trade strategy Archives - Page 12 of 43

Chinese Stocks – Largest One Day Fall Since 2009

Forex KongDecember 9, 2014 Got something to say?

It’s all too easy for investors to get caught up in the hype of the current “western media spin”, going about their daily business with the general belief that everything is moving along nicely – as U.S stocks remain elevated.

But one has to remember ( and especially these days ) that we live in a “global economy” where the puzzle pieces are so interconnected “planet wide” that even the smallest ripple in “other markets” can have a sizeable effect on things closer to home.

Last night ( on the heels of recent moves by The People Bank of China to actually “tighten monetary policy ) The Shanghai index fell 5.4%, registering the largest one day fall since 2009.

Japan Enters Recession – Stocks At The Highs

Forex KongNovember 17, 2014 6 Comments

It sounds completely and totally ridiculous doesn’t it?

Japan has now “officially” entered recession – last night posting it’s second straight quarter of negative GDP growth, while Japanese stock hang near 5 year highs.

You must see the hypocracy in it all.

You understand that Japan’s QE program has been “triple that of The U.S Fed” over the past year, and just last week was increased “even further” with The BOJ now buying 100% of newly issued bonds. Not just “a few of the bonds issued” – but every single one.

This literally equates to Japan sitting in their basement with some fancy printers and xerox machines and “point-blank” printing / counterfeiting Yen all day “every day”to pay off their debts. No different “in any capacity” to a petty criminal organization doing the exact same thing ( counterfeiting and passing artificial money ) – although obviously….risking years in the slammer.

If it where you or I – we’d be tracked down, handcuffed and whisked away to a maximum security federal prison – never to see the light of day again. You can’t just “print fake money”!

Now get this…..Japan raised it’s sales tax from 5% to 8% back in April, and there have been plans in the works to “further raise the sales tax” to 10% early next year! ( Although in light of the current economic disaster they “might” put this on hold). Can you see where I’m going with this?

If that doesn’t amount to “slavery” I don’t know what does.

Imagine yourself heading for the grocery store tomorrow, and seeing a 23% increase in the price of goods ( as your currency has been so dramatically devalued ) then “on top of that” and additional 3 to 5% increase in the tax!

Where you suddenly offered a 25% increase in your salary? Had you recently planted a small grove of “money trees” in your back yard just to stay afloat?

Where are all the new parks / bridges / roads and infrastructure that you “assume” your tax dollars go to ? Where are all the benefits to citizens ( as I know for a fact the people of a country such as Canada “expect” when taxes rise )?

How can the common man “not” see this as essentially being enslaved? You go to work for the same old pay, with rapidly devaluing currency in your hand – in an environment where taxes are going up!

You don’t work for yourself – you work for the bank!

There is no possible way the average person ( in an economic climate of “slowing global growth” ) stands a fighting chance. You used to live in a house, now you and your family live in a one bedroom apartment.

You used to eat the occasional bit of chicken or steak – but it’s “all rice” now.

QE is a complete and total disaster for the people of Japan, and unfortunately the same rings true for those of The United States.

Japan has thrown “everything but the kitchen sink” into devaluing their currency ( as The U.S is also attempting to do ) and has now “brilliantly” entered recession.

Get ready for “QE 4, 5 and 6” coming soon to The U.S – and get ready to start buying rice in bulk.

Japanese Tsunami – Big Waves On The Horizon

Forex KongNovember 4, 2014 11 Comments

The idea that “the entire planet” is racing into The U.S Dollar as well U.S Equities, in the face of “waning global appetite for risk” is ridiculous. Investors don’t “seek shelter” in Twitter or Facebook – you can guarantee that.

The European stock markets (The London $FTSE as well German $DAX ) have already rolled over, putting in a solid series of lower lows and lower highs – with the Canadian $TSX following suit.

It’s obvious only a few days later, that the BOJ announcement of “even more QE” has done absolutely nothing in a “global sense” as it’s effects can only be seen via the currency pair USD/JPY and the continued “buoyancy” of U.S Stocks.

