Everything was going so well. New highs on USDJPY and CL were producing new highs on SPX. The all-time highs were only a ramp job away. And, then, Kuroda et al decide to stand pat on an obviously failing stimulative package?
I’ve written all too often about the overnight resets on USDJPY and CL, all in order to repeat the ramp the next day. Thus, the same rallies can be recycled over and over, and passed off as new highs. Last night’s “reset” will put that practice to the test. There will be many who suggest the yen carry trade is toast, and that SPX should now give up hundreds of points. While I sympathize with the notion, remember that just because the BoJ didn’t expand QQE, it doesn’t mean that they’ve stopped manipulating currency and equity markets. Far from it.
For anyone who took our parting commentary to heart yesterday afternoon and shorted at 2098.75, congrats!
That’s probably about it for this leg. If you’re a contrarian and can hedge overnight and don’t believe BoJ has any ammunition left, this would be a great place to short.
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