If you want to see two charts that pretty much tell it all, take a look at the Nikkei and the Japanese Yen.
The Nikkei futures have dropped 17% in less than a month! That is mind-boggling to me.
Now look at the Yen.. it has staged a 7% rally over that same time period and is having a monster day to the upside today. It was up nearly 3% at one point during this trading session alone!
What you are seeing taking place is now a reversal of the Yen carry trade in which money was borrowed in Yen terms and leveraged into stock buys for even greater gains. The rally in the Yen has caused these highly leveraged trades to disintegrate and that is causing a ripple effect across the currency markets and the equity markets as those trades in which every mother and their dog was long the US Dollar and long global equities and are now trying to exit those trades. That is why we are seeing the Dollar being crushed and is also the reason we are seeing gold moving higher.
Remember, the big trade was to sell gold and take that money and put it into equities. When the equity markets begin breaking down, money flows out of that sector and back into gold while the Dollar breaks down.
Interest rates on the Ten Year, which, a week ago, were near 2.2%, today fell below 2% at one point. I repeat something which I have said over and over again at this site. This bond buying, QE, easy money policy being followed by the Fed has created the most insane volatility I recall ever witnessing in the totality of my entire trading career. I pity the poor risk manager at a mortgage company, an insurance firm, a pension fund, etc. trying to institute hedges to mitigate risk for his/her firm. There is not a single person on the planet who can read this madness and project where this is going more than one day in advance! Imagine trying to decide which side of the market you are supposed to get protection from in this sort of environment!
Tomorrow we get another payrolls number so this incessant, unprecedented volatility will just continue if not become even more exacerbated. Sigh....
I might make a note here to say, this is what I expect will eventually happen to gold at some point down the road when this monetary experiment in unlimited money creation has proved to be an ultimate failure. The investment world has been herded and corralled into all taking the same side of the same trade knowing that they are being backstopped by the Central Bankers. Once the realization dawns upon them that not a single structural problem has been solved and that the entire "recovery" depends on more crack cocaine being shoved into the victim to ward off the withdrawal symptoms, faith in the almighty Central Banks is going to evaporate.
Case in point is what is going on in Japan. The initial euphoria about the bold new monetary and political reform plan to boost the Japanese economy has rapidly soured. Skepticism is rising and with it, caution, and the desire to not be the one left looking for a chair in which to sit when the music finally stops playing.
Gold has been up and down like a damned yo-yo. Until it can strongly clear $1420, it looks as if the rallies continue being sold. However, the longer this market refuses to break down, the more nervous the bears are going to become and will begin to look for an exit. Keep in mind that while short covering is not enough to build a lasting rally upon, ALL REVERSALS IN DOWNTRENDS BEGIN WITH SHORT COVERING. The test then becomes whether or not NEW MONEY flows into that market. If it does, the trend reverses; if it does not, the market moves lower once the short covering evaporates and runs its course.
Dan,
ReplyDeleteI thank you so much for sharing your market analysis. It is very important to me and others as we try to navigate across this mine field called investing.
What a ride Dan, hey check out how I started out this week with my post from Monday, our feelings are so mutual. Thanks again for all you do Dan
ReplyDeleteMartin
http://tradermartinstake.blogspot.com/2013/06/is-joke-on-you.html
Great charts. The gravity of the situation and nature's queer downward attractions LOL.
ReplyDeletehttp://www.economicpolicyjournal.com/2013/06/franklin-templeton-money-manager-we.html Someone had to break ranks- but they're just ocean droplets in forward spray returning to shore, gravity and tides... cue new-age pianos LOL.
-Mikal
This comment has been removed by the author.
ReplyDeleteSorry there was a typo in the above comment. It was meant to read:
ReplyDeleteDan of all the TA guys out there your one of the best. HOWEVER - you moan when the Yen goes down, because Japan are printing money, you moan when it goes UP because all the fools at the central banks will be caught out. This is a symptom of gold bugs throughout the world, basically whichever direction markets go you MOAN.
MOAN? Coming from a coward who goes unknown.
DeleteNo class!
The world would be a much better place if there was more like Dan Norcini!
Unknown;
Delete"MOAN" -
noun
1.
a prolonged, low, inarticulate sound uttered from or as if from physical or mental suffering.
2.
any similar sound: the moan of the wind.
3.
complaint or lamentation.
verb (used without object)
4.
to utter moans, as of pain or grief.
