Keystone's trading algorithm, Keybot the Quant, flips back to the bear side at SPX 1566. Semiconductors and volatility have broken down creating the market selling. Watch VIX 14.21 and SOX 425.67. As always, stay alert for a potential whipsaw today or tomorrow. More information is available at Keybot's site;
Keybot the Quant
KS,
ReplyDeleteYou have mentioned the dollar/yen relationship today. For how long does this relationship play out? Higher yen equally lower equities. It seems to me with the Japanese policies of printing money that we would expect to see a weaker yen going forward.
Yes, you are right. The obscene weakening in the yen has created the upside move in equity markets over the last couple months along with the Fed's QE4 Infinity and Beyond. The game changer was when the BOJ hit the after burners as April began and the money pumping talk grew louder each day, this drastically weakened the yen over the last two weeks and catapulted the SPX to the new all-time highs. So the answer is just like the Fed, it depends on when you think the market will perceive that the crack cocaine easy money would 'taper' off.
DeleteSo, if BOJ continues to promise to fight deflation and create inflation at all costs, then the yen weakens and equities go up. If the BOJ downplays their money pumping on any given morning, then the yen strengthens and markets go down, like today. So the answer is time frames, if you think in the intermediate term QE's should continue so weak yen in that time frame. But in the nearer term, perhaps hours and days, it is way overdone and likely needs to snap back so stronger yen ST. Everything always comes down to what time frame you are referencing.