When running up debt over twice your GDP doesn’t help your economy recover, what’s left? Japan is switching gears and will reportedly try fiscal stimulus — this only two months after a 25% hike in sales taxes. The market is unclear how the $239 billion stimulus will be funded – but it supposedly involves some private money. Uh…right. Because negative interest rates are such an investment magnet.
Prime Minister Shinzo Abe, after whom the failed Abenomics is named, explains: “We shouldn’t miss this chance, this is exactly when we should accelerate Abenomics and overcome our challenges.” It if was simply an expansion of the money printing and stock purchasing going on, markets might have been enthused. As it is, though, USDJPY is having trouble even pushing above its SMA200.
Even US futures, the great catch-basin of monetary stimulus efforts, are yawning.
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USDJPY’s rising purple channel – still broken. A slip below the SMA200 — which I think we’ll get — would be very unhealthy for stocks.
I think the lack of a response bodes well for another leg down around Dec 16. With ES at its .618 retracement, I would be fading this latest pop – particularly if SPX doesn’t push above its SMA10 at 3121.09.
Right now, CL and RB are supporting stocks due to the Vienna OPEC meeting. If, as I expect it to, it fails to result in any meaningful production drops, we should see oil and especially gas drop sharply.
Though VIX is back below its SMA200, it held its own overnight. In other words, it’s not driving higher stock prices – just maintaining current levels.
And, though bonds are having an off day, SMA200 support is getting closer and closer: 127’080 vs 129’035. The 2s10s continues to go sideways.
SPX’s and ES’ SMA10s are both very close to flattening out and rolling over. With a bit of a drop today, we’re headed for a 10/20 cross which would help accelerate the downturn.
I’m going to spend the next few hours working on an update to oil and gas. With OPEC meeting now, the Fed meeting next Tuesday and new tariffs potentially coming on the 15th, I think interest rates and inflation are going to get a lot of attention over the rest of the year.
Stay tuned.