5.
(of the wind, sea, trees, etc.) to make any sound suggestive of such moans: The wind moaned through the trees.
The only thing I MOAN about Unknown is having to suffer buffoons such as yourself who somehow confuse commentary noting price action with moaning. I am attempting to describe in the comments I posted today what is happening and why. If you want to define that as moaning, so be it. It is a fact that the Yen carry was unwound and quite violently at that. Now whether or not it continues is anyone's guess.
Arguing with an ignorant fool is a huge waste of precious time so I will leave my response as noted and let the rest of the readers decide whether or not they constitute moaning. I will only say that I decry ANY and ALL intervention by Central Banks into the market or into the financial system because for every action, there is an equal and opposite reaction. One cannot intervene without producing waves that cause serious repercussions out farther from the center. What the Bank of Japan and the Fed are doing is feeding a frenzied speculative mania by inducing speculators to take on excessive amounts of risk in highly leveraged, one-way bets. That has never ended well at anytime in financial history. If that is what you call "moaning"; then I am guilty of that and that only.
As far as being a "gold bug"; I prefer honest money but have been around long enough in the markets to know trends when I see them.
MARTIN - thanks for the kinds words - I enjoyed reading your comments at your site. Sounds like we are singing from the same song book!
Hi Guy..
ReplyDeleteSilver is going to have blow up rally ...
If you disagree , please don't post anything about my comment ...
I will be waiting at US$28.00 in the next few month... no chart , no technically ...
you can come back and insult me two month from now ....
ReplyDeleteFor information I have no stop loss for my position ...
Could someone help me out with a little theory.
ReplyDeleteI would assume that all this yen dropping would
cause Abe to take action to again devalue the yen, and soon.
I mean printing or whatever it takes to get back to 100 or so.
Not looking for investing advice 'cause I don't do that, just trying to sort out how this game works.
Thanks,
john
Hi John,
ReplyDeleteThis is what advice my friend september last years about yen.
http://realityinvestment.blogspot.com/2012/09/the-down-fall-of-yen-and-japan.html.
for the past 7 month Yen have being weaken too fast now the economy of japan is growing again however the inflation is also soring.
So in order for japan to have a stablize grow .. the Yen need to strengthen to bring down inflation for the time being. so I think abe will allow yen to strengthen and at the same time also reduce the international pressure due to weakness of yen ..
cheer guy
Hi Dan
ReplyDeleteHeard an interesting thought.
From the financial side it would be for the government cheaper to let the stock market crash to safe the bond market from outflows.
Might this going to happen or do you think rather they will let interest rates go up and the bond market collapses?
Same thing could be on the watch in Japan right now.
To have cash in the bank at risk is also not an option.
best regards
Hi Me again
ReplyDeleteYes I am a coward for going by the name Unknown. I am also an ignorant fool for knowing nothing about the market. The day I believe I actually "know" anything will be the day of my downfall.
My post certainly rattled a couple of people. But Dan you clearly weren't happy when the Yen was dropping and now its rising the same thing. Of course you are correct, you are simply commentating on market action, but what would your course of action be for all this mess?
Oh let me guess, get rid of Central Bankers, and let only Gold be real money (thus screwing the vast majority who don't own any). As for getting rid of Central bankers, it would probably be a good thing but it is not going to happen, so get over it.
Unknown, most of us here have knowledge of history and how it turns out because we read. We also know what is happening and Dan can spell it out in distinct market talk that is not politically motivated as such most of the financial pages these days. Yes as the population grows so should the money base. But it should be driven by demand, new inventions, hard work, desire to achieve, and education. Why don't you get some? These markets, our economy, and for that matter most of the world is falling into a huge trap that will unleash another totalatarian, or maybe they are all ready all over us as recent news indicates. We here are mostly libertarians who believe in the above things, not money supply driven economics. Sorry, but if your mom never told you to not talk when you don't have a point, I will. And by the way, if you don't have any gold, it is available, for now, except in India as of yesterday, at least for sale by the government. We love Dan and respect him greatly.
