pebblewriter

Tag: Nikkei

  • Losses Accelerate

    Futures are off sharply this morning as important support for various instruments/indices/currencies begins to break down.

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  • Holding the Line

    Can VIX be contained for another few days? If you want to know what’s going to happen in the market this week, that’s the critical question.

    As weak earnings reports and economic data have dribbled out over the past week, VIX has tested its 200-day moving average almost every day. Every time it comes close, it gets smacked back down. So far, those tasked with preventing another leg down in stocks have been able to hold the line.

    It’s how ES, directed by algos, climbed back above its 50-day moving average and managed to remain there. So far, at least.

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  • It’s Currencies’ Turn

    USDJPY finally tagged our 132.22 target overnight… …a target we set over six months ago [see: Update on Currencies Nov 17, 2021]:Ordinarily, this might be a good thing for stocks. Not this time, as it echos the dollar’s strength against the euro.

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  • Fed Minutes on Deck

    Futures are off sharply as we approach the open. Algos are responding to VIX’s pop back above its 200-DMA and the prospect of increasing Fed hawkishness.

    As we pointed out yesterday, the 10Y has again reached the top of a well-formed channel dating back over 30 years. Its ongoing decline has provided much of the fuel for increasing stock, bond and real estate prices, though, reversals at the channel top have marked severe downturns.If the Fed prevents the 10Y from breaking out while continuing to raise short-term rates, the 2s10s will become even more inverted, validating recession forecasts. And, as we discussed last week [see: Should We Fear a Yield Curve Inversion?] the aftermath of these inversions has never been good for stocks.

    Bottom line, the Fed is damned if they do and damned if they don’t.  The real question surrounding today’s minutes is whether members will sound as bewildered on paper as they have in person.

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  • Update on Nikkei: Jan 20, 2022

    In our last update on NKD [see: Nov 30 Update], I somewhat snarkily disparaged the index’s legitimacy.

    The Nikkei 225 is less a securities index than it is a measure of how much intervention the Bank of Japan feels like throwing its way. It’s what the Dow aspires to be when it grows up.

    At the time, NKD was approaching a trend line connecting five recent lows, none of which had quite backtested the obvious Fibonacci support at 26,463. It was also backtesting a TL connecting recent highs.

    As the chart above shows, NKD is backtesting a TL off the Feb 16, 2021 highs. This could be all we get, as the BoJ dislikes anything smelling like a correction.

    As it turned out, the low that day was all we got. NKD rallied into year end, putting in a respectable +5.1% return for 2021 versus the 1.2% losses which would otherwise have occurred. Japanese “investment” managers no doubt cheered the rally, just in time for bonus calculations.

    The rally left a bad taste, though, and I left the 27,156 target where it was – partly for spite and partly because the BoJ’s pathetic manipulation has become laughably predictable. Guess where NKD just tagged?

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  • Update on NKD: Nov 30, 2021

    The Nikkei 225 is less a securities index than it is a measure of how much intervention the Bank of Japan feels like throwing its way. It’s what the Dow aspires to be when it grows up.

    So, it’s only at times like this that I bother to post it anymore.

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  • Not Transitory, Not Even Close

    If gasoline prices remain where they are or continue to rise, Powell will be just plain wrong about inflation being transitory. This is what to expect if gas prices were to flatline at this level through December. Unless most of the other components of inflation were to nosedive, CPI will remain well above 2% for the remainder of the year.

    Persistent enough for you, Mr. Powell?

    But it doesn’t matter. At least not yet. Although the (flawed) CPI data is more relevant to almost everybody, the Fed focuses on PCE, which mutes the reported inflation even more than CPI.  March PCE is due out tomorrow, and should continue not to alarm anyone.

    In addition, the blowout 3%+ April CPI won’t be reported until May 12. The Fed might roll the dice and leave prices where they are, hoping that they can control the fallout from truly alarming numbers.

    Or, we could see some preventative price action in the futures starting as soon as Sunday. The third option, of course, is the good old “miscalculation” of oil/gas prices, resulting in a CPI print that’s not so scary. They’ve done it plenty of times before.

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  • Don’t Fight the BoJ

    I know what you’re thinking: it’s “don’t fight the Fed.” While that’s generally true, too, the Bank of Japan is the central bank which most conspicuously wears its balance sheet on its sleeve. When my charts are a farrago of bearish indicators, but the Nikkei pushes up through resistance? I’ve learned to ignore the indicators and become bullish.

    Conversely, when the narrative is incredibly bullish but the NKD slips below important support, it’s time to short. For those who haven’t been paying attention, that’s where we are right now. We’ve had a few hints over the past week or so, but the NKD suggests there’s more to come. US stocks just haven’t gotten the message yet.

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  • Update on NKD: May 29, 2013

    While the Nikkei hasn’t officially been on our hit list, it’s certainly been fascinating to watch.  Today, it earned its very own page on pebblewriter.com.

    Late last night (early this morning?) I updated the USDJPY [HERE] which was at a critical point in its own rally to the moon.  It recently broke down through the midline of a channel dating back to August 2012 and was backtesting it within the confines of a rising wedge (dashed, yellow below.)

    This afternoon, that wedge broke down and the pair is heading for the bottom of that channel at 99.56 sometime in the next several sessions.

    I suspect the channel will hold.  But, if it doesn’t… well, let’s just say it’s a very long way down.

    If that channel looks familiar, it might be the similarity to the channel that has guided the Nikkei 225 to a stunning 88% gain over the past 7 1/2 months.

    Funny thing about that channel… it just broke down.

    It’s entirely possible that the dip will disappear — nothing more than an intra-day burp that quickly fades from memory.  But, a failure to retake the channel will more likely result in a slide to 13,112 or even 12,343 to fulfill the obvious Inverted Cup & Handle Pattern.

    When channels break down, they usually just morph into something less aggressively sloped.  This one, like the USDJPY, is ridiculously steep.  A drop to 12,343, for instance, would result in a channel more like the gray one shown below.

    What might take NKD that low? First, remember that NKD just tagged the .786 Fibonacci retracement of the crash from 18,365 to 6,990 between 2007 and 2009 (the Dow and S&P 500 have retraced more than 100% of their declines.)  So, this was no garden variety reversal.

    Taking a look at the smaller harmonic patterns, the little red 1.618 extension lines up with a previous bottom and the .707 of the large white pattern.  So, 13,112 would likely be an interim low.

    The secondary target of 12,343 (the white .886 Fib) intersects with the grey channel bottom next Tuesday, May 4, which is consistent with our general equity forecast.  In a highly-correlated, cross-collateralized, quantitatively amped world, we can expect such a move to spill over into other equity markets.

    The key will be closing below the purple channel bottom, currently around 13,857.

    Stay tuned.