Perhaps someone should start a 'Sex and the President' thread where our American friends can discuss this fascinating subject ad infinitum and ad nauseum. Meanwhile, to change the subject a bit ... here's something about POG etc. :)
by Steven Jon Kaplan
Updated @ 8:10 p.m. EDT, Monday, August 17, 1998.
MONDAY SUMMARY: Set to rise: Yen, Gold, Stocks (including U.S.), Commodities. Set to fall: Bonds.
LAND OF THE RISING YEN--Virtually no one (except yours truly) is willing to stick his or her neck out and advocate purchase of the yen. Yet the most recent traders' commitments for the yen show commercials net long 133,525, short 57,522 contracts; with speculators net long 3,873, short 58,571, and small traders long 13,098, short 34,403--close to an all-time record for any traded futures contract at any time in history. On Monday, Japan Vice Finance Minister for International Affairs Eisuke Sakakibara said that the yen's depreciation is nearing an end. He also said it would be more accurate to view the dollar as unusually strong than the yen as uniquely weak, and that the U.S. economy would have difficulty in sustaining currency strength all alone, according to Nikkei English News, quoting from the Nihon Keizai Shimbun's Tuesday morning edition. Sakakibara added that the yen's plunge could reverse because of slowing appreciation of European currencies destined for unification next year, and falling Mexican and Canadian currencies. The recent trading pattern in the yen, with a bullish key reversal confirmed by followup action and a sequence of higher lows forming over a period of several days, confirms that the yen is about to rally.
WATCH THOSE DEPRESSED STOCK MARKETS BOUNCE--The investment community has recently turned nearly unanimously bearish on those stock markets which have fallen the most over the past year, such as Korea, Japan, Malaysia, Indonesia, Hong Kong, Chile, Venezuela, and so on (the list of bourses which have experienced declines of 70% or more in U.S. dollar terms is extraordinarily long, as a warning to U.S. investors who think it can't happen here). The level of put buying on these shares, as well as outright short selling, has hit extremes generally seen before a significant bounce. Those who have been profiting from these markets' decline should consider covering their short positions, as the likelihood of a sharp short-term rally is quite high. It should be remembered that during the Great Depression in the U.S., there were more short-term 20%+ rallies than at any other time in U.S. history, even with the dividend yield on the S&P500 above 8 percent for extended periods of time. In most of the collapsed third-world stock markets, the dividend yield exceeds the interest rate on government bonds in those same countries, which is one traditional sign of a short-term bottom.
AND U.S. STOCKS WILL RALLY TOO, BUT NOT FOR LONG--This third world rally is likely to trickle up to the U.S. stock market, forming the final shoulder on a typical head-and-shoulders top, and giving investors in U.S. stocks an excellent opportunity--in fact, their last and best lifetime opportunity--to unload those shares which were not sold at the tops in April or July. The U.S. equity put-call ratios have exceeded 0.6 in recent trading, indicating high levels of fear that often precede a bounce, and the VIX sticking its head above 35, historically typical of a short-term bottom. A count of recent newspaper and magazine articles hinting at the possibility of a bear market has increased remarkably over the past month, especially in recent days, supporting the case for a partial rebound. The recently bullish traders' commitments in the S&P500 also confirm the likelihood of this upward retracement, which is likely to follow the usual Fibonacci pattern and bring the Dow back up to around 8888. Late summer rally notwithstanding, however, the Dow will still surely touch 7000 near Thanksgiving as market internals remain exceedingly weak and overvaluations remain extraordinary, with an all-time record number of stocks sporting P/E ratios above 50 during the past several weeks.
MOST BULLISH TRADERS' COMMITMENTS, in order, most bullish first: Yen, Gold, Corn, Soybeans, Live Cattle, Crude Oil, Palladium, Eurodollars, S&P500, Sugar, Copper. MOST BEARISH TRADERS' COMMITMENTS, in order, most bearish first: Platinum, Silver, Deutschmark, Wheat, T-Bonds. |
