This is going to be a huge week and you’ll need to be ready.
Regardless of which asset class you’re currently trading or holding – I strongly suggest that you’ve got your eyes open and your “fingers on the button” as my expectations for the coming week include fireworks, tidal waves , meteorites and circus clowns.
As early as Tuesday, I’ve got it that things are going hard in one direction or another, and at break neck speed may clean out your accounts or make you filthy rich. If the week goes by trading flat – I will post video of myself eating an entire handful of raw Habanero peppers, and subsequently dieing shortly there afterwards.
The most significant concern will be that of the “existing correlations” and weather or not this “proposed turn” will have them turn on their heads – or continue as they have recently.
Let’s have a look.
- USD is going to turn lower here, the question is “will stocks turn lower along side USD”?
- USD is going to turn lower here, and another question is “will that in turn have JPY move higher”?
- USD is going to turn lower here, and yet another question is “will gold finally find support and move higher”?
I think you’ve gather how I feel about the U.S Dollar – as I have absolutely no question at all that it will head lower, but am concerned that the “flipside” of this move “could” go like this as well:
- USD down and US stocks up ( if a “true” risk rally develops then we’d also see commod currencies head for the moon too.)
- USD down AND JPY down ( if a “true” risk rally develops then BOTH safe haven currencies will be sold and again the commods will head for the moon.)
- USD and Gold up ( in this case if a “true” risk rally develops then the normal correlation as to the value of gold in dollar terms may finally make a showing.)
So – all eyes on the U.S Dollar here as everything else will quickly come into focus as soon as we see the turn.
Frankly, I’m on the fence about it and can’t say for certain which way things are going to go – but will be watching very, very closely and will post / tweet literally at the very second that I confirm the move.
What is rationale behind USD moving lower? Is there anything more than “fed is printing money as hell”? If it’s it then yawn. Heard it from 2011 and usd keeps creeping higher.
Not sure that I can ( or care to ) post a list as long as to explain “every single reason” , but do look forward to hearing back from you sometime later this week.
Looking back as far as 2011 the U.S Dollar absolutely tanked and has spend the entirety of the past 2.5 years just barely surpassing the highs so…….I’m not sure what kind of time frames you trade ( if at all ) but there have been plenty of opportunities over the past years to get short USD…..and wouldn’t you know it – here comes another one.
The entire planet is diversifying “away” from holdings of U.S.D in case you need another reason.
I’m not talking about short term trading. Dollar index was ~73 in 2011 and now at ~83. Same story in eurusd, audusd, almost every cross you look at. Not to mention gold. I would not call it “absolute tanking”.
And what about recent run up in dollar interest rates? Wouldn’t it support stronger dollar?
I’m just curious if you have some fundamental arguments apart from technical ones?
What are you talking about?
USD was 81.50 at the start of 2011 AND THEN tanked to 72-74 area taking the entire first 8 months of 2011 near those levels.
You’ve also neglected to consider that most recently every other currency on the planet is being aggressively devalued just to keep up with the sinking value of U.S dollars – just to keep up! This isn’t a technical move at all – its 100% PURELY fundamental.
My last 3 points weren’t fundamental?
Let’s go for #4 – Ask yourself this………when the U.S Bnd market implodes – do you honestly think that will be good for the U.S dollar? Fundamentally?
Yes, dollar was falling in beginning of 2011, but then it stopped and reversed. it is meaningful.
Why do you say dollar is sinking? Sinking in relative to what? Almost all commodities made highs in 2011 and are still much lower. Are commods printed to keep up with dollar too? Don’t look like dollar is sinking if you ask me.
Listen kid…….the majority of people are here to learn and contribute in some “meaningful way”.
Your ignorance to what is “really going on” is really not up for debate – as it’s so painfully obvious. I’ll assume you’re 19 years old and have never traded a real dime in your entire life. This being said you’re welcome to hang around and contribute – “if indeed” you’ve got something to contribute.
Please pick up your phone ( as I assume you’re in Asia ) and call an American – then ask them how much a loaf of bread costs today – and you’ll get your answers on USD.
It would be nice to be 19 again..
Anyway, phone is kinda thing of the past for 19 year old like me, so I picked up some statistics on internet.
Average price of white bread in US. Take a look yourself.
Ill go one more round here my friend….just cuz I’m bored.
Yes….the price of a single loaf of bread has increased by 100% since 2005.
So……..are we looking at some new “miracle ingredient” or some new “costly innovation” in the production of bread in the past 8 years?
Or perhaps a single U.S dollar is essentially worth “half as much” ( in this specific example ) no?
Again……..where are you going with this? as to have any possible contribution to this blog / forum?
