Kong Wins Again – Risk Trade Hits

Bang on the money.

I bought JNUG at 6.80 yesterday afternoon, as well shorted USD/JPY and AUD/JPY. I took long positions in both EUR/USD and GBP/USD first thing this morning.

How can anyone imagine the meeting of Trump and Chinas President Xi being anything less than a total disaster?

April 11th  I “believe” to be a full moon ( what you didn’t check your lunar cycles either? ) – I am very comfortable with these positions through the weekend and beyond.

It’s celebration time here so…..have a good one y’all.

forex_kong_happy

forex_kong_happy

The Nikkei Has Topped – Months Ago

As most of you already know, I follow The Japanese Nikkei more closely than American Markets as its my firm belief that we will see larger scale moves reflected their first.

The Nikkei has been trading completely flat for a whopping 16 weeks now ( 4 months flat as a pancake ) at levels that are starting to suggest that “a lower high has already been made” on a larger scale time frame.

Let me show you.

Here is the “weekly” chart of The Nikkei clearly showing the 16 weeks of flat/range trading which, unto itself isn’t really that big a deal.

Nikkei Trading Flat For Weeks

Nikkei Trading Flat For Weeks

Now if we “zoom out” even further things start to look a bit more interesting as we start to put this “congestion zone” into perspective.

Here is the “monthly” chart of The Nikkei.

Nikkei Monthly Chart

Nikkei Monthly Chart

It’s my feelings that The Nikkei actually topped “mid 2015” and that we’ve spent the entire last year and a half in “distribution mode” – with respect to the continued pump in U.S Equity prices. Japan’s stock market has been unable to share in the Kool-aide drinking, as cheaply printed Yen has flooded over to America, been converted to USD and used to buy stocks.

This is why you see the incredible correlation with U.S stocks and the currency pair USD/JPY ( bet you where wondering about that! ) as the pair rises when stocks are purchased and falls as stocks are sold.

I don’t see The Nikkei reaching for new highs but rather (and more likely) breaking thru support and moving along to create a very large / significant “lower high” on a monthly time frame. Things could get quite ugly from there.

This does not bode well for the “risk on trade”.

Buyers Of Stocks – Now Is Your Time

I too will be taking part….but of course – in my own “creative way”. Even at that “very cautiously”.

The U.S Dollar as well U.S Equities will now put in the long-awaited “swing low” ( if you don’t know what that is yet….please research swing trading ) so for those of you interested in pressing the long side in stocks –  now would be your time. I have no individual stock suggestions as the vast majority are so ridiculously bloated, with valuations that ( to me at least ) make very little sense but….you can’t knock “retail euphoria”.

The larger question at hand begs….

Will the next leg in “risk” reach for higher highs before hitting the skids? Or……will we fall short / put in a “lower high” and roll on over for the larger scale “plunge” expected in coming months?

The current geo-political landscape isn’t exactly what I would call “stable” but how many times has that been the case where U.S Equities simply shrug it off…and the funny money just keeps flowing.

I’m immune to earthly headline / media disease and rely only on my “inter-dimensional time shifting machine” to guide me. I see retail money……must get retail money…must have MORE RETAIL MONEY! So……there it is in a nutshell.

Buyers beware. Stay tight. Remain vigilant. But feel free to jump out on the playing field and take a kick at the can.

What’s the worst that can happen?

Kong Strong

                               Kong Strong

 

Healthcare Bill To Stall – Market Tumble Continues

By Megan Davies and Rodrigo Campos

NEW YORK (Reuters) – The Trump Trade could start looking more like a Trump Tantrum if the new U.S. administration’s healthcare bill stalls in Congress, prompting worries on Wall Street about tax cuts and other measures aimed at promoting economic growth.

Investors are dialing back hopes that U.S. President Donald Trump will swiftly enact his agenda, with a Thursday vote on a healthcare bill a litmus test which could give stock investors another reason to sell.

“If the vote doesn’t pass, or is postponed, it will cast a lot of doubt on the Trump trades,” said the influential bond investor Jeffrey Gundlach, chief executive at DoubleLine Capital.

U.S. stocks rallied after the November presidential election, with the S&P 500 posting a string of record highs up to earlier this month, on bets that the pro-growth Trump agenda would be quickly pushed by a Republican Party with majorities in both chambers of Congress.

 

Investors extrapolated that a stalling bill could mean uphill battles for other Trump proposals. Trump and Republican congressional leaders appeared to be losing the battle to get enough support to pass it.

