As we discussed Friday, USDJPY closed below its 200-day moving average for the first time since Nov 13, 2012. Back then, SPX was about 30% lower (1376) and the Nikkei was 40% lower (9,230.) The big question before us: now that Abenomics is coming apart at the seams, can we also expect the boost Japan’s QQE has given stocks to unravel?
Remember, even though Abenomics as an engine of economic revitalization is failing, the BOJ is still actively propping up equity prices and suppressing the yen. It remains to be seen how players in the yen carry trade will react to the SMA200 breech. Some will bolt; but, the biggest carnage would come with a drop below the 2014 floor of 100.746.
It’s worth noting that USDJPY has also completed a bullish (for the pair) Gartley Pattern, with the tag of the .786 occurring yesterday. Given that it’s the last day of the 2nd quarter, the bots should be out in force — putting a little wax on this clunker of a “market.”
While Friday’s close was unsettling and we saw the first tiny wave of panicky action in quite some time, TPTB still have their sites set on SPX 2000. There is no law that states a move below the SMA200 must produce follow through. Chart patterns and technical analysis that are normally quite reliable have been busted more times than I can count this past six months.
There are many ways to prop things up if they so choose.