NFTRH has been noting for quite some time the mirrored Symmetrical Triangles in Japan’s stock market and its currency. We noted that Sym-Tri’s being continuation patterns, Nikkei should break up and the Yen should break down if the Tri’s hold to form… √
In the current policy and media stoked market environment, anything is possible. It’s the wonderful, magical world of hands-on policy making. 5 years after the financial crisis, but still not enjoying a ramping economy like the good old (and long gone) days of the last great secular bull market (RIP 2000)? Just sit back, relax and let the man in charge control the image.
While the MSM instigates reasons why we should give a damn about what people who have little control over the T bond market were thinking at the last meeting, why don’t we just tune it all out and manage the markets instead?
The top panel shows the 30 year yield marching toward the traditional limiter AKA the 100 month EMA. The pattern measures to 4.5% or so, so there could be a spike above and a hell of a lot of hysteria at some point. That’s the collective markets; 98% hype, hysterics and emotion and 2% rational management. Either the 30 year yield is going to do something it has not done in decades (break and hold above the EMA 100) or it is not. Simple.
The relationship between long term bonds (30) and short term bonds (2) in the middle panel is currently negatively diverging gold as the ratio has dropped this month. Again, we wonder is gold (bottom panel) leading the curve this month or should gold bugs take caution? I think gold is leading the curve, but it bears watching. The relationship became distorted in second half, 2012.
As for gold, it probably bottomed at the end of June. That is because the sold out condition of the sector (read: Paulson puking GLD, hedge fund net short positions, India’s antagonism toward its would-be gold buyer citizens, etc. etc. etc.) was simply historic.
Really, just dialing down all the noise of the last 2 years it was a grand and climactic panic IN to gold in 2011 by the global public in the face of the Euro’s supposed Armageddon. Everyone had bought and then it was time for the bleeding out of this emotional money.
The bleeding went on longer than I originally thought it would, but that is why we do ongoing work to interpret things every step of the way. Hey, no harm no foul. A little patience and ongoing perspective and now we have what appears to be a purified asset class, free of unhealthy sponsorship.
Back to the chart’s top panel. China is a net seller of T bonds. Japan is a net seller of T bonds.
As we have been noting every step of the way T bond yields are a function of supply and demand. The global system endured a solid decade of net inflows of global funds into the T bond market. Now it appears the tide may be going out. Hence, interest rates all along the curve – save for the officially manipulated ZIRP on the Fed Funds – are going up.
It is all normal to free market participants; just another phase. It is only abnormal if you buy in to the idea that the Fed is in control and can remotely operate the financial markets indefinitely; if you buy in to the idea that the Fed decides when the cycles are to change.
If you look at it a certain way, it’ll tickle your funny bone as you listen to Huey, Dooey and Louie jawbone ‘Taper’ in the media or as you review what a bunch of bureaucratic clerks had to ruminate about at the last FOMC meeting at 2 PM US Eastern today.
(e) = external link
Deflation Isn’t an Export; Crazy Talk is Michael Ashton 6.4.13
Out on a Limb James Howard Kunstler 6.4.13
Sell the Dollar? Case for Hard Currencies Axel Merk 6.4.13
Explaining the Gold Bull Market Steve Saville 6.4.13 (pdf)
Annual Report 2012 Federal Reserve Bank of St. Louis 6.4.13 (e)
Wounded Heart Bill Gross 6.4.13 (e)
Gameplan for a Completely Corrupted Market Cody Willard 6.4.13 (e)
Japan’s Easy Money Tsunami David Howden 6.4.13 (e)
March Housing Numbers B.I.G. 6.4.13 (e)
Here are two of them; Japan and Junk.
And I distinctly remember using emerging market bonds as an indicator to bullish things a year ago. Now? Not so much. This market continues to look very opposite to a year ago.
(e) = external link
Let’s All Go Medieval James Howard Kunstler 5.28.13
Crash Patterns Steve Saville 5.28.13 (pdf)
Kuroda’s Gambit Doug Noland 5.28.13
Gold Coins Can Bring a Message Tom McClellan 5.28.13
Rock, Paper, Scissors John Hussman, Ph.D. 5.28.13 (e)
40 Frighening Facts on the Fall of the US Economy Zero Hedge 5.28.13 (e)
Financial Market Articles & News Biiwii.com/EWI 5.28.13
US Corporate Tax Rates Vary Greatly tBP 5.28.13 (e)
The Yen conveniently turned and burned the day after this post noting that it had declined to a big time support zone. Specifically “The Yen is now at its first major support area. If it finds support here and bounces I wonder if other asset trends would reverse as well.”
Here is the daily view:
Much like a gold mining index we know and
love hate manage risk against, the Yen has positive divergence but has proved nothing yet on this bounce because it resides below the EMAs 10 and 20 and is firmly in a downtrend. Now, trends have to end somewhere; either at zero or at a reversal point. But technically, Johnny Yen may only be doing a strip tease (song ref. folks).
In the balance hang all the other asset market trends as noted.
(e) = external link
Whose Move is it? Michael Ashton 4.2.13
Are You Going to Entropy Faire? James Howard Kunstler 4.2.13
Japan: Monetary Madness in Times of Unsustainable Deficits? Merk & Fang 4.2.13
Gold Chart of the Week Brian Booth 4.2.13 (e)
Mostly Positive w/ a Few Dogs B.I.G. 4.2.13 (e)
Just ask Japan. The Yen has gotten pretty frisky lately despite Japanese policy makers’ best efforts. Ouch, says the EWJ fund. Even worse, the currency hedged DXJ got clobbered 4.6 % today.
Again, boiling tea kettles, sling shots and trap doors come to mind. Policy makers – including Dear (Monetary) Leader here in the US – are putting a lot of pressure on their currencies. It is not a global game of Whack-a-Mole; it is a global game of Bludgeon the Living $hit Out of a Mole.
Inflation does not work. Last I checked, the US is inflating too. It’s just that there are different dynamics involved with the reserve currency and things may not shake out right on cue in the short-term.
22 pages… felt like 44. Sometimes doing the necessary work can feel that way. I have little doubt subscribers are going to have a challenge with #230′s lack of flow and clearly defined conclusions as well. I think this will smooth out going forward, but this was a grinder. Sometimes we’ve got to grind.