trading JPY

The Nikkei Has Topped – Months Ago

Forex Kong 2 Comments

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”.

Kong Sells Miners – Buying Again Soon

Forex Kong 2 Comments

Over the past 2 days. I’ve sold GPL, IMG and NUGT for a 28% return on the trades.

I’m still holding short USD/JPY as well long EUR/USD.

I expect this to be a “shallow dip” with respect to the gold and silver related stocks, so I will be scaling back in to these and more here shortly. On this next entry I am going to do my best to actually “buy and hold” something for at least a couple of weeks / if not months but then again…….we’ll see how that goes.

The larger macro turn in both USD as well commodities is slowly making its way…so there is still plenty of time to start building positions.

 

 

Forex_Kong_Japanese_Color

Forex_Kong_Taking_Profits

 

 

 

 

 

Understanding USD/JPY – You Know You Need To

Forex Kong 12 Comments

With Japan now out of the way….we can clearly see that markets don’t dig it. The Yen is powering higher which is the absolute last thing Japan would like to see.

A strong Yen is terrible for Japan ( as a strong currency is for any nation these days ) and suggests that money is actually flowing “out” of markets – back to the place where it was originally borrowed at 0%.

asimo-is-selling-his-u-s-stocks

asimo-is-selling-his-u-s-stocks

Think about it.

Let’s say you went nuts and borrowed thousands of dollars when the interest rate was 0%, then invested it in U.S Equities hoping you could make a buck. Months later your U.S Equities trades are flat at best, but even more likely sitting at a loss. Then you figure out……hey wait a minute – if we get an interest rate hike here in The States…this market is gonna tank! You sit there thinking…..man I better get the hell out of here, or I am gonna get killed.

Imagine if they actually DO raise rates in the U.S today? You are hooooooped!

How will I pay back all that Yen I borrowed??

So you unwind your trade. You sell your U.S Equities likely at a loss…..then you have to convert the U.S Dollars “back” to Yen ( at a new rate that also hurts ) and finally pay back your loan. This is the fundamental driver behind movement in the currency pair USD/JPY. This is why it’s been tanking since markets “actually topped” back in late 2015. Everything else has been pure distribution as the big boys and heavy hitters unwind their Yen Carry trade, and it’s taken more than a year to quietly do so.

You can see it on the charts  so clearly, and now that USD/JPY is at parity……things could get pretty ugly.

Clear signs that markets have more or less topped out – and have been distributing to retail “hopefuls” for the past full year.

Little mining stocks on fire….just getting started in the larger macro trend people so……go grab a couple!

 

 

Tomorrow’s Trade – BOJ And Fed On Deck

Forex Kong 13 Comments

Blah, blah blah……as once again The U.S Fed and Bank Of Japan keep markets on their toes.

Tomorrow we “should” hear from both, which sets up a pretty tricky scenario if you are thinking about placing any trades prior to the announcements. That’s not how I roll, although…….I am still holding every single trade entered like – 10 days ago.

Conviction is great, as I am 100% certain that The U.S Fed will not be raising interest rates this close to the election but we can never EVER count on The Bank Of Japan to do what we expect. In fact…there have been several times in the past where The BOJ has surprised markets –  big time.

You are aware that the BOJ and The U.S Fed have been working together on this “propped up market” for years now right? Taking turns cranking up the printing presses as to keep these fake dollars / yen rolling into markets? 

BOJ takes the next kick at the can

BOJ takes the next kick at the can

This coordinated effort is widely known….yet poorly understood.

It would not shock me in the slightest to hear Japan “beefing up” its easing and money printing efforts in order to keep the balls in the air a while longer as…..Japan is deep DEEP in The Fed’s pocket.

If Japan pulls the trigger ( allowing The U.S off the hook ) expect markets to rally…..otherwise…we continue flat across the top. Flat across the top until the elections are out of the way…then down.

Further currency trading prior to tomorrow’s announcements is plain stupid.

Sit tight….wait and see what shakes out.

 

Nikkei Down -638 Points – Long JPY Trade Is Gold

Forex Kong 4 Comments

The Japanese Stock Market ( The Nikkei ) is now down -638 points as Americans start “waking up”. China has cratered.

How are the long JPY trades going? – Absolutely golden!

The relationship between “risk appetite” and The Japanese Yen ( JPY ) has never been more clear, as short trades in AUD/JPY, NZD/JPY, CAD/JPY and USD/JPY have produced some 5-600 pips in only a few short days.

USD trades remain flat, as the continued concerns about Greece keep EUR ( the polar opposite of USD ) in a continued state of flux/confusion.

