In response to a fantastic line of question from valued reader “Rob” – let’s pull a couple of stops here.
It’s Saturday afternoon…my family and friends have now headed home, and it’s back to business “full-time” for Kong. So what better thing to do than “let loose a bit” after a full two weeks more or less “sitting on the bench”.
After suffering a bit “psychological damage” himself ( alongside the rest of us ), with continued effort actively trading markets these last few months, and in light of one my recent posts “Position Size – When Markets Have No Clue” Rob asks how I may have been able to identify this treacherous market dynamic ( chop ), and manage to keep myself out of harms way.
Excellent question Rob. Absolutely fantastic.
My first tip-off, aside from already having been very wary of markets going back several months was the complete and total “disregard” markets showed for the taper.
Knowing full well that the fundamental story in the U.S continues to deteriorate , one would have assumed that the “initiation of the taper” would have been the first clue that “the party is over”, and the “free money is ending” right? Apparently not.
Seeing U.S Equities continue to rally in the face of continued negative/poor data “coupled” with the suggestion and “initiation” of tapering told me almost immediately that the puppet still dances and that the Fed was still just as busy behind the curtain.
I never believed they would taper. I still “know” they have done nothing more but generate a media campaign, and if anything are even harder at work propping this ponzi up.
Recognizing this had me immediately trim positions, get to cash , scrap trade plans, get out-of-the-way as…..if I thought the Fed was controlling things when QE was “hip” how do you think I felt seeing things continue to push higher as QE was “supposedly” being cut back.
Bullshit. Total 100% bullshit.
Nothing has changed ( short of a couple of entries / zeros / ones in a couple of computers ) as QE will continue until a scapegoat is found, and an excuse can be made for the bubble bursting – period. Then QE will be doubled.
As well keep in mind that “I too” got caught” getting long the dollar, posting a loss of a % or two regardless of how many times I second guessed / knew in my gut that nothing had really changed.
I too – took the bait.
Then looking at things from a technical perspective, I didn’t get a decent signal from the Kongdictator on even as small a time fram as a 4 H, looking at pairs like USD/JPY trading flat as a pancake for now the entire last 2 months there’s been no question.
Markets have no clue.
I’ll break this into two post….and touch on another point Rob touched on – how this all plays out with traders “psychologically”:
The Psychology Of Trading – Reader Response #2
Your crisp understanding of Miss Market staggers me. We see the same dots (things), but it’s not until you connect them for me that i see the clear picture. Fascinating and frustrating (not to be able to do it on my own) at the same time.
I’vve been reading/participating for a year and a half now, and i damn sure will keep on doing so.
Your french “bro”.
He he he….well…
There are an awful lot of moving parts. Thank you – I appreciate that.
As I’ve outlined before “my approach” being from the “very top on down” generally keeps me on the right side of things, but certainly isn’t fool proof. I get thrown curve balls just like everyone.
I swing. I miss. So it goes.
In general though, I try to step back as far as I can….I mean “really step back” ( as my interests in all things “interplanetary” sit well above forex ) and do what I can to look at things from as wide an angle / view as possible.
In the simplest sense – I’ve got a planet and it’s resources caught up in a terrible battle, with the “powers that be” scrambling to get what they can “as fast as they can”, with the current state of war playing out in currency markets.
The U.S is in grave danger of losing it’s privileges associated with holding the world’s reserve currency ( the ability to print and essentially “export” its troubles ) and is desparate to hold it’s place.
The East grows stronger by the day, with less and less interest in letting the boys in Washington continue with this so….conflicts such as those in Cyprus ( looting Russian bank accounts no? ) then Syria ( attempting to occupy / shut down port to the mediterranean ya?) and now Ukraine, may “appear” to casual observers as isolated events but in reality – are all very muchso interconnected.
Ironically – Obama now in Saudi Arabia “soothing relations with key ally”???
This is all about the preservation of the petrodollar.
The day to day ebb and flow in a particular countries stock market / currency has little to do with much…as it’s the “next rung on the ladder” that affects all things below.
At least as I see it anyway.