My Business continues to move forward albeit at a quieter pace than of late. I continue to add pips and $$$ but we are really just, apart from the Antipodean related currency pairs just consolidating recent moves. There are plenty of lights flashing each day, but we are just range bound. At some point this fact will change but for now it’s all rather uncertain.
At the start of last week, we saw the gap between Wall Street and Main Street broaden wider than ever. The divergence between Wall Street and reality to many people appears unreal, and for some disgusting. The old story of the rich get richer and the poor get poorer has never been as evident as it is in the TRUMP era as President. What riles people is as President he’s proud of it!
Then reality set in, probably just a blip for a day or two but it was taken albeit momentarily into consideration.
The FED Chair, Jerome Powell in his speech to the Peterson Institute gave a bleak outlook on the issues that the U.S. faced moving forward. The same day, David Tepper, President of the Appaloosa Management Hedge Fund announced on CNBC that he thought the current equity market was the most over-valued second only to that seen in 1999. He followed, Stanley Drunkenmiller ex Manager of Duquesne Capital a failed Hedge Fund back in 2010 following the GFC, who was in turn also followed by Mark Cuban, owner of the Dallas Mavericks. They all pre-empted last Thursday’s U.S. Weekly Job Claims number that shows that in the past 8 weeks over 36.5 million U.S. workers have lost their jobs and are claiming benefits.
They all spoke Wednesday and following the Jobless Claims numbers the following day the DOW Jones rallied +377 points.
Can you imagine the type of rally Wall Street would provide if 50 Million Americans were without work ...?
Personally, I think “we” are constantly underestimating the damages to the economies worldwide. With the slowing of growth and the negative impact on earnings, we are nevertheless glowing with confidence and projecting a strong recovery. Is this why we hear on TV it's a good reason for us all to buy into the stock market with an average forward P/E multiple of 23?
When you sit back for 20/30 seconds and think; it is all rather sick.
Last week I wrote in my opening section in relation to stock market bullishness that: -
“It would appear that it’s a total BOLLOCKS response ...
- to poor company valuations
- to mass unemployment (over 33million claimants in U.S)
- to records amounts of debt
(U.S. National Debt over $25T increased over $1T in last 30 days)
- to a worldwide recession
- to some of the weakest PMi prints ever internationally”.
TRUMPS response to the David Tepper comments on CNBC were: -
Well there you have it....
Across the pond in Spain, over 120,000 businesses went bankrupt in March. That's about 10% of those registered. When the hospitality industry re-opens with social distancing laws in place, how will they make money on low capacity limits? I wonder what percentage of businesses will disappear in Spain this year. One can only assume Italy’s numbers will not be too far behind.
Dr. Anthony Fauci, (Director of the National Institute of Allergy and Infectious Diseases) and member of the TRUMP administration Coronavirus taskforce, spoke out against the TRUMP “all is well, get back to work message”, he urged caution about opening up distancing rules etc., too soon. TRUMP did NOT like the comments... watch this space; Tony could soon be known as Tony who?
Well, there you have some more...
We know that Institutions looking for yields for clients only have one place to go and that is the Stock Market. The “Ma and Pa” investors faced with trying to provide themselves a retirement income are faced with the same dilemma.
It’s really a NO longer-term RISK because the institutions also know that the FED will backstop any huge short selling move and, I would NOT rule out either a short-term selling ban or the FED buying up equities. The FED is already buying huge amounts of corporate debt. On Thursday last week the FED purchased USD$305 million of exchange-traded funds on Day One of their intervention / support program.
“Pockets are DEEP and there are NO BOTTOMS....”
The above statement applies to the entire G10, and what I am saying once again is that THE U.S. STOCK MARKET IS MANIPULATED along with ALL the other G10 equivalents.
Nothing I have said here is new. I have written the same sort of commentary before, many times, too many to count over the past 8 years BUT the difference is that most times have been as a result of an economic reaction. This is 100% different, we have a health issue, a GLOBAL PANDEMIC no less.
Step back for a minute....
