Japan Still Leads – You Need To Look Close

We’ve all got a thesis ( or at least I hope you do ) as to how we see things moving in the future. Some base it on their knowledge of fundamentals, others purely from a technical perspective and then fewer still – those who attempt to take both disciplines into account, to formulate a picture of things to come.

When you consider that trade volume in U.S Equities has dwindled some 50% since 2008, and of the 50% remaining some “70% of that” is merely HFT ( high frequency trade algo’s ) trading back and forth amongst themselves, you’ve really got to ask yourself if looking to The SP 500 for future direction really makes any sense at all.

This isn’t your father’s market.

In the US, the wealthiest one percent captured 95 % of the “post-financial crisis growth” since 2009 – while the bottom 90 % became poorer.

The top the top 1 % of Americans own 40 percent of U.S. wealth, while the bottom 80% own just 7 percent of America’s wealth. This market has absolutely nothing to do with “mom n pop” anymore  – as The Fed and Wall St. are essentially the only buyers / sellers.

It’s a sad state of affairs really.

I tend to look to markets “outside” the immediate influence of such factors to formulate a “more reasonable view” of reality, our current place in things, and likely moves in the future.

I look to Japan.

The Nikkei led world markets down in 2007 by a full 6 months, and it’s my belief that this time will be no different. It’s been a full 6 months now since The Nikkei topped back in late December 2013, lining up well with the expected correction coming in the U.S.

The Japanese economy is completely hooped and The BOJ has now suggested they will stop devaluing Yen until at least early 2015 “if not” later. I’ve marked some “general” elliot type / wave type numbers ( for those of you who follow that stuff ) providing a broad stroke of where we’re headed next.

For further in depth analysis of The Nikkei, it’s correlation to The SP 500 as well currencies and gold – please join us our members area at: www.forexkong.net

The Yen’s Strategic Reversal – Your Signal to Front-Run the Majors

Here’s what the crowd is missing while they’re busy chasing breadcrumbs in manipulated equity markets. The BOJ’s pause on further yen devaluation isn’t just monetary policy – it’s a strategic pivot that’s about to blindside every trader still playing yesterday’s game. When a central bank that’s been weaponizing currency weakness suddenly pumps the brakes, you don’t wait for confirmation. You position.

The Currency Correlation Play That Changes Everything

The Nikkei-SPX correlation isn’t some academic exercise – it’s your roadmap to front-running the next major move. For six months, Japanese equities have been telegraphing what’s coming to U.S. markets, just like they did before the 2008 collapse. The difference this time? Currency dynamics are the primary driver, not credit markets. USD/JPY has been the puppet master pulling equity strings, and that relationship is about to reverse violently.

Smart money knows that when the BOJ steps back from active yen suppression, the carry trade unwind accelerates. Every hedge fund, pension manager, and sovereign wealth fund that’s been borrowing yen to buy everything else is suddenly staring at margin calls. The USD weakness we’ve been calling isn’t just a technical bounce – it’s structural shift driven by Japanese monetary policy normalization.

Why Technical Analysis Still Matters in Manipulated Markets

The Elliott Wave structure in the Nikkei isn’t just pretty charts – it’s revealing the algorithmic patterns that even HFT systems can’t override. When 70% of remaining volume is machines trading with machines, wave theory becomes more relevant, not less. These algorithms are programmed with the same mathematical relationships that Elliott identified decades ago.

The five-wave decline from the December 2013 highs is textbook impulsive structure. We’re not dealing with random walk theory here – we’re seeing institutional liquidation following predictable mathematical sequences. The corrective phases within this decline have been sharp and brief, exactly what you’d expect when real money is heading for the exits.

The Fed’s Impossible Position

Here’s where it gets interesting for forex traders. The Federal Reserve is trapped between fighting inflation and supporting asset prices that have become completely divorced from economic reality. When the Nikkei forces their hand by leading global equities lower, the Fed’s response becomes predictable: emergency liquidity measures that crush the dollar.

The wealth concentration statistics aren’t just social commentary – they’re revealing market structure. When 95% of gains flow to 1% of participants, you’re not looking at a market anymore. You’re looking at a wealth transfer mechanism that operates through currency manipulation. The moment that mechanism breaks down – which Japanese policy changes are accelerating – currencies realign violently.

Positioning for the Reality Check

The smart play isn’t trying to time the exact moment when U.S. equities follow the Nikkei lower. It’s positioning in currencies that benefit when artificial support systems fail. JPY strength against the dollar is just the beginning. When carry trades unwind, funding currencies strengthen across the board while risk assets get obliterated.

This isn’t about being bearish for the sake of it. It’s about recognizing that markets built on central bank intervention have structural breaking points. The BOJ’s policy shift toward yen stability is removing one of the key pillars supporting global risk appetite. When market bottoms eventually form, they’ll be in currencies that weren’t artificially suppressed, not in equity indices that required constant intervention to maintain their highs.

The Nikkei’s six-month head start isn’t a coincidence – it’s your early warning system. Japanese markets are showing you what happens when central bank support wavers, even slightly. The global currency realignment that follows won’t wait for mainstream recognition. Position accordingly.