The point blank point is that the U.S dollar is being so aggressively devalued as to at some point possibly even spark “hyper inflation” – so……put yer money where yer mouth is and trade it as you see fit.
I will stop my contribution if it ins’t welcome, but I will be watching market to see if it play out as you say.
Isn’t that the idea then? To watch the markets and trade accordingly?
Where did I “say” this is what’s going to happen?
Hilarious……I’ve laid out several scenarios that may just as likely unfold. So yes yes…please do watch and “see”!
Still yet to see any “contribution”. In all you are either caught long USD ( which is unlikely since you have no money anyway) and / or you really have no sense at all what’s actually going on.
China now has trade relations with Russia, Australia, Brasil and many in the Middle East that now “bypass” the use of U.S.D as a reserve currency, and the need to be converted in order to buy commodities. Soon the actual “petro-dollar” will come under tremendous pressure as more and more countries get on board and say “WTF should we need to convert our currencies thru U.S.D in order to buy goods?”
Imagine that amount of business walking out yer front door in a given year or two? Nighty night USD!
Maybe I will do the list.
And of course the printing………
Soon to be DOUBLED!
Shall I go on?
So what currency will replace dollar as reserve currency? I don’t see any candidates on horizon, so I will remain skeptical on such theories.
Gday mate! I am always keeping an eye on your posts.
I am totally on board with the holiday fireworks you suggest.
Could you please shoot me an email at gmail.com?
I’ve got some ideas I’d like to discuss with you.
Where the hell have you been man?
Hope all is well with you and yes – Ill shoot you a mail.
Tell us….what’s going on? Where you at?
In your neighborhood.. Costa Rica
You’ve got to visit the Volcano in Arenal, as well if you’ve got the time ( and 4 X 4 ) a must see area is Puerto Jimenez and Corcovado National Park Reserve.
I flew in to the ranger station out of Puerto Jimenez and spent several days in the heart of Corcovado with the patrol / rangers. Tiny 4 seater plane and a grass runway – in the evenings we’d get out and look for Jaguar but never saw one, but heard them groaning in the night!
Saw 4 species of monkey including crazy spider monkeys swinging through the jungle, a huge Tapir in the underbrush and the list goes on!
If you hit San Jose / Escazu I could have a couple friends hook up / take you for beers!
I think the circus clowns may have arrived early (not referring to zkot) 🙂
Sure, please send any San Jose info.
Regarding fireworks week, last Thursday’s triangle in GDX signals the next impulse down is the last (I have been studying my butt off in Elliot Wave!!). Friday’s action in miners was the equivalent of September, 27, 2000 (c up of 4 up of 5 down of big bad 5 down, of, presumably, cycle C down). It was also the equivalent of October 8, 2008.
I see one final five waves down — 5 down of big bad 5 down of cycle C down — ahead. GDX should be profitable for shorting.
Did you see the monster puts during Fed week? 130,000 puts for GDX @27 strike. Turned out to be an eighteen banger.
I botched my exit — remember, I’m a rookie until Aug 20. But I still made a decent profit — despite myself. Then, over the weekend, I went back and watched Prechter’s Elliot Wave videos — for the third time. And I’ve only gotten thru half of them.
Also — please shoot me an email!
Cheers ~ zkot
Great stuff Dev!
It’s gonna be a big week ( in my eyes ) as the US Dollar is at a significant point of resistance, as well a significant time in it’s usual cycles.
I am expecting it to move, an in turn – EVERYTHING moves!
Kong, what do you think about stocks being so strong ? I recall your June 9 post:
where you got a technical sell which led to a 7+% pullback but now the market has come all the way back regaining a lot of lost ground. Did you think stocks are still a sell and do you have any new signals? Thank you!
How can you say stocks are strong?
the series of lower highs and lower lows is well intact on 1H 4H etc……
What you’ve seen over the past few days has mearly been a counter trend rally in a well established downtrend, and Im assuming today / tomorrow will confirm that as USD rolls over, and stock trade along side as they have been for months.
You can’t let near term price action cloud your vision of the larger picture. Yes the “illusion” of strength is there if you are watching T.V and notice 4 days in a row of “stocks head higher” stocks moving up” – but that’s not in context, as the recent down move hasn’t come close to reversing.
As I suggested in this post – this week ( if not Tues ) should be very telling. Im quite confident that I’ve nailed the swing in U.S.D – but again….as the post outlines……it remains to be seen what other “intermarket dynamics” may play out.
Let’s give it another 48 hours.
like the call of USD lower and stocks lower- although needs confirmation
my rationale for aaaxn on this correlation- main driver of recent stock and USD rally has been money flowing out of Japanese pension funds seeking currency stability from a Japanese central bank this is openly trying to devalue the Yen, into to USD denominated assets that pay a dividend for the pension holders(i.e. Dow components, REIT’s, US treasury’s etc). I think a brisk sell off in JGB’s could happen soon could be the spark that unwinds this.