We are trusting self-serving “vote / popularity sensitive” politicians to get us through this mess, who will ignore health and science specialists to ensure that they are re-elected (Need I write about that fecking idiot of a President who wanted health and disease experts in the U.S. to look into disinfectant injections to clear our bodies of the Coronavirus).
A second mutated wave of Covid-19... “the virus bites back” is more than likely coming to a street near you in the future. I am no expert but read what the likes of Anthony Fauci and his peers have written from all four corners of the globe. They ALL know that against popularity-sucking politicians they are fighting a losing battle.
Apologies... this is NOT a pretty picture I have described, and I have not even looked at trading FX yet!
Knowing that the market is “FAKE” how can we trade? ... carefully is the answer.
Whether you look at the U.S., the EUROZONE, UK, CANADA, AUSTRALIA etc., everyone is in the same boat.
- We have a RECESSION on our hands.
- We have a LOW INTEREST RATE policy for ever and ever and ever....
- Do NOT rule out DEFLATION as a result.
Look at the economic numbers.
We are told that the markets are looking beyond the poor numbers. Bollocks and double bollocks; the markets have great difficulty looking beyond 4PM on a trading day. The markets are run on a “BUY THE DIP” mentality, they are NOT superheroes or superhuman, they feed on FEAR and GREED nothing else at all. Do NOT be fooled by the sound-bytes. This premise will NOT change as long as the belief is that the FED is the lender, the backstop of last resort.
From an FX perspective there are some FUNDAMENTALS hovering around that will NOT be ignored by the market makers: -
- HUAWEI – TRUMP due mostly to decreasing popularity over his handling of the Covid-19 pandemic has switched focus to bring back a vote winning popularity by attacking CHINA, in particular HUAWEI. Banning HUAWEI is seen by CHINA as an act of war! This week’s open could be interesting with weekend comments added into the mix.I expect CHINA to retaliate against APPLE, BOEING, U.S. TECH etc....
On a side issue and NOT wanting to be too cynical but......
On Friday when TRUMP launched his popularity vote winning rhetoric in CHINA the S&P sank.
Usual response on a Friday to give him a “feel good factor” over the weekend....
Out comes LARRY KUDLOW to tell us all is good basically, don’t get your panties in a twist, the CHINA deal is NOT falling apart.
The Stock Market does NOT believe him... at last thank GOD!
Then revert to PLAN B....
Out comes TRUMP in the Rose Garden telling the world he thinks there will be Covid-19 vaccines ready and implementation started before the end of 2020.
Project “WARP SPEED” is launched FFS....
We are now up in the stars there will be URANUS jokes soon.
TRUMP will say or do anything to win votes and boost his failing popularity. As I mentioned last week to vote him in as President once can be seen as an accident and excused but twice.... give me a break surely people can see through him by now.
- BREXIT – The negotiations are at stalemate. Red lines are drawn, and no side wants to move. I think that the UK may just walk away and leave the EUROZONE. Michel Barnier, the European Union Chief Negotiator is focused on a two-year extension to talk about a deal. This is a pure cash grab with no guarantees.Wouldn’t the UK just be best to leave and take all the bad economic data at the same time as the Coronavirus negativity in one and build from a base?
The European Union is in a mess, why drift for two years?
- OIL – Not out of the woods yet. If we have a second Coronavirus wave it will be more disruptive than the first wave. It will be of little consequence how much OIL is not produced, as ALL storage facilities will be full very quickly.
- RISING DEBT – I could NOT get the numbers I wanted but there are large mutterings of thousands of Americans NOT paying their mortgages. I am sure that this will be reflected all over the globe.
- POOR ECONOMIC DATA – I eluded to this earlier. We are shrugging off economic data and poor earnings with a stock market grossly over-values. There will be a payback time. It will harsh and 100% unforgiving. It will be a FLUSH of all FLUSHES and will go down in the history books.
WE ARE ASLEEP AT THE WHEEL
There are FX trade possibilities. As I have said before it’s all about RISK identification and for me nothing vis-à-vis trade identification has altered much over the past 5/6 weeks or so.
