Final 24 hours…subscribe to pebblewriter.com and enter the code “Black Friday” in the space provided for a cool 68% savings off the first year of a regular Annual Membership — only about $2/day!
Better yet, lock in your savings with a Charter Annual Membership. For about $2.60/day, your price is guaranteed to never increase.
Either way, it’s a great way to save big while enjoying the best market forecasting available. Happy Holidays from pebblewriter.com!
* * * * *
The big picture shows several very significant features. First, the drop from 1998 followed a fairly well-formed channel that was interrupted in October 2011 by a massive QQE expansion. The subsequent yen devaluation (USDJPY increase) sent the pair screaming higher where it barely reacted at the yellow .382 — not even dropping to the next lower Fib level.
Another QQE expansion sent it spiking out of the huge channel and up to the yellow .618 at 120.11 where it was quite overdue for a retracement. However, since the pair is carefully managed by the BoJ, and any decline is instantly translated into falling equity prices (thanks to the yen carry trade), it was, again, not really permitted to react.
It has occasionally drifted lower, but as soon as equities start sagging it is immediately brought right back up to that key Fib level. Finally, this past May, it broke out. But, it almost immediately ran into the rising purple channel that broke down back in 2008.
This backtest has proven problematic for USDJPY’s continued upside, as has the BoJ’s pause in announcing additional QQE. USDJPY dropped and almost backtested the .618 in July. Stocks were not pleased. But, it was nothing compared to the bloodbath that ensued when USDJPY dropped below the .618 in last August.
That’s when the wheels came off the bus.
continued for members…
When the rising gray channel was broken, the impact on stocks was dramatic. SPX fell 238 points (11.3%.)
However, central bankers were able to stem the tide — holding USDJPY to a decline that remained above last December’s lows and kept the uptrend (barely) intact.
Putting it all together, we get a picture of a tightly-controlled experiment that came very close to a very messy implosion. In the 3 months since Aug 24, however, central bankers have done a pretty good job of glossing over the economic turmoil underlying global equity valuations.
But, they haven’t yet answered the most important questions: will they further expand quantitative easing? And, whether or not there’s additional easing, will they continue to devalue the yen? In my opinion, they have no choice [see: An Offer Japan Can’t Refuse.] The question is “when?”
At present, we’re left with a number of potential targets. A backtest of the .618 (the yellow dot) seems more unlikely as time goes by. Today is one of the last days it could be accomplished without breaking the rising white channel bottom.
Other downside targets include a backtest of the SMA100 or 200 at 121.572 in mid-December (red dot) or the white .618 at 122.139 around Christmas (white dot.) Given that Fed meets Dec 15-16 and is expected to raise rates, the mid-December target gets the nod at this point. 
It suggests a slight weakening of the dollar/strengthening of the yen, which in turn suggests that the Fed doesn’t raise rates.
There are two upside targets worth keeping an eye on. The first is the falling red TL off the June highs. USDJPy came very close to tagging it on Nov 18. The second, which would require that the TL be broken, is the white .886 at 124.74. I’ve placed it around Dec 17 due to the fact that it would involve another backtest of the broken gray channel.
No surprise, then, that things depend on what the Fed does (or, doesn’t do.) Stay tuned.