For the past several weeks the real story has been Japan’s amazing efforts to weaken the Yen – and in turn drive it’s stock market “The Nikkei” to the moon in the process.
Regardless of what you might think (with respect to recent data coming out of the U.S or even the latest stream of “upbeat earnings” from U.S companies) – the primary driver ( actually “the only” in my view ) to higher equity prices in the SP500 has been the massive liquidity injections by The Bank of Japan coupled with Uncle Ben’s usual 85 billion per month.
We have now ( and finally ) reached a point where there is absolutely no question that we are in “bubble territory” as even the Fed is now doing what it can to “talk down” its own stimulus (which we all know can’t happen).
The correlations laid out here have been very straight forward. “Nikkei up = Yen down” and “SP 500 up = USD up”.
What’s interesting when we “zoom out” (and look at much longer term charts such as the last 20 or so years of The Nikkei) we see that nothing is really that far out of wack.
The Nikkei has been rejected at the downward sloping trendline of “lower highs” – for the last 20 odd years running.
Nikkei_Longer_Term
So once again we are left to consider if indeed the massive amount of money printing and central bank intervention can truly..TRULY…make a lasting difference in the growth of a given economy…or merely provide a brief “reprieve” from the pressures therein.
As the Nikkei corrects lower – so will USD.
I remain short USD….and look to get long JPY in coming days.
Hi Kong,
I got also some long long yen they floating pretty well since wensday but will it substain i did some reading they say the current abeeconomics isnt enough at the moment. Lets see if they bring more stimuless or whe going back down. Only with coms i am not sure aud mostly then copper remains under pressure but that level 0.92 handle area looks like good place to build some position till 0.90 handle. will see. I look to long some yuros and gbp next week hope the data later from eurozone will back it up later in the week.
I like where you are at “trade wise “Fuzzy…..
I wouldn’t worry too too much about data coming from EUR or GBP in coming days in that – we are really looking at a scenario of “risk on or risk off” on a larger scale, where focus needs to be on the safe haven currencies vs the commod/risk related currencies.
Moves will be made in JPY and USD ( against anything and everything ) regardless of near term fundamentals in EUR or GBP.
I’d keep your eyes on Japan for the most part – as they are currently in the drivers seat…and most other currency moves in coming weeks will merely be “bi-products”.
Just my two cents.
Thanks kong for your reply apreciate it 🙂
Given that the BOJ is printing like its never done before we should consider that this time is different. I think Abe is going to eventually, probably in the not too distant future, blow a hole in that trend line. Nikkei to 40000 and beyond lol!
We Love Kong.
He he……well – let’s keep out eye on it for sure.
It will be interesting to see just how far this “global asset pump” will go.
Hello Kong & Everyone,
John Mauldin just addressed the topic of Japan and their various policies.
A brief quote from his newsletter:
“I wrote several years ago that Japan is a bug in search of a windshield. And in January I wrote that 2013 is the Year of the Windshield. The recent volatility in Japanese markets is breathtaking but characteristic of what one should come to expect from a country that is on the brink of fiscal and economic disaster.”
The next paragraph elaborates and clarifies that statement but I’m “selling the sizzle” just like John.
I have only read the first page and will finish later. However, I wanted to alert you because Kong just posted the topic. Also,
Mauldin is known to get and share input from high level thinkers that do not follow the party line. John is much in David Kotok in that regard. The newsletter is free and there is never any spam.
This is the URL:
mauldineconomics.com/frontlinethoughts/?utm_source=newsletter&utm_medium=email&utm_campaign=frontline
Don’t be put off by the first post by a subscriber. She asserts that everything we see is part of the Grand One World Conspiracy. Certainly, conspiracies exist and there are evil ideologies that would love to achieve their dominance over everybody and every thing. However, this is the theory that brings the bed bugs out of the mattress. The notion that humans could pull it off would be another “a camel is a horse by committee” scenarios.
I believe that the Grand One World Conspiracy is an illusion. We humans are evolved to find patterns in essentially random data. The population of players in this game is fantastically huge and fantastically diverse. Ultimately, and what they have in common, is that each player is playing for his own self-interest. Alliances pop up, and are usually short lived, when it is expedient for the parties involved. I.E. The enemy of my enemy is my friend (until my friend becomes my enemy).
It is very easy for some folks to see these superficial alliances and extrapolate that they are seeing the tip of the conspiratorial ice berg. There is comfort in knowing who the enemy is.
I’m sorry Kong. I got carried away. I am concerned that your readers will reject the article based on the comments of an atypical Mauldin subscriber. However, maybe the Japanese fear the Grand Round Eyes Conspiracy?
Devil Yell.
Throwing information around is great – and readers can make their own assumptions / considerations. Personally, I think the broader / wider one can look at things…the better so – thanks.
For all – the blog doesn’t allow for external links so if you are looking to view the article Devil Yell has posted you will need to copy and past in your browser so….
mauldineconomics.com/frontlinethoughts/?utm_source=newsletter&utm_medium=email&utm_campaign=frontline
if .94 does not hold in the Aussie we are going lower – the long weekly squeeze fired off in the .99 range so we have moved another 300 pips sinec the fire….. looks like the long-term squeeze fire was accurate for now…
Regardless of AUD in particular – I’m pretty sure USD just put in the high for the year….and am looking for the entire summer heading lower.
Wow – finally.
Hi Kong! To what extent (if any) do you think borrowing in dollars is being used to fund bond carry trades? The bond market has been misbehaving of late; I’m wondering if unwinding of carry trades might start to get ugly and if that might contribute to dollar weakness? Then again, I may have the potential impact on the dollar bassackwards in my mind…
Gotta be honest with you Power man – I’ve never heard of “bond carry trades”! – interesting!
Can’t comment on that – but as far as “currency carry” USD has already been re “replaced” with JPY so I don’t see further weakness in USD coming from this. Frankly I see “weakness in all things U.S.A!” as bonds get wacked….the dollar….and stocks.
Kong – I hear you but all I am suggesting that the long-term squeeze system I have running is accurate, until this hit a bottom the Aussie will continue lower. For me it’s pretty accurate even on the long-term which was running some 28 weeks prior to the neg fire.
I too am looking for the DXY to roll-over to take advantage of the PM plays I have in this sector – has been a long 6 months with this current action!!!!! Reday for a move in the other direction – well undervalued sector – SMT money has already smelled this out I think!
Best of luck Schmed,
Im not sure what time frame you care to trade Schmed – in that I’ll take 300 pips of upside any day.
I see USD rolling into yearly low over coming months…and in turn AUD/USD higher first – then YOU GOT IT – DOWN SHE BLOWS along with everything else!
SMT money “already” smelled it out? – he he he…that’s funny – I guess if you stick to the same story ( and are dead wrong for 9 months ) sooner or later you’ll be right. Buy gold – brilliant.
That guy has little respect for anyone or “anyone’s opinions / view” other than his own.
I really don’t imagine he’ll stick with it much longer…regardless – I got the boot long ago.