Even The Nikkei itself has given back a full – 530 points overnight – taking a nice “chunk” out of the massive spike of the two days prior.

The BOJ’s move is looking more like a “preemptive strike” as opposed to something spurring global investors to “jump back on the risk train” – and it only makes sense really.

If Japan sees a Tsunami of cheaply borrowed Yen rolling in from The Pacific, wouldn’t it make sense to get the currency as low as they possibly can “prior”? Buying themselves a little more time and space before the economy is crushed like sushi roll underfoot?

Back in the day ( before the roll out of this massive QE campaign ) Japan would openly intervene directly in currency markets with hopes of keeping The Yen at bay, and time and time again the market would “slam it right back in their face” reversing the entire move – usually within the same 24 hour period.

Perhaps this time will be no different as Japan’s QE initiative will look like a “tiny water pistol” compared to the Tsunami ( unwinding of The Carry Trade ) gathering speed in the distance.

Small trades will come and go. Winners and losers alike, but “the big trades” come in “big waves” – and that’s where the money is at.

Waiting On Yen – Waiting On USD – Waiting Waiting…

Forex KongOctober 30, 2014 15 Comments

As contrarian as it may sound – you all know I’m looking for an intermediate “top” in USD – leading to a much larger decline.

The immediate reaction ( obviously ) to the “official end to QE” resulted in a huge spike in USD, sending EUR/USD and GBP/USD lower as well USD/CHF higher.

Today’s “candle” in $DXY ( pin bar ) is now looking prime for reversal, as it will take very little price action tomorrow – to close under today’s low.

This would fall right in line with a bottoming in JPY, and our expectation of “risk aversion” to continue.

JPY_Futures_Forex_Kong

If you’ve had any doubts of my continued view of both JPY as well The Nikkei – I hope this “blatant example” can finally put them to rest.

The correlation of “JPY down = risk on” and “JPY up = risk off” could not be more obvious as The SP 500 has done “the exact opposite” over the past week and a half.

Exactly.

I suggested some time ago that the currency pair USD/JPY “is the market” as Yen is borrowed on the cheap , then converted to USD to buy stocks. This could not be more obvious in viewing the correlation over this last “massive V-shaped move” in both Yen as well The SP.

USD reversal “lower” ( any day now ) and JPY confirming reversal “higher” will put a stamp on the end of this upward correction – and the beginning of our next leg lower.

Global Appetite For Risk – SP 500 To Fall Hard

Forex KongOctober 21, 2014 Got something to say?

So the SP 500 ( and global appetite for risk in general ) has got a couple more points left, before she turns and makes the next “larger leg” lower, then even lower still. I hope you’re prepared for a couple of ugly months.

Here is what we are looking at for The SP 500 and “global appetite for risk” over the coming months:

SPX_Oct_21_Forex_Kong

I know you don’t want to hear it but…….unfortunately after the countless number of posts, the never-ending supply of supporting data, and finally the “exit of The Fed” – you’ve had ample warning. This market has no possible chance of holding up on its own, and its VERY LIKELY that come late January The Fed will make reference to “QE 5” or which ever “QE” we’re on to next.

Survival here is key, as there will be significant buying opportunities come February – pending that you’re not so deep underwater with current positions that perhaps you’ve got a little cash to deploy AT THE LOWS.

Let’s imagine that markets “scream back” after this correction leading into late January, and by April of next year you’re “almost break even”.

Lots of pain to endure in the meantime, let alone profits to be booked ( if you currently have any ).

This thing was built on pillars of sand – you knew that.

Now the waves are coming in.

The Weekend Report – Ideas Of What To Expect

Forex KongOctober 19, 2014 Got something to say?

We find ourselves in an interesting spot now, with respect to “where markets are headed next” as……the major “risk indices” have put in “swing lows” – suggesting that new daily cycles are now underway.

At the very least we know “things are set to bounce” but “to what degree” remains to be seen so we need to keep an open mind, and get our heads wrapped around a couple different scenarios, as well take into consideration “whatever else we can” in order to formulate a plan.

Regardless of near term market direction, we can also see that “volatility” has certainly picked up, providing for all kinds of intraday opportunities and short-term trading.