Any hint of further trouble for Trump’s agenda, especially his proposed tax cut, could precipitate a stock market correction, said Byron Wien, veteran investor and vice chairman of Blackstone (NYSE:BX) Advisory Partners.

I expect markets to continue lower well into next week, as those who’ve not yet sold “freak out” at the last minute…then sell into the waterfall. Sound familiar? Stocks will bounce sure…so if you are holding now…you likely lose a few nights sleep but “its too late to sell now”. 

How many days / weeks ago did I suggest to “raise cash” and look for another great entry opportunity?

Read the rest here.

AUD/JPY – Focus On Risk Appetite

Well…..

Now that we’ve got that out-of-the-way ( the Fed’s sill little rate hike, and of course the nearly “not covered” debt ceiling debacle) we can move on. It’s time for more “mind bending macro market analysis” considering that these last few calls have been bang on the money. In short…..the U.S Dollar “plunge” shall continue, as both gold and The Euro continue to move higher. Further riches will be made with this simple concept burned into the back of your skull like a bad tattoo.

Let’s have a quick look at the weekly chart of my old friend AUD/JPY and refresh our memories, as to how this currency pair can help you gauge risk appetite with another simple concept.

AUD/JPY UP = Risk on.

AUD/JPY DOWN = Risk off.

                                                                       AUD/JPY – Risk on vs risk off

You can see how AUD/JPY has been trading completely flat for the past 10-12 weeks as U.S Stocks have really only taken a small leg higher during the same period of time. U.S Stocks are always ALWAYS the last to go when risk appetite ( and the machines on Wall St ) switch from “buy” to “sell”. Always.

AUD/JPY has been up against very solid resistance for an extended period of time, and if “all was well” would surely have broken through, and climbed higher along side U.S Equities some time ago.

Such is clearly not the case as this currency pair has “literally” miles to fall. And fall it shall.

I am currently tracking this pair but not getting excited about entry “short” until I see a nice solid read candle and a decisive break lower. Even 85.00 and lower to truly seal the deal.

You see how this works right? I’m “tracking / observing” market activity with a pre conceived notion of at least two ( if not two hundred ) things.

  1. AUD/JPY ( a significant indicator of risk appetite in markets in general ) is trading in a range against significant over head resistance.
  2. A significant break lower should “clear the field” and is suggestive of a much larger shift from “risk on to risk off” across markets in general.

Eezy Peezy when you have a plan. Do YOU have a plan? There could be 1000 pips below this currency pairs current price.

Damn rights I’m still short USD. Damn rights I still own NUGT. Damn rights I’m killing it long EUR/USD.

Any questions today? I’m back in the saddle.

 

 

 

Debt Ceiling Wednesday – Rate Hike Too?

Unfortunately….for those of you who’s investment and trading decisions depend solely on the grunt’s and groans of some smart mouthed Silverback with an attitude – I am busy today.

An esteemed  colleague and I have been summoned to the head offices of Google San Fran – where we will be building time machines, slipping microchips under our skin, and dancing through holographic simulations of the future. Jealousy will get you everywhere. I’ll post some pics later this week.

The Euro has continued higher – as expected. The U.S Dollar has taken its beating over the past few days and ( in my view ) will continue to get hammered –  as expected. And good ol’ gold has now put in its daily cycle low somewhere here around 1200.00 per ounce.

The current trade hypothesis still resting on the fact that “whatever happens” on Wednesday with respect to both interest rates rising and the U.S debt ceiling being reached “again”…The U.S Dollar sees its day, and continues South.

This “could” stretch another month if indeed the powers that be somehow appease markets – by what? Raising both interest rates AND raise the debt ceiling? This I truly have to see with my own eyes to truly get the full sense of just how “totally F’d” this system is.

I don’t particularly enjoy trading ahead of macro news events, but in the case will take it on the chin one way or another.

Good luck to all over the next 48 hours…you’ll likely need it.

Best advice…..don’t move a  muscle til ‘after the announcements on Wednesday….and even then – don’t get “trigger happy” Thursday morning either.

Forex_Kong_Space_Future

Forex_Kong_Space_Future

 

March Rate Hike – Already Priced In

The near term strength in The U.S Dollar ( although still no higher than 5 days ago…. ) is a ramp into the proposed rate hike and a clear “sell on the news” trade. It’s so obvious. Staring you right in the face as Gold’s near term slide looks to FINALLY end – in the congestion zone around 1200.00

Looks pretty clear to me, as per the previous post and information provided by James Rickards.  A “nominal rate hike” with stocks at all time highs ( when else could these bozos possibly even consider it ) and perhaps a short-term “extension” of this ridiculous euphoria….then reality, as both stocks and The U.S Dollar hit the skids.