This is not about Greece. It’s about China. It’s about global appetite for risk…and it’s about the big boys making a speedy exit with profits in hand, as The SP 500 “continues” to make lower highs and lower lows ( the definition of a down trend ).

This is certainly not over. It’s not a dip to be bought, as we’ve been on the other side of the mountain for days now.

Protect yourself, as I “remain” short risk.

 

 

 

 

A Forex Plan Moving Forward – Risk Off

Forex Kong 1 Comment

The down trend in Japanese Yen ( and subsequent rise in risk appetite ) now looks to be “officially broken”. We clearly understand the relationship here.

It would take an awful lot to imagine pairs such as AUD/JPY or CAD/JPY reversing here, and putting in new highs. Very unlikely.

I am looking to start ( in typical fashion – with single contract entries ) short positions in any number of JPY related pairs with particular focus on JPY vs AUD, NZD, CAD ( the commodity related currencies ).

In general I expect to see JPY rise…..and USD fall along side risk.

I would be wary of trades in EUR/JPY , CHF/JPY and perhaps even GBP/JPY as “if/when” USD continues to fall….the E.U related currencies will take inflows so…..bigger moves to be seen in JPY vs Commods.

Still holding USD shorts – YES.

This is pretty “macro” here everyone, as at some point you’ve got to pick a side, plan your trades and put that plan into action.

If markets continue to trade “sideways” in general well……these trades could just as easily wallow/sit in the mud as the continued “distribution” here across the top goes on.

Broad strokes have me seeing a lower low now firmly established in SP 500 suggesting we bounce, and look for the ultimate short entry ( long JPY vs Commods, Short USD against E.U currencies ) over coming days.

If the media has us waiting until Sunday for more bullshit coming out of Greece – so be it. Small entries as mentioned above can be made prior…with thought in mind of either “adding to shorts higher” come Sun/Monday…..or getting some orders in “underneath” these pairs..allowing momentum to pick us up.

I see the table set for a significant move lower in risk appetite so….the breakdown above gives you the plan across most of the major currencies “pending” this plays out,,,,and “doesn’t” just continue trading back into the range.

Have fun. Enjoy some sun. Stay out of trouble if you can help it.

Japanese Tsunami – Big Waves On The Horizon

Forex Kong 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 Kong 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

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.

Worlds Largest Pension Fund – Buying Japanese Stocks

Forex Kong 1 Comment

The Nikkei has just moved 340 points higher on rumour that Yasuhisa Shiozaki ( who has been advocating for the GPIF to reduce allocation to domestic bonds ), may be appointed the Health Minister ( so what? ) when Abe announces his new cabinet tomorrow.

The GPIF ( The Government Investment Pension Fund ) The world’s largest pension fund ( yes a Japanese fund not American ) is expected to increase purchase of Japanese shares to 20 percent of holdings and reduce domestic bonds to 40 percent.

With the market way ahead of itself here it’s the actual “timing” of said purchases that is still unknown. The fund would need to buy an additional 3.5 trillion yen of domestic stocks to reach the 20 percent target, so the “span of time these purchases would be made over” is key. The fund will announce its new asset allocations in the fall – according to GPIF investment committee chairman Yasuhiro Yonezawa.

Both Gold and the Japanese Yen got absolutely demolished overnight, with fear “once again abated” having the largest pension fund on the planet now suggest it’s ready to “step it up” in support of the ponzi we’ve all come to love.

This comes as tough news for Kong as I’ve been trying to “get long JPY” on the inevitable turn, so it remains to be seen if this will manifest as a simple “spike” or develop into something larger. My initial thoughts are “nothing can save Japan” and that this only goes further to affirm the complete and total desperation currently sweeping the land of the sinking sun.

Regardless – one has to respect that a player as large as The GPIF most certainly has the ability to “ruin your day” should they decide to go all in.

Fukushima Exposed – Tuna With Two Heads

Forex Kong Got something to say?

After years of obfuscation and, simply put, lies; TEPCO has admitted in a new report that more nuclear fuel had melted at the Fukushima nuclear reactor than previously stated. While this is dreadful news, it gets worse, as the report further confirms that despite Abe’s promises and TEPCO’s state-funded efforts to build ice-walls, it may miss an important deadline binding it to clean radioactive water stored inside the Fukushima nuclear plant.

Bloomberg reports officials commenting “we are doing everything we can do,” but it appears, that is not enough as tens of thousands of tons of toxic water are expected to remain at the site by the imposed deadline.

Get the rest of the story here or “oh I dunno” maybe start looking ito the “reality of this disaster” yourself.

You still haven’t got short Japan? EWJ ( as suggested a couple days ago ) clearly moving lower.

More here.