Forex trading is back!

Scenario 1:

Personally, I don’t feel the market has yet come to a “capitulation type moment” and would first entertain that perhaps we get another couple of “up days” early in the week, a fast roll over and a further dive to test the recent lows.

It would be from “there” that I would imagine the stronger and larger bounce higher in risk.

Scenario 2:

Off to the races first thing Monday morning markets start ripping higher, then higher, then higher still – squeezing every single short and pressing to the near term / all time highs.

I feel this is “less likely” from both a fundamental as well technical perspective, but considering these markets and the “desperation” of Central Banks to keep confidence in the system – I can’t rule out some completely ridiculous “media induced” rally closer to the highs.

SPX_Oct_19_Forex_Kong

Please envision the exact same chart / scenario for The Nikkei.

Either way you look at it – you’ve really got to make some solid trade decisions here. One could choose to just “sit this leg out” and be very prepared for the tiniest suggestion that things are heading lower again – then jump on the train headed in the “direction of the trend”. Or you could certainly “take a stab” at a few long ideas, just with the understanding that you are trading against the trend, and that your time may be short. Perhaps too short.

For me it’s “almost” to late already to be chasing any “short-term trades” following risk higher, as the “downtrend” in most currency pairs ( JPY related for example ) is still intact.

Take AUD/JPY for example – 150 pip counter trend move over the past two days only brings the pair to the upper portion of its downward facing trading channel, and still has it “burgundy” on a 4H as well “gold” on the 1H. It could just as easily turn lower over the next 24-48 hours and continue on its way down.

In fact considering the large moves higher in SP 500 over the past few days – the currency market “so far” has done nothing to suggest ” a major low is in” and that we should just “switch to the long side” so……..I’m gravitating towards the first scenario, and plan to sit tight Monday / Tuesday ( unless of course things are already moving ) planning to “stay short risk in theory” and look for the absolute best entries I can in re shorting JPY related pairs.

Appreciate that I am nearly 100% cash at this moment as well.

The U.S Dollar

USD is giving us no clear signals as to which direction she’s headed next week and “as per usual” the correlation with “risk” is muddled.

The Dollar has fallen from its highs yes…..but hasn’t really gone anywhere in any “big way” as it’s still trading “gold/amber” on a 1H chart.

USD_1H_Forex_Kong

Unfortunately this doesn’t provide for any “aggressive trades” in USD short of keeping a very watchful eye on GBP/USD, EUR/USD, USD/CHF as well USD/CAD for possible entry “if / when” USD breaks below the 85.00 area.

Most USD related charts “do look primed” for this trade to come to fruition – but things continue to grind. I see no immediate evidence that USD is “heading back towards the moon” as everything I track still suggests USD is set to fall further.

AUD/USD as well NZD/USD appear to be “impossible trades” regardless of the fact that NZD has likely bottomed here as well so……all we can do another day or two is watch USD, keep an eye on all these pairs – and be ready. ( I still feel AUD as well NZD need to “take a bounce here” – but it sure is a long time coming.)

Trade Ideas

The next leg lower in “global risk” is going to be a whopper – so you’ll want to be fully onboard for that. It’s these “counter trend” moves that will always throw you for a loop as it’s near impossible to gauge the “extent to which” things correct.

If you’re actually bullish then perhaps you’ll see this as an excellent opportunity to buy, although I certainly can’t recommend that.

The big moves ( and the big money ) have clearly been with JPY and I suggest a continued focus on these pairs. We know “without question” that the correlation of “risk off” = JPY strength so the question begs “if it ain’t broken – why fix it”?

This is the most obvious and blatant trade / market dynamic we can put our finger on today so it only makes sense to continue concentrating on it.

We wait for this “upward correction” to take our JPY related pairs as high as they’ll go – then get underneath them again for the next ” and larger” leg lower in risk.

We continue to monitor all USD related pairs ( as I’ve entered long GBP/USD ) for the first signs that indeed USD is heading lower and that these pairs will offer some good trade opportunities.

