intermarket analysis

Fed Announcement – Time To Face The Music

Forex Kong 41 Comments

As you all know, The U.S Federal Reserve Meeting winds up this afternoon with the announcement due out around 2 p.m.

Speculation as to “what the Fed will do or say” is pretty much a fools game at this point as they’ve thrown investors for a loop a couple of times already, having “said they where going to do one thing”….then doing the complete opposite.

I really can’t imagine them “pulling the taper” before the taper has “officially” even started ( as meaningless as the amount is ) but will be on the lookout for any “language” that might suggest the possibility down the road.

My medium term trade plans would see things continue lower through February and into March, before the Fed might “flip the switch” along with the Bank of Japan increasing it’s QE – should things get too wildly out of control.

As if things aren’t getting wildly out of control already…we’ll really want to watch this correction closely as it “should” mark a significant turning point, with respect to the rest of the world’s expectations, and interest rates “planet wide”.

If the Fed is truly going to commit to “turning off the spigot” of free money / liquidity (which again I have a very difficult time believing) then it would appear that the party is over, and many, many countries ( including the U.S ) may quickly find themselves  – facing the music.

The obvious trade is still “long USD” if indeed the Fed continues in the same direction as stated last month. Should the Fed pull another fast one here ( with perhaps some “tricky language” or a “taper” of the “tapering” ) I will literally drop every open trade in a heartbeat, then re evaluate.

It’s painful “being held hostage” (yoJSkogs!) yet again with the Fed’s movements essentially dictating market direction but……this is the world we live in now, and trader’s just have to accept it, adapt and continue to find strategies that work.

Blame The Emerging Markets – Right!

Forex Kong 5 Comments

The emerging markets are more or less a product of the massive money printing that has been taking place in both the U.S as well Japan.

The reason “emerging markets” are falling is that “funny money” printed in the U.S has previously been “invested” in these emerging countries where one might actually expect a “reasonable return” – as opposed to investment directly in the U.S ( where one can expect “0” return ).

Big American banks take the “funny money” from Ben, and opposed to lending it to hard-working Americans, the money is used to invest in “other countries” where the likelihood of return is much higher.

What we are seeing is the harsh reality ( well I doubt it ) that the “free money” is coming to an end, and large investors are repatriating their “previously invested U.S funny money” back to their bank accounts in the U.S – in a “flight to safety”. It’s the Fed’s doing – not the emerging markets.

Here is my original post from back in September: https://forexkong.com/2013/09/23/emerging-markets-effect-of-qe/

You’ve had plenty of prior warning.

Forex Food – Breakfast Of Champions

Forex Kong 3 Comments

I was up around 4.a.m – so I guess you really can’t call it breakfast.

Finishing up my “early morning analysis” today, I found myself rummaging through the kitchen looking for something “new” to eat, and even more so – “something new to do”.

The world hadn’t yet ended, I had little to do otherwise so I thought I’d take a walk over to the local ” pescaderia (fish market) to see if any lazy fisherman had bothered to get up as early as I.

Bought these little babies. Rock prawns.

Forex_Kong_Food_Breakfast

Forex_Kong_Food_Breakfast

Apply named, as the shell is literally “hard as rock” – these little beauties more closely resemble tiny lobster than a traditional soft shell or spotted prawn, with a much sweeter meat and firmer texture.

I butterflied these and will be grilling momentarily, with garlic butter, white wine a squeeze of lime, cilantro, and of course…….an accompanying cold beer after all…….it’s gotta be 5 o’clock somewhere. He he he…..

Grinding action here this morning / mid day as USD sits flat, and markets continue to flounder. Nikkei falling “further” through support and looking extremely weak with tonnes of trades setting up very nicely.

Fed To Freak! – QE To Double As Suggested!

Forex Kong 31 Comments

This is hilarious.

Or at least…..it’s hilarious to me as – you know full well what I’ve been talking about these last few months. With only 2 or 3 days down and emerging markets hemorrhaging, currencies selling off like hotcakes, and equites taking it on the chin.

A little “wakey wakey” out there people!  Anybody just “a little nervous” about what’s going on?

Gees….2 days and the sky is falling. Hello!

Well – CNBC is stumped of course, but still very, very positive about “buying the dip” and tapering “just getting started”. Uh Huh. Right..tapering as global growth / appetite for risk sets up for a major “tanking”.

The Fed will freak out sooner than later, pull taper and double QE as suggested.

EEM ( The Emerging Markets ) will be temporarily “saved” , U.S equities will rally “once again”, the U.S Dollar will continue it’s slide into the toilet, and the American people will be told “once again” that the Fed is a freaking superhero.

If you’re piecing this together at all, I hope you’ve come to realize what an impact “tapering” would have had ( I’m already talking in the past tense ) as the global “dependence” on these massive injections of liquidity has become so great – that essentially…it’s the only thing holding the house of cards up.

UPDATE: CNBC now quoting Kong with suggestion that “the Fed may need to look at “pulling back” on tapering!! But….I thought it was “pulling back on QE! – Give me a break!

