Monday, October 8, 2007

Entry for Oct 08, 2007

The newly found Japanese Prime Minister, has clearly set the tone as towards his policies. I have recently learned from my business pen pal's in Japan, Former Former Prime Minister Koizumi was one of the most Pro American Factions, which Former President Abe was once under. The relevency lies in that PM Fukuda has reinstated much of Abe's former cabinet, this coupled with his strong stance on the refueling of warships all screams pro american to me.

Obviously the natural consquence of his actions can be traced back in part to economic reasons. The last time i checked approximately 1/4 of Japanese exports are to America, hence why the reason in the past why the Japanese have sold yen in the secondary markets to enable this relationship. Though most interestingly, the yen has been able to float and has strengthend quite considerably. As to the effects can be seen a stronger shift of carry trade to other other currencies away from the yen/us to the AUS dollar or New Zealand Dollar whose interest rates are still quite siginficant. With the BOJ interest rates of .05% vs the AUS or NZ interest rates of 6-7% + any strengthening should not shake carry traders as the interest gained is still quite significant more so over than the US dollars interest gains.

Though as the dollar is poised in better footing perhaps a shift will be seen back to investors bring carry trade to the U.S. if interest rates are on hold, and economic growth can show more strength. This would be most benifical for the Japanese economy since the stronger yen will dampen their own growth since exports will drop, any drop is siginficant considering how much the country relies on exports considering the resources, size and population (increasing growing old) population. Though despite the yen being stronger this will be a lagged affect shown in the economy since as i stated the dollar is strengthening, which most likely will lead to the weakening of the yen, which only reflect in a later quarter...

Fukuda also, is very bold and ambitious in his statements. He plans to some how attain an economic surplus with the current conditions. I find this hard to believe considering prevailing inflation felt among the japanese people which leads to bad news for the Bond Markets, and I don't see how else Fukuda will try to gain capitial if no one wants to take up debt... Further more the stronger currency will certainly not help grow the GDP making Japan a less attractive place for foreign investors, Whatever his solution maybe, will certainly amazing he can achieve what he says.

(Espcially when he loves giving away free resources such as oil/gasoline by the tons to other countries...)

As for the US domestic equity markets, the strong bullish upmove from last week resulted in more gains takers than I had expected, this probably has to more with a pyschological factor ahead of earnings with mroe investors erring on the side of caution (better be safe than sorry). As i had expected the revisions of the Job markets really leaves the fundamentals not that significantly different from summer...

On the chart for S&P 500:
back testing shows shows, in my opinion at least 5-6 months of bullishness. The 20 SMA seems to do the job on the back test. Around july through september for the past 3 years the 20 SMA traded within the price before breaking under for upward support. Strong support of the 50 and 200 SMA also ensue, in bullish order of 20 on top of 50 which is on top 200. The RSI shows it got room of around 10 before considered oversold. what only worries me is that each year the downward movements became more significant with each year. It is possible that the bullishness may not last the full 5-6 months and may take a downward turn earlier. Primarily in the short term I am bullish, volume still is letting up in a traditional pattern which alludes to higher highs.

Complentary techinicals and fundamentals, what remans the sentiment...

Bond Market is now not as certain on anothe Fed cut considering the strength of the Job Market, but the bond markets sentiment is as fickle as ever. More importantly the consumer...

With lagged affects perhaps the consumer may feel in part what the finanicals have been experience the past months... Which naturally leads to this slow down in consumption. But i think this move has already happend or is occuring, and the consumer is bound to spring back, considering my inflationary scenario i presented prior...

*back thoughts
As I have been going through IBD, I just can't shake the nagging reoccuring feeling that the tech sector will start catching up with the other indices as the past year as I have followed it has always been some what laggard to the other indexes.

No comments:

Post a Comment

This Blog has been developed by Analyze Capital LLC, and as an independent organization we provide “AS IS” information without warranty. The ideas and opinions expressed by the contributers of this blog are personal and do not represent the actions or policies of Analyze Capital LLC. The contents of this blog do not intend to assert recommendations or to offer advice of any kind. We are not responsible the consequences, be they gains or losses, that may result from using any of the information from this blog.