When will Stock Market Crash? This Guy Predict One Possible Scenario…

Full credit to: Charles Hugh Smith

The one thing we can know with certainty is it won’t be easy to profit from the crash.

After 8+ years of phenomenal gains, it’s pretty obvious the global stock market rally is overdue for a credit-cycle downturn, and many research services of Wall Street heavyweights are sounding the alarm about the auto industry’s slump, the slowing of new credit and other fundamental indicators that a recession is becoming more likely.

Few have taken the risk of projecting a date for the crash, this gent being a gutsy outlier: Hedge Fund CIO Sets The Day When The Next Crash Begins.

Next February is a good guess, as recessions and market downturns tend to lag the credit market by about 9 months.

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Market Correction as high as 50% Is Impossible? Don’t think it can happen?

So i stumbled this article today and I think is pretty interesting to share with my readers. I have been bearish since end of 2015 and it is quite insulting to see the market trade against my view, well, we are talking about Mr.Market don’t we.

Nevertheless, as a trader we need to know when we shouldn’t trade and obey to our rules. There are always opportunity for us to come back to reap a great profit rather take unnecessary risk.

Below is a good article where i share the same view with the author.

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Let me tell u a secret about USD

Before I am going to share a secret with you about USD….let me ask you a question.

Have you ever wonder on recently, why USD seem able to rally and seem strengthen after a series of weakening and before that USD seem like heading to a new low?

Some of you who have look into economic data of US so far should be thinking the odd for September of rate hike seem diminishing since the positive NFP data, others data seem quite bearish on US economic outlook for August. Especially, this week data release.

So you might be thinking, if the chances of US Fed rate hike is smaller, the US dollar strength should be weakening yet the US dollar seem able to support at its old level, some currency pair able to trade slightly higher than their old time low. Do you ever ponder, why is it so? Who are those who willing to buy and support at those level despite the rate hike odd has decreased. What is the reasoning behind?

So let’s talk about basic fundamental of Forex. Not sure how many of the readers care about fundamental of a currency but I heard before from a Barclay trader who claim he is No.2 in his Forex fund management circle where he is able to generate close to 800% return a year. You might be thinking now..Wu ya Boh (really or not/ Too good to be true) but after i traded myself with his concept, I can tell you with his understanding on Forex and their strategy, making 800% return a year for full time trader is really possible (Still relative new to Forex but i am already achieve close to 1/8 of his performance).

What make them in the higher odd of winning is this. For all full time traders in his financial institution, despite they use technical analysis most of the time, all of them able to memorize all the currency pairs that they traded, their currency pair interest rate. What do I mean by currency pair interest rate?

For example,

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If they traded EUR/USD, they will know that US dollar central bank interest rate is at 0.5% while EURO central bank interest rate is at 0%. In a bigger picture and long term, they will want to buy a currency that has a higher interest rate. Why? Let me put into lay man term and show you some example, let say there is Bank A and Bank B, if you deposit your money at Bank A and they give you 1% interest rate every year compare with Bank B who offer you 2% interest annualy, which bank you will prefer to park your money, if both bank has almost the same level of  reputation, security and the list goes on, what is their difference mainly are their interest rate. I believe you will choose…Bank B right! It is direct, of course we want to deposit our money in a bank that give us a…Better rate! That’s right!

So when come to Forex trading, come to currency pair it is obvious we want to bullish on those currency pair that has higher interest rate. This is the fundamental 101.

So, you might be thinking now. Ok, then what is it going to do with US dollar. Rate Hike odd for Sep is like 10 to 12% chances and don’t tell me you are going to tell me US dollar is strengthen and rally is due to Sep Fed rate hike odd.

My answer to your question is nope. In fact, I am going to tell you something totally different.

The reason is simple as this, even no further rate hike this year, USD still attractive. You might be confuse now and wonder what is this guy talking about but let me hold you on for  a second, please be patience…let me just show you few things by doing the elaboration below,

On 2nd August, RBA (Reserve Bank of Australia) cut their rate from 1.75% to 1.5%

On 4th August, BOE (Bank of England) cut their rate from 0.5% to 0.25%.

