Japanese Tsunami – Big Waves On The Horizon

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.


11 Responses

  1. Michael Penthouse November 4, 2014 / 7:56 am

    I agree. We are rolling into a risk-off phase for several years from this point. And central bankers can go to frigging hell.

    • Pot Stock Watch November 4, 2014 / 8:07 am

      Yes! Michael yes!

      Now if you can just manage to “slug it thru” this contuned move across the top.

      All will be revealed soon enough.

  2. Anonymous November 4, 2014 / 10:44 am

    Short-term CIT underway as planned — but trade safe as it’s not likely to last much longer… the boyz and botz play for keeps and as we’ve seen, rules and common sense don’t apply…Friday could surprise with another test of, or a new HI…

    Nat Gas has also been a great trade for the past week — Go UNG

    best to you,

  3. David November 4, 2014 / 10:51 am

    The question is does USD/JPY go to 115, 120 or higher first, and are any shorts left who didn’t start positions up that high? Frustrating indeed. Some of these crosses are melting off though from the spike on Friday, CAD/JPY for example.

    Do you plan to long USD/JPY at all Kong, if it closes the gap at 112.50ish or even down to 111, 110.50? Or are you only going to be playing the short side from here on out?

    • Pot Stock Watch November 4, 2014 / 11:00 am

      I won’t be going long USD/JPY no.

      Perhaps down at 96, when U.S is foreced to raise interest rates and we’ve got a whole new ball game on our hands.

  4. Anonymous November 6, 2014 / 2:58 pm

    Sold UNG today…seemed prudent.
    The boyz are likely to squeeze at least one more day out of this rather vertical move…trade safe.
    best to you

  5. madness November 7, 2014 / 3:55 am

    What possible reason is there for JPY to reverse it’ course and hence risk? If you know the Japanese authorities are intent on their madness policies, why should the market stand in it’s way. Simply sell JPY and buy again when it depreciates past 120/125.

    With commodity prices falling too, the impact on the Japanese who import 80% of their commodities isn’t so severe as it would be if ie. oil were still at $90-$100.

    BOJ doing it’s best to reach the desired inflation target, “no matter what it takes”. You know you simply cannot lose until the BOJ stops. Yen will continue to weaken and act as a catalyst for risk on.

    What can the US do about it’s soaring Dollar? It can’t decrease rates or engage in more QE as this will drive risk on even more. Whatever it does to reduce the value of the soaring dollar, will be seen as risk on for the equity markets.

    Look at AUD and NZD, they have been falling since August/September which would indicate risk off yet equity markets keep on soaring to all time highs. With xmas not to far now, the xmas rally together with low volumes could easily see another 5-10% rally in US stocks

    Only thing that will stop the rally in equities and hence risk, is some Black Swan event or a realisation that socks are over valued. Then again, when has anyone cared about stock valuation over the past 6 years – it’s all about low volume melt-ups, momo and HFT trading.

    • frenchdna November 7, 2014 / 3:48 pm

      Great comment. Thanks for sharing your opinion.

      • madness November 10, 2014 / 6:08 am

        Just the ramblings of an amateur…base my comments on “common sense” and how I see it. Have no training in economics, financial analyses so can’t claim any deep behind the scene knowledge.

        Wondering who on Earth is continuing to buy risk at such high levels? They say there are some real intelligent people in the world of Trading. What are they seeing that we common folk are not? What is the justification to continuously be buying at such high prices knowing full well economic conditions are getting worse?

  6. Anonymous November 7, 2014 / 8:33 am

    Mr Kong,
    you clearly have your own style and are very good at what you do, but this young man often provides very insightful advice, too.
    please consider as you plan your next big score…

    Conclusion and What’s next: We make a 11/7-10 major High and start a decline.

    best to you

    • Pot Stock Watch November 7, 2014 / 8:43 am

      My current plans center on the same.

      The “megaphone pattern” playing out in U.S Equities has more or less hit it’s peak here as of today.

      I expect a full reversal of “risk” here into early if not late December.

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