Conviction Market Call – Where To Next?

Speculation as to “where markets are going next” is running rampid across the various forex, stock trading, news outlets and financial blogs these days, with a pretty equal split between both the bulls and the bears.

And for good reason as….It’s an absolute meat grinder out there.

This being said “caution” is likely the best suggestion anyone can make while markets continue to “sit on the fence” but you know…..you’ve really got to “go with something” as lack of conviction won’t really do much for you either.

Reducing position size or going to a cash position is never the wrong thing to do, so there’s always that….but again – we’re looking to “make some money here” so if it’s a bit of “hard work that’s required” well then?….We’re gonna do it!

I’m going to simplify and keep this short.

The largest QE program on the planet ( coming out of Japan ) ┬áis currently doing “nothing” to elevate Japanese stocks as the Nikkei “will” continue to fall here. This is significant in that…if the QE money isn’t doing it anymore ( as well consider the QE money in the U.S now evaporating monthly ) what on Earth would it take to continue pushing higher?

Nikkei_May_04_Forex_Kong

Nikkei_May_04_Forex_Kong

I believe that the “near term” wind has certainly come out of the sails, as U.S “momo names” have also taken their “first leg down”, with Twitter cut in half ( from 75.00 – 37.50 ) and Yelp soon to follow.

The analysis / theory is simple…..just follow the money.

Who’s printing the most money? Where’s that money going?

Do you seriously think the “world at large” is rushing to the “supposed safety” of U.S Bonds for anything more than a short-term trade?

I don’t….wait – I do…..no…..wait ( U.S Bonds are gonna top out here pronto ).

These things take time yes. It’s a grind yes, but there are many excellent trades setting up for those who are patient, and for those willing to do a little work.

I remain short the Australian Dollar ( risk currency ) as well am keeping a very watchful eye on all JPY pairs as these “will” move fast and hard with further weakness coming in Japanese stocks.

I continue to look for a stronger US Dollar on the “repatriation trade” and see us at a significant turning point here. Should USD fall lower it will only mean the trade has been “put off” a touch longer as much further weakness in USD will have some larger “ripple effects” with our friends across the pond.

I don’t believe the U.S can allow USD ( if they can really help it remains to be seen ) to fall much further without risking a serious, serious knock to whatever credibility it still has left.

Lots of great stuff on tap this week, so good luck everyone!

 

 

 

 

3 Responses

  1. Power Corrupts May 4, 2014 / 9:32 am

    Kong! I always enjoy reading your analysis and the capital allocation ideas which flow from it. Your stronger dollar outlook matches that of Michael Hartnett at BofA/ML, but with different reasoning – Bofa/ML: “We remain convinced the last great reflation trade will be the US dollar surging higher…”

    • Pot Stock Watch May 4, 2014 / 9:41 am

      It’s always interesting to me, how a couple of different analysts can view wide ranges of “differing material” and in turn still come to the same conclusions.

      I don’t delve into the tiny workings / spreadsheets that I imagine many economists / big wig bankers are “required to” in order to formulate then back their claims / views, but am very confident that ( perhaps another rung lower on the ladder ) what I “do” observe / interpret amounts to about the same.

      Perhaps the “layman’s version” no?

      All things considered – it’s very difficult for me to envision the U.S Dollar going “much” “if any” lower here.

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