Right on the money John.
Hot money flooded out of Japan on the massive liquidity pump, and had to be converted to USD prior to buying the last market standing. Hence the unusual correlation of USD up and US stocks up. Bang on.
I’ve been hot on the heels of this trade ( and it’s inverse ) now for months – and am salivating as to what should come soon.
Some big trades long JPY as well short USD, against a miriad of others.
Hey John, did you actually check the numbers? Japanese were actually selling foreign bonds and stocks at record pace in 2013. Foreign were on other hand massively buying Japanese securities. Not saying JPY won’ rise, but clearly it did not fall for reasons you give.
Central bank have total control on bond prices so there will be no JGB sell off without BOJ approval. Do you think they will approve that? Also QE is not inflationary on its own, because it is simply asset swap. It creates liquidity, but private sector cooperation is needed to actually create inflation. I think JPY weakness is run by same flawed arguments that lead investors to massively bet against USD in 2011, because FED QE was supposedly cause inflation.
Good stuff aaaxn.
Although we do need to consider that Central Banks “do not” have full control over bond prices in any way shape or form, as the bond market ( being so much larger) sets rates and prices all on it’s own.
As well JPY (seen as a safe haven currency – as Japan’s debt is primarily held domestically) will rise in times of “risk aversion” no matter how much the BOJ prints, as carry is unwound and monies are repatriated back to Japan.
Central Banks would have most “believe” they’ve got yout back – but in reality this is an illusion. The net result of all this central bank intervention will ultimately be ” net negative ” and currently ( in my opinion ) is more of a “band-aid on the problem….and not at all a viable long term solution.
When the wheels come of this “global liquidity pump” ( and they will without question ) things are going to get real ugly.
Great input – great insight. Nice work man.
I disagree. Central banks have total control over bond priced in their currency. This is for the same reason SNB can keep EURCHF above 1.20 as long as he wants: central bank cannot run out of his own money. If BOJ is committed to keep bond prices high he can just buy all Japanese bond that lands on market. Of course such actions could have serious consequences in terms of yen price and inflation, but it can be done.
PS Have you bought habaneros already or you hope Friday will bring some action ? 🙂
Ok aaaxn – Im in profit on both long NZD as well AUD vs USD and flat on USD/CAD….so – no habanero’s for me yet.
I rarely if ever trade ” the rookies pairs” like EUR/USD as you likely see – they just get pounded and eat up little kids accounts.
Bond market makes it’s own rules as you’ve recently seen it go berzerk in Japan, and likely soon to be the same in U.S
Bernanke is absolutely powerless if the 20% of the bond market he “doesn’t control” decides to sell. It will bury him in an instant.
Only things that’s different ( and better in Japan’s case )is that the debt / bonds are widelt held domestically…and the people of Japan will continue to suppport these initiatives.
Keep at it kid. Keep reading – you’ll get it.
aaaxn- Why so angry? Cut back on the coffee.
I did check the numbers. The Tokyo Stock Exchange numbers are consistent with my argument of domestic selling of stocks/fixed income in Japan. The Japanese Ministry of Finance numbers report net selling of foreign assets by Japanese citizens/institutions. If you believe both sources the island of Japan is a big holder of Yen which is being devalued.
If you have total faith in Central Banks and QE don’t argue with me or Kong. Put your money where your mouth is. Go long the Japanese 30-year with leverage. You can come back here in 3 months, 6 months and a year and rub our noses in how much money you have made. I’ll be the first to congratulate you.
Ahhhhhh……and the blog’s integrity remains intact. Great post John.
I’ve recently been involved at another website forum that’s teaming with young retail “demo traders” convinced they’ve got this figured out.
I welcome those interested in further learning, and truly hope that I can get them on a path to profitability – but for those nieve and/or jealous, looking for conflict we’ll do it this way…..
Post as you see fit (I would suggest doing your homework, as well as choosing your words wisely) and you can swim with the pro’s here for the first couple. Anything past that and the filters will grab you.
It’s a snap to just keep this dribble from ever hitting the public page.
Good FF gang?
I’m angry? Why do you think so? You said Japanese were buying foreign assets to run away from yen. In fact data says they were net sellers of foreign assets so were bringing money home. You were wrong, it’s not a shame to admit it.
Why on earth you think I have total faith in CBs? I just said they have total control of their own currency bond market. For this reason playing short JGBs is not a good trade, but it doesn’t mean getting long is! That said, long JGBs will probably be better trade than holding stocks in next 6 months ;]