I’m not putting a date on it, but as suggested here “forever” – this thing is so fragile, so dependent on stimulus, that ( in my view ) even the ridiculous “suggestion” of tapering QE could very well be the catalyst for a global move towards risk aversion.

Confirming that China’s growth is slowing, Canada pulling down GDP estimates, The EU a complete and total “disaster waiting to happen” and the U.S data so fudged…SO FUDGED it can’t even be considered relevant – what have you got?

Recovery baby…..oh ya – you bet. You buy that dip……then you keep buying.

Killing it……kiiiiillllllling it short humanity……long interplanetary travel.

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China Numbers Fall – The Dow's Smoking Gun

Forex Kong 33 Comments

You don’t see it because you’re still pretty much stuck watching the T.V – looking for stock market direction, and perhaps a glimpse into where things are headed next.

I just watched one CNN gal ask “the other CNN gal” – The Dow is down -156 Why is this happening? Mutterings of “lower than expected Manufacturing PMI numbers” out of China, which IS actually the case! I almost couldn’t believe my ears. These gals got it right! Do you care?

Simple enough – above 50.0 indicates industry expansion, below indicates contraction, so with a reading of 49.6 (the lowest reading in 6 months) we’ve found our smoking gun.

China is the global growth engine, and the United States largest creditor. As goes China so goes the United States (not to mention the rest of the planet) as global growth is clearly slowing!

So I’m curious….and would love to get some feedback.

What you plan to do about it? Seriously…..

Are you going to just “ride out the next dip”? What if it’s not a dip?

What would you need to see / hear on your “T.V” that would have you consider making plans / taking action to protect yourself – should things seriously come off the rails?

Are you watching the Australian Dollar get taken out to the woodshed here today? The Nikkei down -360 points! I’m up an additional 4% No wait……Justin Beiber just got caught drinking and driving so…..I’m sure that’s the top story for today. Pfffffffff!

I’d also be very wary loading up on gold here as I expect further USD strength. This would allow for gold/silver to “correct” at the very least.

 

The Truth On Syria – All About The Petrol

Forex Kong 7 Comments

You’ll have to understand that Syria has been in U.S sights long before this “humanitarian cause/save the people” campaign started up last year.

According to retired NATO Secretary General Wesley Clark, a memo from the Office of the US Secretary of Defense just a few weeks after 9/11 revealed plans to “attack and destroy the governments in 7 countries in five years”, starting with Iraq and moving on to “Syria, Lebanon, Libya, Somalia, Sudan and Iran.” In a subsequent interview, Clark argues that this strategy is fundamentally about control of the region’s vast oil and gas resources.

Syria holds Russia’s only port to the Mediterranean Sea. That’s right – Russia ( the largest supplier of natural gas to all of Europe ) can’t operate its navy or its oil export operations without that port.

Can you imagine the blow to Russia if the U.S where to occupy Syria? Never gonna happen. Never.

As suggested “well before” Obama put his tail between his legs, and paddled back to the states the “last time” Putin ( and his Chinese counterparts ) would not allow U.S intervention in Syria. Not a chance.

Syria has also been in talks with Iran about building a pipeline to allow for Iranian oil reserves to be shipped through, as well Saudi’s Prince Bandar bin Sultan has stated ” whatever regime comes after” Assad, it will be “completely” in Saudi Arabia’s hands and will “not sign any agreement allowing any Gulf country to transport its gas across Syria to Europe and compete with Russian gas exports” so…….if you’re starting to put the pieces together here – Syria is an extremely significant and important country with respect to its geopolitical and geo “pipelineal” relations.

There is no question that Assad is a war criminal whose government deserves to be overthrown. The real  question is by whom, and for what interests?

I’m some 300 pips in the green on several short AUD trades tweeted / posted yesterday with plans to see if I can’t “hold on to these babies” a little longer. Wild swings in currencies overnight with USD taking a dip, but really just to trendline support. I’ll be watching close today for intra day reversal and opportunity to keep pushing long USD / short risk.

Perhaps you hadn’t noticed by way of the SP 500 making a 16 day run flat as a pancake – but “risk” is clearly selling off in the currency markets. I’d suggest keeping a watchful eye.

U.S.A Is Broke – New Levels Of Desperation

Forex Kong 11 Comments

The United States of America is broke. You do understand that – don’t you?

We’re not talking about ” a little bit of a cash flow problem” or a short-term need for a “loan” no no no…..we’re talking about 100% flat-out broke, robbing Peter to pay Paul type broke, applying for a new credit card as fast as the applications can be filled out, scrounging around the living room, searching for loose change under the couch type broke.

Totally….and absolutely – flat busted.Zip.Nada.Zero type broke.

You do understand that right?

The idea of a “debt ceiling” is a complete and total “fabrication” serving no “real world” purpose, and as ridiculous as the idea of recovery in itself. The U.S debt ceiling will be raised, then raised again, then again and again…then again as there is no such thing! It’s debt to the moon as the entire economic model is built on debt!

