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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: Moominoid who wrote (53426)7/15/2006 11:52:14 AM
From: YanivBA  Read Replies (1) of 116555
 
Dollar denominated Nikki did not lead into the May drop. Yen denominated did. Look at this chart:

stockcharts.com

Above is the Dow Jones world index for reference. We see it topped a week or so into May. In the middle in solid line is the EWJ ETF or Dolar denominated Nikkei, we see it topped together with the rest of the world. But, in the dashed line you see the real Nikkei, Yen denominated. It toped a week into April, one full month ahead of the dollar denominated Nikkei and the rest of the world. Why? Look below. That is the Yen/Dollar cross rate. As the BoJ drained liquidity from the market the first reaction was a steep rise in the Yen (not that I know about it until Mish wrote "Nightmare Carry Trade Scenario" on June 6). EWJ was still making good returns but it was now due to the rise in the currency. Needless to say how the destruction of the Yen monetary base is bullish for the Yen. Anyway that's for Nikkei leadership (see how it dipped even before the Yen started rising).

As for the effect of current events, I guess it's bullish, but as I said, I really want to see what they will do on Sunday. If they really drain the 2.8 trn they said they would while the markets drops on them, that's bearish. If they drain the 2.8 trn while the market raises I think that will be enough to strongly invalidate the theory. Anything else I think is bullish. However, I find it hard to believe they will keep their word to the full so as for meeting expectations we will probably end up in gray territory.

YanivBA
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