  • USD/JPY should hit resistance around 114.85-114.95 and that will be that.
  • EUR/USD is perfectly fine here around 1.0525-1.055 ( as it’s STILL above 1.05 despite USD bounce )
  • AUD/JPY ( our “risk barometer” ) hasn’t even budged. No breakout. No nothin so…..

Don’t get too excited. Nothing has changed except of course –  further bad news on trade deficit with China and of course…..Trump instability / Tweetfest and generally nuttiness – still on the rise.

 

Forex_Kong_Cartoon

           Forex_Kong_Working

 

Market Participants – How Can’t You See This?

Please Read: I’ve highlighted the significant bits.

kong and rickards

Jim Rickards – Markets Are Experiencing Cognitive Dissonance

Cognitive dissonance is a psychological term to describe a situation where perception and reality are out of sync.

It’s similar to what most people refer to as “denial.” The patient sees things one way, but the reality is different. Of course, it’s just a matter of time before reality prevails and the patient is jolted back to reality. This process can be fast or slow, easy or painful, but the important thing to bear in mind is reality always wins.

Something like cognitive dissonance is going on in markets right now. Markets have been temporarily euphoric over Trump’s tax, regulatory and spending policies. Those policies are important to business and credit cycles and economic growth.

The perception is that happy days are here again. The new Trump administration is expected to pour trillions of dollars of stimulus spending and tax cuts into the economy. Immediately after the Nov. 8 election, investors took a quick look at Trump’s policies and decided they liked what they saw.

Trump wants lower taxes, less regulation and higher infrastructure spending. Corporate profits and consumer spending benefit from lower taxes. Banks and pharmaceutical companies benefit from less regulation. Construction firms and defense contractors benefit from infrastructure spending. There seemed to be something for everyone, and the stock market took off like a Roman candle.

And indeed, the major stock indexes hit one record closing after another. The Dow topped 20,000 this week before pulling back. The dollar has been trading near a 14-year high, although it’s slipped in recent days. Gold was moving mostly sideways until it broke out again over the past few days.

Bank stocks went vertical in expectations of wider net interest margins (from Fed rate hikes) and less regulation (from Dodd-Frank reform). Happy days, indeed.

Reality is another matter. I’ve been warning my readers lately that the Trump trade is levitating in thin air and is ready for a fall. Now that reality could be beginning to sink in.

It’s far from clear how much of the Trump economic agenda will see the light of day. Congress wants to offset tax cuts in one area with tax increases in another so they are “revenue neutral.” That takes away the stimulus. Less regulation for banks won’t help the economy if bankers lead us into another financial meltdown like 2008.

Infrastructure spending will increase the debt-to-GDP ratio past the already high level of 105%, putting the U.S. closer to a sovereign debt crisis like Greece. As I wrote Tuesday, many believe a 60% debt-to-GDP ratio retards growth. That’s the standard the ECB uses for members of the Eurozone. Scholars Ken Rogoff and Carmen Reinhart put the figure at 90%.

Again, the U.S. debt-to-GDP ratio is currently at 105%, as stated, and heading higher. Under any standard, the U.S. is at the point where more debt produces less growth rather than more. This is one more reason why the Trump infrastructure spending plan will not produce the hoped for growth. And if infrastructure is funded privately, you’ll need tools and user fees to pay the bondholders, which is just another form of tax increase.

There’s almost no way Trump’s policies can supply the stimulus the market is pricing in. The Dow Jones index peaked on Jan. 26, 2017, one day after cracking the mythical 20,000 mark. It’s now trading around 19,900. The downhill trend may continue and get steeper soon.

Productivity has stalled out in recent months. Economists are not sure why. It could be due to lack of investment by business, or that workers are not being trained in useful skills, or that everyone is spending too much time on social media. Whatever the cause, productivity is flat.

Fourth-quarter GDP came in at 1.9%, below expectations — the final chapter on the worst year of U.S. growth since 2011 when the economy was still healing from the global financial crisis. The strong dollar is a major headwind to growth, along with flat labor force participation and weak productivity growth.

Growth in a major economy is simply the sum of increases in the labor force plus increases in productivity. Think about it. How many people are working and what is the output per worker? That’s it; that’s all there is. The reality is that the workforce is not growing.

Labor force participation is near 40-year lows and is expected to decline further for demographic reasons. Birthrates have never been this low since the Great Depression. The U.S. used to get a labor force lift from immigration, but that might dry up because of Trump’s policies. We’ll have to wait and see.