I worry at times that people are still of the mindset that “oh well…..these things will work themselves out” or “it’s just a rough patch – everything is going to be just fine”.

You aren’t one of “those” are you?

Do you understand the net effect of these “zero percent interest rates” over time? You’ve got it right? You understand the objective here?

Seniors and anyone who may have worked their entire lives to save enough money to retire, now find their bank balances being drained like never before! 0% interest actually has a standard bank account “losing money” day-to-day as the cost of goods just keeps going higher, and there’s not a single point of interest given on savings. Factor in “fees” and you’ve got yourself and entire generation of Americans being stripped of their savings, and “forced” to seek yield in much riskier assets like……….The stock market of course! Yes yes! Take your hard-earned nest egg ( or perhaps even apply for a high interest loan) and put your money into the stock market!!

That’s what your banker or broker will tell you no?

The level of desperation appears so obvious and blatant to the outside observer, I’m seriously dumbfounded that Americans have yet to “rise up” and “speak out” of the “fleecing” currently under way. This “massive bag of debt” will in turn, be handed off to the next generation unable to survive without at least a couple of credit cards of their own….saddled with the burdens of their grandparents now sitting in cold dark rooms with little to eat – drowning in health care premiums.

I can’t even get started with Obama Care ( or is it just a further extension of the “police state”? ) and of course, now we’ve got renewed talks of “humanitarian interests in Syria” and of course “more trouble in Iran”.

It’s about Oil and the preservation of the Petro Dollar people! You know that right?

Gees…….bury head back in sand please.

More on this….ALOT MORE ON THIS to follow.

Forex Trades – Right Here – Right Now!

Forex Kong 7 Comments

Some general observations:

The overnight surge in GBP looks a tad “suspect” to me, so I’ll be watching for opportunity to “get short GBP” in any of several pairs including GBP/USD as well GBP/JPY and even GBP/NZD, pretty much “right here – right now”.

The Australian Dollar has also “seen its day” with a couple of days of retracement, but with absolutely nothing but “empty space” down below. I expect AUD to turn, and continue its way lower……much lower. Short AUD/JPY reload more or less….”right here – right now”.

The U.S Dollar has pulled back “a bit” providing for further “long opportunities” if you are still in that camp. Keep in mind that USD has changed it’s course creating higher highs since early January so….regardless of near term squiggles – I’ll be looking for a stronger USD moving forward.

Long oil idea from weeks ago has certainly been a performer (as much as I scrapped the trade a couple of days in ) and good ol gold “appears” to have caught a bid.

Another day ( ho hum ) with SP 500 / risk – trading flat as a pancake.

Wish I had more to share.

Markets Trade Sideways – You Know What To Do

Forex Kong 4 Comments

I thought I’d wait until after the close today – hoping that “perhaps” there might be something a little more interesting or exciting to chat about. Low and behold…..not.

Today being the 15th trading day with the SP 500 still flopping back n fourth – in range.

Gold putting in some “constructive” moves but certainly nothing to write home about, and the US Dollar’s upward move has “for now” run a little low on steam.

Japan’s Nikkei has also continued to trade in range, unable to get back over that magical 16,000.

What’s changed? What’s new? Absolutely nothing as price action continues to trade sideways day in and day out. There is absolutely nothing you can do about it, just accept it and do your best to remain calm, focused, and don’t get lulled to sleep.

Markets have a tendency to “jump up and punch you in the face” at the most “inopportune time” so…..keep those eyes peeled and maybe “just maybe” we’ll see some fireworks here soon.

Ramblings On USD – Still The World Reserve

Forex Kong 8 Comments

This from the comments section, and some great points / questions raised by valued reader “Rob”.

Hi Rob.

Great trading man…I’m glad to hear you’ve been doing well.

You bet USD is most certainly the “current” world’s reserve currency, and yes “obviously” takes flows as other assets denominated in USD are sold (an incredible privilege for the U.S  – but unfortunately one that is currently being “so abused”).

We don’t see it in a day-to-day sense but….the fact is – the rest of the planet has had enough of the U.S abuse of it’s reserve status, and is making considerable effort to “insulate itself” from further devaluation. USD will rise but ( in my view ) only as a product of these market mechanics and NOT because anyone in their right mind is outright “buying USD”.

With some 85% of global forex transaction “still” involving USD ( as being the worlds reserve we have to appreciate how many countries “must” hold USD as a means to buy commods ) the ship can’t turn on a dime. It’s a cruise liner – not a speedboat.

Don’t be fooled. The macro vision has USD going to zero…while the shorter term zigs n zags may very well suggest USD strength.

In my view IT’S BY DEFAULT – in that USD is “still” the reserve, and as risk comes off – assets denominated in USD are sold and cash is raised.

Nothing more.

EU is a disaster, China looking to slow moving forward, and a complete and total joke of recovery in the U.S. No one “wants” to buy U.S dollars. It’s “relative strength” is a mere by-product of simple market mechanics.

As I see it anyway…..

Great stuff Rob….you’ve obviously got your head screwed on right. You can take my crap with a grain of salt, and even better with a nice shot of Tequila.