On  11th August, RBNZ (Reserve Bank of New Zealand) cut their rate from 2.25% to 2%

What does all these mean? The global outlook is going to ultra low interest rate environment, every country is looking into more stimulus instead of recover their interest rate to their old time high.

This is contrary compare with US where they are in track to rate hike although the odd to increase their rate on this year is very difficult and challenging but if others peer are decreasing their rate while US Fed has the odd to increase..it will be looking so attractive now on US dollar. Please take a second to imagine and think about this, if during September US Fed did hike the rate, what will happen then? Can you imagine that?

This is why despite the rate hike odd is diminishing, the support of USD is still there, fundamentally it look attractive now. Remember the bank example?

Of course, this is just basic 101 intro to the currency, there is much more to it to justify the buying and that is the beauty of Forex.

Of course the bank example is a simple way to convey the concept of interest rate of a currency. The truth to it is much more due to its currency pair country’s domestic outlook and  economic(like in a more professional way and more close to reality of saying : central bank of a certain country if raising interest rate will cause cause monetary tightening, reduce money supply, reduce inflation and so on…so that currency will be attractive and appreciate, yup i know it might be information overflow to you so let me just stop at here)

If this is new to you then you might want to explore more on this as it will surely help in your Forex trading. There are a lot of “secret” in Forex trading..the more you explore it, the less risk you will be exposed. Most of the people around me always think that Forex is just a gamble. Let me tell you, it is definitely not a gamble, it is the ignorance of people that don’t understand the risk make it look like gamble.

The truth to the Forex is we all have been trading Forex, either you buying something from oversea or you went for a vacation for oversea, we did the money exchange trading too right? So why is it when it come solely on trading the currency pair or Forex it become a gamble? That’s an interesting question for you to ponder about.

Before I end this sharing, let me share with you Warren Buffet quote to end this beautiful Friday night.

Risk comes from not knowing what you’re doing.” – Warren Buffet

Have a great weekend ahead and safe trading and investing pals!

 

 

July US Fed Rate Hike is coming! Here’s why….

“The first rule of forecasting should be that the unforeseen keeps making the future unforeseeable.”

Since the Brexit incident, a lot of analyst forecast that the July Fed Rate Hike is equivalent to zero and the chances of 2016 rate hike has dropped to 22.9%.  There are some traders even speculate of rate cut.

But I beg to differ.

The concern of Brexit from Fed and the key person Yellen perspective is that the impact to the economic but as we can see from the past 1 month, the economic don’t really impacted much by the effect of Brexit, more on speculation basic. If we talk on the US economic itself, it is advancing to its peak.

The US dollar index just break their mid term resistance on 96.7 and attempt to rally higher. This mean that more bullish speculators trade on that and the bearish speculators has retreated and realized profit.

The stock market has create a new high on its index accompanies by its US economic data which proven one of the strongest month this year. With ADP Nonfarm employment change and Nonfarm Payroll create a new high.  Positive ISM Manufacturing Employment and Core PPI, Continuing Jobless Claim getting better, although CPI didn’t live up to the forecast but it still maintain last month performance.

This is to say, July is the best month for FOMC to rate hike. They can try to increase 10 basic points instead of 25 basic points and see how the global economic react to it but to have the first rate of 2016. My opinion is, this month is the best month to make the move.

The S&P 500 is trying to break 2177 but we can see some distribution symptom happen above 2160 which the bull trying to half their position or exit their trades. Currently the 20MA is reaching higher to 2116 where the support might tested there and the upper BB has widen to 2216. The Q2 earning for most blue chip company didn’t show positive sign,a dip is expected but whether the upward continuous trend will sustain, the pullback support shall be checked and this mostly relied on next thursday 28th July, FOMC rate decision.

 

 

US economy data for July:

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Happy investing and trading Pal and stay safe!

 

 

So My Market Crash Forecast Has Become True, What Next?

So I written an article last month, Market Crash Forecast. Which turned out to be true.

I am surprise that majority market players didn’t really anticipate Brexit and when it happened, it turn into a black swam event. During the start of the Brexit referendum when Bremain is leading, all traders are able to see how majority pump the pound sterling and the stock markets, and ya even the commodities like oil, like Bremain is a sure thing to happen. Then, when Brexit surpass Bremain with a significant lead, things goes haywire. market turmoil happen.

