a “much larger correction” ( as suggested previously ) running into late March – right around the time I expect “full-scale panic” and the printing pressed to start-up again.

Japan already knows it’s in very deep trouble ( and has been forever ) with effects of QE very quickly dissolving. I don’t think they “or” the U.S will have any choice but to kick things into high gear “printing wise that is” come late March.

Trade wise….I’m taking the weekend off, and booking /planning next weekend’s trip to the tiny broken islands off the coast of Belize ( The “Blue Hole” and Ambergris Caye – please google them) as the “math and theory” is already complete for the coming weeks.

These trades and several others will simply be “re entered” at various points along the way as……we’ve finally come over the crest, and find ourselves on the “other side” of the mountain.

A painful and extremely frustrating process but….the next “peaks” are certain to be sold.

Hope everyone else made out OK too!

Kong……..”more than” gone!

And The The Next Leg Lower…….

Forex Kong 9 Comments

I’d pull up a chart of the SP 500 pretty damn quick if I was you, and consider how far we’ve fallen and “how fast”.

Today’s move upward doesn’t come CLOSE to being considered a “reversal” as we’ve barely even “bounced” – with respect to the near term technical damage done over the last couple of days. Even now the index looking weak moving into the late afternoon.

I usually don’t make short-term calls on U.S Equities but as I see things from a purely “technical perspective” you might expect another day, or even another day or two – before we roll over and take the next leg lower.

That’s right “the next leg” lower.

Long USD trades turned out fantastic, although I’m not at happy with the way I traded it. Another 1% added here with short EUR and CHF providing most of the juice. Now leaning pretty heavy on the short NZD trade moving forward. JPY pairs still suggesting more JPY strength to come so….beware! The ol SP “risk o meter” is still very much so pointed – lower.

 

 

Forex Market Madness – U.S Labor Force Declines

Forex Kong 5 Comments

Well if trading through yesterday (with hopes of seeing much for profits) wasn’t “pain in the ass enough” – we’ve now got the “every so significant” U.S data out at 8:30 here Thursday morning.

Sure we saw the U.S Dollar “finally pop” late last night as expected, and yes the trades in EUR,GBP, as well CHF and even NZD all came away fine,but depending on exactly “when” you entered and what kind of position size you had in each – a little strength in AUD and you’d likely of just  broken even.

I jumped around like a mad man well into the night, grabbing a piddly 2% and frankly – am not impressed. The forex market is an absolute mess at the moment, with charts looking more like “abstract works of art” – from a classroom full of pre schoolers.

It’s an absolute mess out there, and I can’t really imagine this mornings ” artificial employment data” helping much. We get to hear “once again” some ridiculous number reflecting “improvement”…he.he..he… have you seen what’s happened to the participation rate? Now hovering around the lowest levels since 1978?

Have a look:

Labor Force Participation Rate_1

Labor Force Participation Rate_1

“Real employment” – sadly on a steady decline, as more and more people are simply “giving up” and not even bothering to “look” for a new job.

Labor Force Participation_0

Labor Force Participation_0

How is “this data” being incorporated into the weekly “employment figures” that are supposedly showing an improvement?

News flash – it’s not.

I’ve held a couple, and taken profits on a couple. I’ve re entered a couple and I’m in the red on a couple. The US Dollar most certainly “moved higher” so I hope you all caught some of that, with the biggest gains seen vs the Euro, Pound and Suisse, but in all – the cross winds across multiple currency pairs has chopped / flopped me around pretty good. I’ll see what comes of today, and will likely consider “closing up shop” early as…..staring at this for more that 18 hours in a row can be very hazardous to both your health, and you account!