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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (24551)	9/2/1999 12:21:00 PM
From: donald sew	Respond to of 99985

Les, Yes, I am getting divergence in the readings of the major indices. I have the the DOW/SPX/OEX in the oversold region(CLASs 2 BUY) and the NDX/NAZ smack in the midrange. If the NDX/NAZ gives in to the downside that would be quite negative. seeya

To: Les H who wrote (24551)	9/2/1999 12:41:00 PM
From: Les H	Respond to of 99985

The surge in the yen is really no big surprise Australian Financial News By Stephen Koukoulas afr.com.au The Japanese yen slipped to an eight-month low against the $US yesterday, trading below 109, on twin expectations of a broad-based economic recovery in Japan and concerns that the previous substantial Japanese investment in US stocks and bonds might unwind in the near term. If these latter expectations prove to be well founded, it will force the greenback, and US stocks and bonds, to weaken substantially as Japanese positions unwind. The recent surge in the yen, which is now more than 20 per cent above the average of late 1998, is based on sound fundamentals. Importantly, Japanese economic growth prospects are improving GDP growth is accelerating, business and consumer pessimism is moderating, interest rates are zero and the Government is running Budget deficits over 7 per cent of GDP, which means, unambiguously, that the economy is in better shape than at any stage in the 1990s. The case for an even stronger Japanese yen is also gaining credibility. Importantly for the global economy, a strong yen will not undermine the approaching recovery in the Japanese economy indeed, as a vote of confidence, it enhances it. Those who think that the appreciating Japanese yen will choke off the recovery are ignoring several decades of economic history. That history suggests that economic growth momentum is important in determining the direction of currencies. Trends in the current account balance are also an important influence on currencies. On both those fronts, especially with the current account surplus still rising to near record levels, above those which preceeded the Plaza Accord intervention, the recent strength in the yen should only surprise the ill-informed. The current account surplus in Japan is on track to reach 3.5 per cent of GDP. At the same time, the current account deficit in the US is likely to get frightfully close to 4 per cent of GDP. The combination of these influences, in an era of floating exchange rates, is the main influence behind the yen appreciation. In addition to the growth momentum and current account imbalance, the relative cheapness of Japanese stocks is likely to see the yen move higher, with a test of 100 against the $US likely in the not too distant future. The Nikkei Index, which has vacillated around 18,000 points in recent months, is thought to have performed well through 1999. Despite the 40 per cent gain in the index since the beginning of the year, it is still 50 per cent below the peak levels reached in the late 1980s. Foreign inflows into Japanese stocks could and should continue. Over the longer term, a test of the record low of 80 yen is possible once the Japanese economy moves unambiguously to sustained growth. Additional news on the growth performance of Japan will come on September 9 with the release of second quarter GDP data. If, as expected, there is a small rise in GDP after the stunning 2 per cent rise in the first quarter, then the recovery scenario will gain further credibility. This will further support the yen on its march towards 100 against the $US.