If we imagine all JPY pairs taking a minimum 150 pip bounce ( and even more likely 200 pip bounces ) then getting under even 5 of them, and seeing things move back to the previous lows ( and then lower even further ) – that’s a good 1000 pips before things have really even moved much!

GBP/JPY as well CAD/JPY and AUD/JPY have already made considerable moves higher, but with downtrends still very much intact.

I imagine we’ll have an answer as early as Tuesday, as to whether it’s worth it chasing a couple trades higher / long risk, or to just “sit it out” and plan for the “major trade” setting up for the next leg down. One way or another – we just want to see those JPY related pairs keep moving higher as to “get back underneath them” for some big wins in the weeks to come.

Please feel free to visit the members website at: www.forexkong.net for weekly reports, daily commentary and real time trade alerts.

WOW! – What Can Be Said?

Forex KongOctober 15, 2014 4 Comments

There’s very little to say here this morning.

You just sit back on a day like today….and know that all the hard work is worth it.

Boom.

Massive trades/profits short USD and risk in general.

Stay In The Trade – Or Re Enter On Momentum

Forex KongOctober 14, 2014 Got something to say?

When you are actively trading a given asset or currency pair, you often run the risk of “missing out” on large movements in price, as you’ve taken profits and then try to find the best way to get “back into the trade”.

Obviously I would generally “look for a bounce” in order to re-enter the trade at higher prices when shorting, but what if that “bounce” doesn’t come? You’ve booked profits on only a small portion of the move, and now run the risk of “missing the crash” as you sit on the sidelines “hoping for the ultimate level” to re-enter the trade.

It’s always a tough spot. And I can’t tell you how many points I’ve missed over the years, exiting a trade then watching it go “much further” without me. You can’t catch every single one, and you can never go wrong taking profits.

I employ a simple strategy of “getting under the asset” – placing orders several pips “below current price” when shorting ( and obviously “above” current price when getting long ) with hopes that my orders will get picked up on “further momentum” in said direction. It’s really all you can do.

If you just sit patiently waiting for a bounce, there are times ( such as these last few days with our general position long JPY ) that you may just miss the bigger ride lower, so having a couple of orders in the system “below or above” the current price “should” allow you to participate further, should the move continue.

It’s always tricky looking to “actively trade” as opposed to looking at larger time frames and holding trades longer, and it’s really a matter of preference, but I can say from experience – It’s almost “always” more profitable if you are able to just “stay in the trade”.

Selling The Rip – Earnings To Disappoint

Forex KongOctober 13, 2014 2 Comments

The SP 500 has now broken below a critical area, suggesting that further losses ( over the next several weeks ) will be seen. But of course, right around the time you figure that out – markets also look set to bounce.

This “bounce” ( however great or small ) will only provide greater opportunity to continue shorting – just at higher prices.

Dip buyers will unfortunately be met with “the dip that turned into a dive”.

Regardless of near term price action over the next couple of days, what people need to understand is that we’ve turned a corner, and that as per The Nikkei in Japan ( leading us lower for several days prior to The SP finally rolling over ) any idea of a “new string of higher highs and higher lows” is very likely out of the question.

I don’t expect higher prices in Japanese stocks period so……as nearly every single index globally has now broken below significant lines of support it’s fair to say that indeed – a significant top has finally been reached.

“Selling the rips” now, not “buying the dips”. That’s the road we’re on.

Sinking below 1904 has solidified a much larger and more serious correction ahead, so investors / traders need to be aware that we’re on the other side of the mountain now. This earnings season is also expected to bring disappointement so look ahead to lower stock prices in coming weeks.

JPY Center Stage – Reversal Complete

Forex KongOctober 2, 2014 6 Comments

The near term bottom in Japanese Yen ( JPY ) marks the top in Japanese Equities, and subsequent fall in “global risk for appetite”.

Wouldn’t you say?

Down -420 points in Japan,with U.S Equities falling past “any idea of near term support”, and fast.

This would only make today “Day 1” in a new investors cycle in JPY ( generally playing out over many weeks ) so one can only imagine the trade implications here.

You can get under just about anything JPY related and short.

Risk moves lower from here.