But,

The real fear is not really Brexit event but is more on, what is coming next. What will happen to Eurozone? Which country is the next country to exit? What is the real impact to the economy after British exit the Eurozone, how it affect on the global economic? In a large scale, it is really scary. Because no one really go deep into the calculation impact that due to Brexit or maybe minority has done that but no one able to accurately pin point the exact turn of events in future. FEAR is the market sentiment now.

So let us have a look on the indices. I will only be talking about Equities indices this time.

 

S&P 500

Market hit a high 2127 during Brexit referendum and anticipate a Bremain then event reverse with all the bull rushing to realize profit and the short seller come in to perform a “Bull squeeze” and create an impactful downward momentum and trend all the way to 2000. Then, the short seller realize profit and market reach an equilibrium before the  US market open on Friday.

From the chart we are able to see from daily time frame the index is pushing and close near the 200MA where we are unable to see clear 200MA is acting as support or resistance (at the current moment is more resistance bias). The crucial information we are able to see is that the long term 2040-2050, especially 2048 has break strongly where Brexit day is the day where the Bull support has gone totally vain for the first time in the past three months.

Buy at the weakness, sell at the strength is it working today? We only able to see next week but currently the downward momentum is so great where it can squeeze all the bull out of the game. The bear awakening!

Next week will be an interesting week where those short seller already in the game will try to add position to their winner and the bull decision to support at the current stage or retreat all the way back to 1900-1930 area to support the bull camp again.

If 1900-1930 failed we will all the way see the indices fall to 1800 to 1820 area where early this year support stand. If it failed again, new low will be created. Crucial key level 1773, 1687 and 1630 will be tested. All this might happen in a week time.

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STI

STI index undergo weakening during Brexit where most players taking early profit and short seller very cautious in advancing. Next week might see an interesting development where 2718 might break and all the way under a freefall zone where the next support only able to see at 2500-2530 level.  To be honest, I won’t be surprise to see a gap down next week.

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Has the market crash or is just a merely technical correction? Seem like but next week we should be know the clear direction. But my thought process is this, with the current market development, if you want to go and buy stock now, is it the stock price attractive enough? Has the stock price pricing in the future economic development. The demand level now is decreasing unless there is an unexpected positive news arising next week.

Compare to other investment vehicles are there more attractive alternative. As a trader that trades Equities, Forex, Indices and Commodities, I can tell you there are surely are. So if you are buying at this weakness now, you must be able to at least explain, what are so motivating you to buy now.

More likely sell the rumor and buy the news will happen now if market sentiment turn negative. Big players will come and push the market to the lowest point. They have been waiting for ages.

With FOMC coming on next month, I believe the event will still heading to its peak . More to come!

I am going to a vacation soon and slowly hide back to my cave. Also, because I am going on a vacation to this country.

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I am thinking to talk about safe havens. Market has favorite these two when Brexit happen.

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Yes, Gold and Yen. But personally I don’t think these two are the safe haven.

With Yen fundamentally weak and Japan Financial Minister statement  where he signals readiness to intervene as Brexit boosts yen. It is a foolish move to hoard Yen. My valuation on Yen against USD is on 108 to 110 area where if the intervention happen, it might fall back to that area. Currently Yen against USD fall to an attractive zone where a clear price rejection occur from 101 level below.

For gold wise not much demand when it is above 1300. I manage to collect some when the Bremain sentiment is strong but I don’t intend to keep it for too long. It might be continue rally or maybe not. But I guess the ranging between 1200 to 1400 will persist for some time.

I more interested if talking about Safe Haven, to talk about these two currencies.

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Aussie and Kiwi.

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With New Zealand and Australia attractive yield and its currency strength, they are the real king of safe haven. Also, with fundamentally support. They are my favorite now.

Ok, it has been a hectic week for me and I believe for all the traders and investors out there. Let us have a good weekend ahead and ride the market again next week, don’t forget to take a break and enjoy the world. life’s too short not to enjoy it.

Till then, we shall talk again. Happy Investing and Trading Pals!