In FX, because currencies are also manipulated it has to be a careful selection. The backdrop of Central Bank equity support would just say to you to play currencies that trade well in RISK ON conditions.
If only it was that simple. If this were the case you would be seeing USD/JPY at +120.00, ... it struggles to reach 110.00 and at the moment it is sub107.00!
USD/MXN and EUR/MXN are possibly the best RISK trades in FX at the moment they are both very sensitive to RISK.
The cable is sensitive to the FTSE and therefore one can argue that the GBP/USD is also a RISK play. This then introduces by default the EUR/GBP into the mix. This pair after the EUR/USD and USD/JPY is possibly the third most liquid pair in the FX market.
At the moment, I am still a huge fan of trading the commodity currencies and their crosses. The hardest adjustment is that trying to be a longer-term trader in today’s environment is not easy. Shorter-term timeline horizon trades are the way forward at the moment. Once FUNDAMENTALS kick back in, then one can take a longer-term view.
FX - FORWARDS, BACKWARDS & SIDEWAYS:
1: - USD INDEX (DXY) TRADE CHART and MY THOUGHTS:
(The Daily DXY chart is below and my thoughts, ideas and comments regarding the DXY are contained on the chart)
MY SHORT-TERM BIAS: Neutral
MY LONGER-TERM BIAS: Bullish
2: - USD MAJORS - TRADING CHARTS and MY THOUGHTS:
3: - THE WEEKLY FX PREMIUM:
3.1: FX PREMIUM MONTHLY PERFORMANCE:
3.2: WEEKLY FX PREMIUM SUBSCRIPTION INFORMATION:
The WEEKLY FX PREMIUM is my subscriber based FX support option, which offers, subscribers’ full access to my suggested trade set-ups and my market commentaries.
If you go to my website https://www.weeklyfxdrivethru.com you will see more information about the WEEKLY FX PREMIUM.
Lots of information about the way I do things, plus, previous reports about my trades, my trade styles and my trade projections for the year are located on my home page by selecting the appropriate tab located at the top of my home page.
It is a low-cost way to maybe “KICK START” 2020; 3 month’s (10 weeks) subscription in CAD$450.00 equals approximately: -
CAD = CAD$450.00 (CAD$ 45 per week)
USD = USD$340.00 (USD$ 34 per week)
EUR = €310.00 (€ 31 per week)
GBP = £265.00 (£ 27 per week)
AUD = AUD$500.00 (AUD$ 50 per week)
NZD = NZD$520.00 (NZD$ 52 per week)
JPY = JPY 38,000.00 (JPY 3,800 per week)
CHF = CHF 340.00 (CHF 34 per week)
In addition, details about how to subscribe to the WEEKLY FX PREMIUM is also located at the top of my welcome page under the “SUBSCRIBE” tab.
4: - WEEKLY FX PREMIUM SUBSCRIBERS ONLY:
(The section is only available to WEEKLY FX PREMIUM subscribers distributed via a separate blog)
5: - THE FINAL SHOT:
Not much major news on the horizon this week. We have a few FUNDAMENTALS which may help with volatility, which I eluded to earlier in the blog.
- GBP: Flash Services PMI and Retail Sales.
- USD: Flash Manufacturing PMi
- EUR: Flash and Services and Manufacturing PMi.
All data is expected to be poor and it remains to be seen if its poor enough to move markets that are dominated by Covid-19 headlines.
5.2: CLOSING THOUGHTS:
Finally, as usual…
Always remember longevity in Forex trading can only be achieved through trading with good RISK and MONEY MANAGEMENT, and above all set your position sizes in accordance with the size of your account and allow for some flexibility.
Finally, Be GRATEFUL for your wins and COUNT THEM. Be positive, keep a POSITIVE MINDSET in play at all times, regardless of the market conditions.
Self-isolate and stay safe...
The Pip Accumulator
BLOG VERSION: #367 FREE NEWSLETTER
DATE: 17th May 2020