DeleteDan,
ReplyDeleteOn behalf of your American readers I just want to again thank you for your "unprecedented experience, understanding capital and international markets, finance and economic underpinnings". I understand what you meant completely regarding MOAN, volatility, huge cash sloshing around and the markets being driven by political rather than on a fundamental basis. Please do not allow those like "Unknown" to become distracting such that you lose sight of what you have done for so many of us. You do this on benevolence, charity and heartfelt reasons trying to educate those of us who may have some knowledge and experience, but none of the depth. Those like Unknown are the ones in the world who want this type of leadership. Crying in the dark. The Central Bankers have given us a clear "path to hell". Our politicians have now demonstrated that they care not what the basis of the American Society is based. In the last few years the acceleration of the destruction of our "free" society is occurring. It is not relegated to just Democrats, but rather some GOP members themselves. War on our constitution with outright spying (violation of search and seizure" 4th amendment, war against guns (second amendment), Mr. Graham saying bloggers may not qualify for the 1st amendment, and god only knows how many others. These guys certainly love the 5th amendment however. Thank you for your work, your beliefs as an American, your experience, strength, and most of all your Willingness to share freely.
God Bless you Dan
Today is more evidence that Bernanke has total control of the financial markets.
ReplyDeleteStocks soaring and commodities brutalized, so much so that if there is the slightest bit of a hiccup in the future, Bernanke can unleash more QE again since the CRB index will be smashed to 52-week lows.
When he has to slow things down again, the Dow will be 17,000, gold at $1,650, gasoline at $3.00.
He must be laughing at how easy it is these days.
Mark,
DeleteThank god I read Jessee's Blog a few days ago and decided after much pain to reduce my miners holdings some 70%. I had to admit based on the last 3 years that the Bernanke's and the Big Banks combined with the MSM would do what they have been doing. So yesterday with a pit in my stomach I bailed the miners :(. Sure enough they threw out the news on India's, let the shorts cover up to 1420 or so then SMASHOLA today based on more lies. Well, I was not smart enough to run any into the stock market. I decided I am going to let the HFT's and the big boys just tear each other apart. Let em kill each other. I will wait. No question what it is about. All the jobs in the Investment houses, the bankers, the lawyers,the politicians, need to be fed rather than have them lend more risk into small American Business'. Sad. Anyhow, I cant trade as fast, but I really minimized my losses! Gold and Silver will be back, they have been stagflation hedges for 2,000 years, and Jesus does still exist in our souls, so IMHO, Big business cannot create the revenues to get the DOW to 17,000. Dow up a measley 1% 15,200 at 2:14 PM. More small business' die, the elderly get smashed and the populace ends up like Rome during the end days of the empire. Waiting for another bottom, then convert cash to BRIC stocks, and GOLD, under Gods direction.
Have a great day Mark! :) Maybe us blogger followers can utilize some "misdirection" too!
Hi Dan. I believe that uncontrollable inflation will eventually be the end for fiat, not deflation. As long as we're able to tread water with deflation - there is nothing holding back from reflating.
ReplyDeleteOn a longer timeline, I believe that stable fiat economies (i.e. U.S/Japan) will always be able to reflate. It's inflation that they can't control once it gets rolling. Imagine a tale of two cities if you will: those with inflatable assets, and those without. Something like 73% of U.S. citizens own no equities. They will feel the squeeze.
This doesn't end good - not because of deflation - but inflation.
The bears are still firmly in control of PM's. They set a trap at 1410 trying to real in some more longs, but nobody was biting, so they had to do their smashdown anyway.
ReplyDeleteGold *IS* going to retest 1325 at some point if there is no inflation. Also, if you believe that there is an oil glut due to U.S. supply increases, Gold is in for a world of hurt until inflation picks up.
2 Thessalonians 2:12-- That they might be damned who believed not the TRUTH, but had pleasure in unrighteousness. (KJV)
ReplyDeleteu write a good letter; why u would want to be interviewed on KWN though is a mystery to me, and it is none of my business of course, but 80% of the interviews there are sophomoric, simplistic, and rear view mirror pollycock, but then who am I, but I thought the latest diamond recommendation, and I will not name the name, but it was hillarious, but I guess was written for elementary school kids; when I read comments at different blogs, the pm bulls all share common qualities; they are cry babies, uncouth, and have not read a book in ages; God forbid they try to read Stockman's The Great Deformation, since it is 700+ pages; back to the manipulation argument==have they studied history at all? Do they think dirty, rigged mkts just showed up last Wednesday? I do not like it, but if they can not handle it, then call it a day and spend the rest of your life out in the lawn chair, ok pals? Take care and have a good weekend!
ReplyDelete