A flat labor force plus flat productivity equals a flat economy, or almost zero nominal growth. That’s reality.

kong and rickards

                                                        How will this situation be resolved?

Either growth will rebound based on “animal spirits” and the Trump stimulus working better than expected or markets will collapse once they realize the growth is not coming. By “collapse,” I mean a violent stock market correction, a falling dollar and major rallies in bonds and gold. We expect the latter.

Financial crises are not mainly about the business cycle. They’re about investor psychology, sudden shocks and the instability of the financial system. Right now investors are skittish, numerous shocks are waiting to happen and the system is highly unstable due to overleverage and nontransparency.

Despite Trump’s best efforts and positive policies, a collapse could happen any day unless radical steps are taken to prevent it — such as breaking up big banks and banning derivatives. I’ve been warning about this for a while, but now mainstream economists see the danger too. Nobel Prize winner Robert Shiller, for example, sees a stock market crash coming that could be worse than 1929 or 2000. I hope he’s wrong.

The problem with a financial panic is that panicked investors don’t care if the president is a Democrat or a Republican; they just want their money back. The same dynamic applies to natural disasters like tsunamis and earthquakes.

Once the disaster starts, the dynamics have a life of their own and don’t care if the victims are liberals or conservatives. Everyone gets hurt just the same. I’m not hoping for it, but this is a lesson Trump may learn the hard way.

Above I said collapse means a violent stock market correction, a falling dollar and major rallies in bonds and gold. I expect the latter. The long-term trends favor gold if U.S. growth continues disappoint.

The strong dollar story can’t last, so it won’t. The Trump administration has clearly signaled that the day of the strong dollar is over. When you see a coordinated attack on the dollar from the White House, the Treasury and the Fed, you can bet the dollar will weaken. That means a higher dollar price for gold.

The dollar may get one last boost from a Fed rate hike in March, but after that, even the Fed will acknowledge that they got it wrong again and start another easing cycle with happy talk and forward guidance.

For now, investors should not stand in front of a moving train. Keep cash ready and be prepared to move into gold, bonds and the euro. In fact, it’s not too soon to leg into those positions now.

Instead of watching the tape or short-term trends, my advice is to stay focused on the long-term trends. That’s how you’ll make the most money and preserve wealth in adversity.

kong and rickards

 
                                             – Source, James Rickards via the Daily Reckoning
                                                                            Who is James Rickards?

Dow Jones – Over 2000 Points Above 200 SMA

I can’t bear to watch.

See the green area on RSI – How long it’s been overbought? See the distance DOWN to the red line ( 200 Moving Average ) See the “rolling hills” of the MACD ( useless indicator anyway ) as price on the chart is so much higher…yet the near term “rolling hill” so much lower than the previous. Divergence baby – Huge divergence.

Even a correction down to the 50 MA will wipe any and all profits that anyone “envisions” prior to actually realizing them – and pushing the sell button.

This is the blow off top. How long she goes? Who cares! Just be sure to get out alive.

 

Dow Jones – 2000 Over 200 SMA

Buy EUR/USD – Before Tuesday Afternoon

You’re going to want to buy EUR before Tuesday.

This trade fits into the exact same framework we have been working with…with respect to The U.S Dollar taking a very large nose dive –  very, very soon. You can see in the chart below that EUR/USD has now put in an absolutely “classic swing low” right at the 50 day moving average…after completing only the first daily cycle of this new “intermediate cycle”. This suggests that we’ve got several more daily cycles to go ( lasting somewhere between 30-35 days each) before this upswing completes.

I would imagine the 200 day moving average ( marked in red ) should be the next target. That’s some 350 – 400 pips!

Buy EUR Before Tues Afternoon

These correlations with The Euro, USD and Gold are batting near 100% right now….as you can’t have The Euro rise without USD moving decidedly lower. The same thing goes for Gold, and if you really want to nail this…feel free to get long The Japanese Yen ( JPY ) as well. Yen chart looks exactly the same as EURO.

So…only one more asset class to consider here right? U.S Equities.

I can’t stand the stock market right now, as it’s continued rise goes against just about every fundamental principle I can drum up. There are too many indicators and factors to list – all suggesting this thing tops out  soon…or at the very least – makes a serious correction. The stock market is cyclical and there is not a single thing “any acting president” can do to change that.

Trump has certainly “empowered the common man” with the talk of bringing jobs back, and I can certainly appreciate that but…..it won’t last. Unfortunately for stock buyers – foreign exchange leads the way and the message is painfully clear.

This thing needs a complete and total reset before some incredible turn around in the U.S economy will be realized.

Wash rinse repeat people. You know this. Has it ever been any different?