Slope of Hope Blog Posts
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Since the Yen low (USD high) at 125.86 in June 2015, the Yen has climbed about 15%. Since Jan 29, 2016, when BOJ (Bank of Japan) moved to Negative Interest Rate Policy (NIRP), the Yen has climbed nearly 12%!
Let’s fully understand that instead of weakening in reaction to negative interest rates, the Yen has strengthened! My reaction to this counter-intuitive situation is that:
1) market psychology has reversed from confidence in QE (very easy money) to concern that it has not, all will not work to produce inflation and demand, and
2) investors have been, and still are, unwinding massive, intermediate-term, short Yen positions that reflected their prior optimism in “Abenomics”.
Who cares? We should, because this counter-intuitive picture is coming to a theater near you, as The Great QE Unwind extends into the US financial markets, possibly much sooner than later.
Originally published on MPTrader.com.
In my post of December 29, 2015, I stressed the importance of the Financials ETF (XLF) in, potentially, propelling the SPX to an increase of 5-6% for 2016.
You can see from the Daily ratio chart below of XLF:SPX, that price weakened considerably afterwards and fell to new lows not seen since 2012. Price is attempting to stabilize above that low, but all three indicators are still in downtrend and display new “SELL” signals, and price action is still under the bearish influence of the Death Cross formation of the moving averages.
If price drops and holds below near-term support of 0.0105, we could see a significant drop in the SPX, likely to new lows for the year, as I mentioned on April 3.
Well, the central bankers are really beginning to fail in a very public way. Kuroda has obviously made a complete shitshow out of the senior citizens colony known as Japan. Yellen has, so far, been given a free pass by the blinkered, pig-ignorant American public, who are too busy watching the Kardashians, but trust Tim on this, she will have her comeuppance.
Draghi, though, has become an embarrassment beyond my powers of elocution. Exhibit A is Deutsche Bank, shown below. As you can plain see, the stock price is – – and please let this sink in – – far lower than it was during the worst depths of the Financial Crisis. Try to imagine Goldman Sachs or JP Morgan being a single-digit stock these days, and you get the picture (of course, Yellen would never let that happen to the tribe. But I digress).
In any event, Draghi has mortgaged the future of his grandchildren, great grandchildren, and further descendents (his own infertility and/or impotence notwithstanding……..stay with me on this one) in exchange for the brief illusion of recovery. He. Will Fail.
I was talking about the conflict between the daily sell signals and the shorter term buy signals yesterday morning, and that was resolved yesterday with a strong rally that made most of the buy signal targets and made the possible near miss targets on the remainder. Yesterday was a cycle trend day and that was obviously dominated by the bulls. Today is the other cycle trend day this week and if bears can take it there is now a clear path back to 2000 roasted, stuffed, and ready to go if bears can return to yesterday’s support and break down through it. If today is dominated by the bears, then that will be the obvious next target.
The first thing for bears today is to break down through wedge support on the very nice looking 70% bearish rising wedge that formed from the lows yesterday and overthrew bearishly at yesterday’s close. If this is a full reversal wedge then that can take us straight back to retest yesterday’s lows. SPX 1min chart: