Sentiment Turns Bearish On The USD/JPY
Sunday, 24. August 2008, 14:02:07
Stock market report for August 22, 2008; this is a repost of an article that I did the other day with some more material added
Introduction
Sentiment is so bearish on the chart of the USD/JPY, that the US Dollar is going to fall. This together with growing risk aversion to investing stemming from the the Fed's bail out of Freddie and Fannie, as well as the level two assets and level three assets at banks, and rising inflation coupled with diminished economic growth, is going to cause the stock market to fall this next week.
Even though EUR/JPY will continue to fall, and even though EUR/USD will fall, gold will be kept above $790 by the falling USD/JPY.
Gold has arisen as the defacto international currency and measure and means of garnering and preserving wealth.
Sentiment is totally bearish on the US Dollar
The USD/JPY courtesy of FXStreet.com rose from yesterday's value of 108.490 to 109.9450 as Bloomberg's Craig Torres and Scott Lanman report that Federal Reserve Chairman Ben S. Bernanke said inflation should ease later this year and in 2009, while warning that policy makers will act if price increases don't slow over the ``medium term.'' USD/JPY as of 8-22-2008 in morning trading at 109.9450.
A recovery in the dollar and declines in commodity prices ``should lead inflation to moderate,'' Bernanke said in a speech to the annual Fed conference in Jackson Hole, Wyoming today. The Fed ``is committed to achieving medium-term price stability and will act as necessary to obtain that objective,'' he said.
The USD/JPY being up, is a tremendous opportunity for the wealthy to go short the USD/JPY as analysts sentiment index on the USD/JPY is 67% bearish and 33% neutral, FXStreet.com reports in the notes on the referenced chart from FXStreet.
The sentiment of 66% bearish and 0% bullish relates that the traders do not believe the Fed has any bullets left; the rise in the USD/JPY this moring is only temporary. It's jump up is much like the gap open higher in the stock market seen in the ongoing 5 day chart of the US Stockmarket. VTI.
The meeting of the world bankers will not produce any results to turn back the Deflationary Hurricanes that are coming to traditional wealth of currencies, DBV, stocks, VTI, US Treasury bonds, TLT, credit, AGG.
Credit, AGG, is getting a write down even as the Fed Chief speaks.
The chart of VTI, shows a gravestone doji; which I believe will turn out to be an abandoned baby candlestick on the first day of trading next week.
The Bank of Japan well springs of fiat wealth, the USD/JPY and the EUR/JPY, have turned down.
The USD/JPY turned down just the other day; and the EUR/JPY is now in an Elliott Wave 3 of 3 Down. This is causing a disinvestment from traditional forms of wealth.
And as of August 15, 2008, an investment demand for gold, GLD, has re-arisen; I write about this in my article Investment Strategies For Peak Dollar.
Currency traders will be accessing the 0.5% Bank of Japan lending facility to go long gold, $GOLD, and short the US Dollar, $USD.
Jesse and David Cho of the Washington Post in article A Few Speculators Dominate the Vast Market for Oil Trading relate that: "A few large financial firms, Goldman Sachs and Vitol for example, were able to influence the rules on the exchanges to allow the manipulation of commodities prices, including oil and other energy products.
Enron was an early example of this new found power. The havoc this one company was able to inflict on the State of California is a microcosm of what is happening to the world today.
This report from The Washington Post shows what opened the door for this latest round of market manipulation. Goldman Sachs figures prominently in this story.
The Commodity Futures Modernization Act, along with the repeal of the Glass-Steagall Act, set in motion the events that are battering the financial system today in article How Phil Gramm and the Wall Street Investment Banks Helped to Destroy the US Financial System.
The worst is yet to come. The actions of the Fed and the Treasury are only serving to make the final outcome worse. We are heading inexorably towards an Abyss.
Until reforms are put back into place, and markets and governance are once again efficient and relatively free of corruption, and price discovery and asset allocation is restored to normal functioning, the economy will lurch from crisis to crisis until we are exhausted and collapse.
The best an individual can do is to try and make themselves, their wealth, their family, and their ongoing welfare as independent as possible from the US financial system".
Charts show the Dollar Rally is ending
The Dollar Rally began July 14, 2008 as the yen carry traders sold oil to take profit: they invested in the financial sector, and consumer ETFs; these are now turning down: KBE, the homebuilding stocks, IAT, the consumer discretionary, IYC, the pharmaceutical, PBE, the retail, XRT, medical instruments, IHI, biotechnology, IBB.
Numerous Dollar Rally stocks show a topping out:
Medtronic, MDT, a medical equipment manufacturer
Pulte Home, PHM, a homebuilder
Johnson and Johnson, JNJ, a pharmaceutical producer
Autozone, AZO, the very epitomy of the US automobile based culture
Medifast, MED, the very epitomy of American discretionary spending
Home Depot, HD, a dow component and lynchpin retailer
EUR/JPY analysis
The yen carry trade is unwinding, which is seen in a downturning EUR/JPY, FXE:FXY.
Disinvestment has been coming out of the BRICS, EEB, especially china, FXI, and the emerging markets, EEM.
My take on the EUR/JPY, FXE:FXY, is that this is all the correction we are going to see; I expect more down next week.
My analysis of FXI is that profit taking is about done; and that the China bear market ETF, FXP, and the emerging market ETF, EEV, will rise again as the Euro falls lower.
EEV has been a terrific winner as disinvestment has been consistent from the emerging markets on rising risk aversion to debt, inflation and lack of growth.
The Finanancial Ninja writes: Trillion Dollar Mortgage Time Bomb, US May Lose AAA; the market place is now believing this as TLT has turned down. Yes, even as Bernanke speaks, the interest rate on the US 30 Year US Treasury Bond, $TYX, is increasing, as is the interest rate on the 10 Year Government Bond, $TNX. The yield curve, $TYX:$UST2Y, has been increasing since June 25, 2005 when investment concern grew over the Bank of Japan May 19th meeting announcements that inflation is an investment risk concern.
Rising inflation, rising interest rates and falling bond values always stimulates an investment in physical gold
The 2x3 chart of gold from The Privateer shows strong support for gold at $800.
The chart of the gold ETF, GLD, shows the spike down bottom of gold that came with Peak Dollar on August 15, 2008, as well as today's downturn to $81; it could easily fall lower to $79 again on a falling EUR/USD and a falling EUR/JPY, but $79 is likely the bottom floor as the USD/JPY is now turing down.
Nasdaq, QQQQ, analysis
The Nasdaq, $NDX, fell 1.4% this week as natural resource stocks rose.
The Nasdaq was down three days, unchanged one day, and up on Friday in deference to the world bankers' conferernce in Wyoming.
The US dollar consumer stocks, such as XHB, KBE, IYR, VCR, IAI as a group fell 3%.
The natural resource stocks, such as OIH, XME, XLE as a group rose 5%.
Here are the charts of the Nasdaq daily, and the Nasdaq weekly; the latter shows a bearish lollipop hanging man canglestick suggesting a downturn is at hand; confirmation comes from the fact that the Nasdaq has fallen to the middle of a broadening top pattern that goes back to the week of June 18, 2007.
Here is Trader Joe's daily chart of the Nasdaq Composite, $COMPQ, from article Indices showing how it hit resistance with Peak Dollar; manifested a bearish harami candlestck in an abandoned baby pattern, and is now turning lower; note how it flowed higher on falling volume -- no wonder it is now falling lower. The chart "screams" sell!
Special thanks to the Vancouver Sun for their provision of their weekly top gainers by $ who helped me have the above insight into the Nasdaq.
Transportation, IYT, analysis
The transports reside at the middle of a broadening top pattern and will be falling lower this next week.
The transportation stocks, IYT, have been generally higher with a rising dollar; but now that higher oil prices are here, the transports, will fall from the apex of their broading top pattern which goes back to the week of April 7-14, 2007.
Here is Trader Joe's chart of the transports, $TRAN, from article Indices showing a long legged bearish harami for August 11, 2008, signifying the end of the Dollar Rally in stocks.
Dow Jones, $INDU, and S&P, $SPX, analysis
Corey Rosenbloom in relates in article Viewing the Current S&P and Russell 2000 that "The S&P 500 and Dow Jones Index, appear to be breaking down out of a channel or possibly bearish wedge pattern, and both have significant resistance (via moving averages and Fibonacci retracements) on multiple time frames.
The NASDAQ and Russell 2000 have significant support beneath them. I don’t show the NASDAQ here, but it’s pattern and structure is highly similar to that of the Russell.
What gives? I’m not magic enough to answer that question, but I can point out that this is a strange development, with strong technical positioning on two indexes, and weak technical positioning on the other two. Generally, all four indexes show similar structure, and it’s not very often that we get such massive divergence (conflicting signals) as I’m seeing now."
What gives, is that the Dollar Rally that began July 14, 2008, and which ran through August 15, really "goosed up" the consumer stock laden Nasdaq, and the financial stock dependendent Russell 2000, as is seen in the Yahoo Finance three month chart of UUP relative to the four major indices.
The dollar driven consumer stocks of the Nasdaq include includeadbe,csco,ctsh,orcl,intc,aapl,mcd,hd; their performance for the the last month is seen here, with RIMM and CSCO up 10%.
Great falls are coming to the dollar drive consumer stocks of the Nasdaq; these represent exceptional short selling opportunities.
Consumer stock, XLY, analysis
Now that the Dollar Rally is over, I see Whirlpool, JC Penny, and Brunswick falling rapidly again. The MSN.com year-to-date chart of these three shows that the Dollar Rally has been good for WHR, JCP and BC. With a downturning dollar, these are great short selling opportunities.
One needs a sound wealth preservation strategy
The case for a twin investment strategy of short selling and an investment in gold is clearly established above.
I recommend that one invest 1/3 of one's wealth in SKF in a trust account and not a brokerage account; and 1/3 in BullionVault.com and 1/3 in GoldMoney.com.
It's plainly evident that the world has entered Kondratieff Winter: this means a very dark age both economically and politically.
World Socialist author Bill Van Auken reports that the Democrats and Obama prepare platform of war and reaction.
Yes even if the Democratic candidate Obama does not win, the EU US World governement is assembling a massive naval armada in the Persian Gulf; and confrontation of Iran over its nuclear ambitions is forthcoming; I suspect that World War III will commence immediately after the November elections.
The professionals are going the wrong way on gold
Here is professional Chris Vermeulen's article DZZ: How To Short Gold by Going Long, published in Seeking Alpha, where he recommends that one short gold with DZZ. The chart of DZZ, shows it has turned parabolically lower. One should be going short DZZ rather than long DZZ.
Investor Tim Knight relates "The market is open a few more hours, but I'm heading home. My stops are up to date, and I don't need to watch this stuff. I'll do a post late tonight. My take on the big jump in equities today is that it's still within the confines of the Fibonacci ranges we've been trapped within most of the month".
I feel comfortable with my oil/ag/gold short positions, which are helping shore up my portfolio in light of the big pop in equities
Elliott Wave analysis of gold
Gold is going to continually trade above it's recent low of $778.
Much thanks to By lancelot41 for posting TheLFB News article Elliott wave: Gold vs. Euro & Usd/Chf on ForexFactory.com.
It suggests "v" wave for gold lower than 778.65.
I do not see it that way.
I believe 778.65 was "C" and "v" down. I believe we are starting an up movement in gold, or at the very worst a double bottom at 778.65.
The saving factor is the fall of the USD/JPY, which is not shown in the charts: the fall of USD/JPY will pull gold up to $845 to $857, and then eventually much higher to $1,000, and even then beyond.
Charts of the day
FXStreet.com USD/JPY rising as bankers meet in financial summit. One should be short the USD/JPY; a this level, it's the short selling opportunity of a lifetime.
Stockcharts.com Weekly VTI showing a massive bearish enguling candlestick at $64.62, which is below the apex of a 'broadening top pattern' at 65.38 going back to October 9, 2006 . All I can say is lookout below.
Stockcharts.com Daily VTI at 64.61 showing a fall from 65.50 on Friday August 15, 2008. More down will be coming next week.
Jack Chan/JC's Buy And Sell Signals chart of the gold ETF, GLD. I bet he will probably give a buy signal next week as it turns further up.
Jack Chan's chart of the Dow, DIA, to which he gave his sell signal.
Stockcharts.com chart of DGP relative to UDN showing suggesting that Peak Dollar occurred August 15, 2008, and that gold has arisen as the defacto world currency and measure and means of garnering and accumulating wealth.
The Yahoo Finance five day chart for the week ending August 22, 2008 shows that gold has risen 2% and the overall US Market has fallen 1%, documenting that Peak Dollar occurred August 15, 2008.$TRAN$TRAN
Introduction
Sentiment is so bearish on the chart of the USD/JPY, that the US Dollar is going to fall. This together with growing risk aversion to investing stemming from the the Fed's bail out of Freddie and Fannie, as well as the level two assets and level three assets at banks, and rising inflation coupled with diminished economic growth, is going to cause the stock market to fall this next week.
Even though EUR/JPY will continue to fall, and even though EUR/USD will fall, gold will be kept above $790 by the falling USD/JPY.
Gold has arisen as the defacto international currency and measure and means of garnering and preserving wealth.
Sentiment is totally bearish on the US Dollar
The USD/JPY courtesy of FXStreet.com rose from yesterday's value of 108.490 to 109.9450 as Bloomberg's Craig Torres and Scott Lanman report that Federal Reserve Chairman Ben S. Bernanke said inflation should ease later this year and in 2009, while warning that policy makers will act if price increases don't slow over the ``medium term.'' USD/JPY as of 8-22-2008 in morning trading at 109.9450.
A recovery in the dollar and declines in commodity prices ``should lead inflation to moderate,'' Bernanke said in a speech to the annual Fed conference in Jackson Hole, Wyoming today. The Fed ``is committed to achieving medium-term price stability and will act as necessary to obtain that objective,'' he said.
The USD/JPY being up, is a tremendous opportunity for the wealthy to go short the USD/JPY as analysts sentiment index on the USD/JPY is 67% bearish and 33% neutral, FXStreet.com reports in the notes on the referenced chart from FXStreet.
The sentiment of 66% bearish and 0% bullish relates that the traders do not believe the Fed has any bullets left; the rise in the USD/JPY this moring is only temporary. It's jump up is much like the gap open higher in the stock market seen in the ongoing 5 day chart of the US Stockmarket. VTI.
The meeting of the world bankers will not produce any results to turn back the Deflationary Hurricanes that are coming to traditional wealth of currencies, DBV, stocks, VTI, US Treasury bonds, TLT, credit, AGG.
Credit, AGG, is getting a write down even as the Fed Chief speaks.
The chart of VTI, shows a gravestone doji; which I believe will turn out to be an abandoned baby candlestick on the first day of trading next week.
The Bank of Japan well springs of fiat wealth, the USD/JPY and the EUR/JPY, have turned down.
The USD/JPY turned down just the other day; and the EUR/JPY is now in an Elliott Wave 3 of 3 Down. This is causing a disinvestment from traditional forms of wealth.
And as of August 15, 2008, an investment demand for gold, GLD, has re-arisen; I write about this in my article Investment Strategies For Peak Dollar.
Currency traders will be accessing the 0.5% Bank of Japan lending facility to go long gold, $GOLD, and short the US Dollar, $USD.
Jesse and David Cho of the Washington Post in article A Few Speculators Dominate the Vast Market for Oil Trading relate that: "A few large financial firms, Goldman Sachs and Vitol for example, were able to influence the rules on the exchanges to allow the manipulation of commodities prices, including oil and other energy products.
Enron was an early example of this new found power. The havoc this one company was able to inflict on the State of California is a microcosm of what is happening to the world today.
This report from The Washington Post shows what opened the door for this latest round of market manipulation. Goldman Sachs figures prominently in this story.
The Commodity Futures Modernization Act, along with the repeal of the Glass-Steagall Act, set in motion the events that are battering the financial system today in article How Phil Gramm and the Wall Street Investment Banks Helped to Destroy the US Financial System.
The worst is yet to come. The actions of the Fed and the Treasury are only serving to make the final outcome worse. We are heading inexorably towards an Abyss.
Until reforms are put back into place, and markets and governance are once again efficient and relatively free of corruption, and price discovery and asset allocation is restored to normal functioning, the economy will lurch from crisis to crisis until we are exhausted and collapse.
The best an individual can do is to try and make themselves, their wealth, their family, and their ongoing welfare as independent as possible from the US financial system".
Charts show the Dollar Rally is ending
The Dollar Rally began July 14, 2008 as the yen carry traders sold oil to take profit: they invested in the financial sector, and consumer ETFs; these are now turning down: KBE, the homebuilding stocks, IAT, the consumer discretionary, IYC, the pharmaceutical, PBE, the retail, XRT, medical instruments, IHI, biotechnology, IBB.
Numerous Dollar Rally stocks show a topping out:
Medtronic, MDT, a medical equipment manufacturer
Pulte Home, PHM, a homebuilder
Johnson and Johnson, JNJ, a pharmaceutical producer
Autozone, AZO, the very epitomy of the US automobile based culture
Medifast, MED, the very epitomy of American discretionary spending
Home Depot, HD, a dow component and lynchpin retailer
EUR/JPY analysis
The yen carry trade is unwinding, which is seen in a downturning EUR/JPY, FXE:FXY.
Disinvestment has been coming out of the BRICS, EEB, especially china, FXI, and the emerging markets, EEM.
My take on the EUR/JPY, FXE:FXY, is that this is all the correction we are going to see; I expect more down next week.
My analysis of FXI is that profit taking is about done; and that the China bear market ETF, FXP, and the emerging market ETF, EEV, will rise again as the Euro falls lower.
EEV has been a terrific winner as disinvestment has been consistent from the emerging markets on rising risk aversion to debt, inflation and lack of growth.
The Finanancial Ninja writes: Trillion Dollar Mortgage Time Bomb, US May Lose AAA; the market place is now believing this as TLT has turned down. Yes, even as Bernanke speaks, the interest rate on the US 30 Year US Treasury Bond, $TYX, is increasing, as is the interest rate on the 10 Year Government Bond, $TNX. The yield curve, $TYX:$UST2Y, has been increasing since June 25, 2005 when investment concern grew over the Bank of Japan May 19th meeting announcements that inflation is an investment risk concern.
Rising inflation, rising interest rates and falling bond values always stimulates an investment in physical gold
The 2x3 chart of gold from The Privateer shows strong support for gold at $800.
The chart of the gold ETF, GLD, shows the spike down bottom of gold that came with Peak Dollar on August 15, 2008, as well as today's downturn to $81; it could easily fall lower to $79 again on a falling EUR/USD and a falling EUR/JPY, but $79 is likely the bottom floor as the USD/JPY is now turing down.
Nasdaq, QQQQ, analysis
The Nasdaq, $NDX, fell 1.4% this week as natural resource stocks rose.
The Nasdaq was down three days, unchanged one day, and up on Friday in deference to the world bankers' conferernce in Wyoming.
The US dollar consumer stocks, such as XHB, KBE, IYR, VCR, IAI as a group fell 3%.
The natural resource stocks, such as OIH, XME, XLE as a group rose 5%.
Here are the charts of the Nasdaq daily, and the Nasdaq weekly; the latter shows a bearish lollipop hanging man canglestick suggesting a downturn is at hand; confirmation comes from the fact that the Nasdaq has fallen to the middle of a broadening top pattern that goes back to the week of June 18, 2007.
Here is Trader Joe's daily chart of the Nasdaq Composite, $COMPQ, from article Indices showing how it hit resistance with Peak Dollar; manifested a bearish harami candlestck in an abandoned baby pattern, and is now turning lower; note how it flowed higher on falling volume -- no wonder it is now falling lower. The chart "screams" sell!
Special thanks to the Vancouver Sun for their provision of their weekly top gainers by $ who helped me have the above insight into the Nasdaq.
Transportation, IYT, analysis
The transports reside at the middle of a broadening top pattern and will be falling lower this next week.
The transportation stocks, IYT, have been generally higher with a rising dollar; but now that higher oil prices are here, the transports, will fall from the apex of their broading top pattern which goes back to the week of April 7-14, 2007.
Here is Trader Joe's chart of the transports, $TRAN, from article Indices showing a long legged bearish harami for August 11, 2008, signifying the end of the Dollar Rally in stocks.
Dow Jones, $INDU, and S&P, $SPX, analysis
Corey Rosenbloom in relates in article Viewing the Current S&P and Russell 2000 that "The S&P 500 and Dow Jones Index, appear to be breaking down out of a channel or possibly bearish wedge pattern, and both have significant resistance (via moving averages and Fibonacci retracements) on multiple time frames.
The NASDAQ and Russell 2000 have significant support beneath them. I don’t show the NASDAQ here, but it’s pattern and structure is highly similar to that of the Russell.
What gives? I’m not magic enough to answer that question, but I can point out that this is a strange development, with strong technical positioning on two indexes, and weak technical positioning on the other two. Generally, all four indexes show similar structure, and it’s not very often that we get such massive divergence (conflicting signals) as I’m seeing now."
What gives, is that the Dollar Rally that began July 14, 2008, and which ran through August 15, really "goosed up" the consumer stock laden Nasdaq, and the financial stock dependendent Russell 2000, as is seen in the Yahoo Finance three month chart of UUP relative to the four major indices.
The dollar driven consumer stocks of the Nasdaq include includeadbe,csco,ctsh,orcl,intc,aapl,mcd,hd; their performance for the the last month is seen here, with RIMM and CSCO up 10%.
Great falls are coming to the dollar drive consumer stocks of the Nasdaq; these represent exceptional short selling opportunities.
Consumer stock, XLY, analysis
Now that the Dollar Rally is over, I see Whirlpool, JC Penny, and Brunswick falling rapidly again. The MSN.com year-to-date chart of these three shows that the Dollar Rally has been good for WHR, JCP and BC. With a downturning dollar, these are great short selling opportunities.
One needs a sound wealth preservation strategy
The case for a twin investment strategy of short selling and an investment in gold is clearly established above.
I recommend that one invest 1/3 of one's wealth in SKF in a trust account and not a brokerage account; and 1/3 in BullionVault.com and 1/3 in GoldMoney.com.
It's plainly evident that the world has entered Kondratieff Winter: this means a very dark age both economically and politically.
World Socialist author Bill Van Auken reports that the Democrats and Obama prepare platform of war and reaction.
Yes even if the Democratic candidate Obama does not win, the EU US World governement is assembling a massive naval armada in the Persian Gulf; and confrontation of Iran over its nuclear ambitions is forthcoming; I suspect that World War III will commence immediately after the November elections.
The professionals are going the wrong way on gold
Here is professional Chris Vermeulen's article DZZ: How To Short Gold by Going Long, published in Seeking Alpha, where he recommends that one short gold with DZZ. The chart of DZZ, shows it has turned parabolically lower. One should be going short DZZ rather than long DZZ.
Investor Tim Knight relates "The market is open a few more hours, but I'm heading home. My stops are up to date, and I don't need to watch this stuff. I'll do a post late tonight. My take on the big jump in equities today is that it's still within the confines of the Fibonacci ranges we've been trapped within most of the month".
I feel comfortable with my oil/ag/gold short positions, which are helping shore up my portfolio in light of the big pop in equities
Elliott Wave analysis of gold
Gold is going to continually trade above it's recent low of $778.
Much thanks to By lancelot41 for posting TheLFB News article Elliott wave: Gold vs. Euro & Usd/Chf on ForexFactory.com.
It suggests "v" wave for gold lower than 778.65.
I do not see it that way.
I believe 778.65 was "C" and "v" down. I believe we are starting an up movement in gold, or at the very worst a double bottom at 778.65.
The saving factor is the fall of the USD/JPY, which is not shown in the charts: the fall of USD/JPY will pull gold up to $845 to $857, and then eventually much higher to $1,000, and even then beyond.
Charts of the day
FXStreet.com USD/JPY rising as bankers meet in financial summit. One should be short the USD/JPY; a this level, it's the short selling opportunity of a lifetime.
Stockcharts.com Weekly VTI showing a massive bearish enguling candlestick at $64.62, which is below the apex of a 'broadening top pattern' at 65.38 going back to October 9, 2006 . All I can say is lookout below.
Stockcharts.com Daily VTI at 64.61 showing a fall from 65.50 on Friday August 15, 2008. More down will be coming next week.
Jack Chan/JC's Buy And Sell Signals chart of the gold ETF, GLD. I bet he will probably give a buy signal next week as it turns further up.
Jack Chan's chart of the Dow, DIA, to which he gave his sell signal.
Stockcharts.com chart of DGP relative to UDN showing suggesting that Peak Dollar occurred August 15, 2008, and that gold has arisen as the defacto world currency and measure and means of garnering and accumulating wealth.
The Yahoo Finance five day chart for the week ending August 22, 2008 shows that gold has risen 2% and the overall US Market has fallen 1%, documenting that Peak Dollar occurred August 15, 2008.$TRAN$TRAN
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