If You Were The Leader, You’d…
…Probably do what ever it takes to pull the economy out of a nose dive.
And that’s what the leader of the world’s second-largest economy, Japan’s
Junichiro Koizumi, plans to do. But implementing radical changes will be an
arduous, politically difficult process that could take many years before it
shows results. Progress against a mountain of bad bank debt,
structural-economic inefficiencies, 11 years of stagnant growth, a
recession, a 16-year low in the stock market, and deflation will be stymied
by an entrenched body politic that is unlikely to quickly acquiesce to any
changes the “reformist” Prime Minister attempts.
Meanwhile the honeymoon for the recently elected Koizumi appears over.
For despite winning Japan’s ceremonial upper-house elections over the
weekend, there was no relief rally, as traders focused instead on the latest
round of dismal economic news. An unexpected slowdown in industrial
production out for Monday’s trading again sapped confidence in the economy,
in Japanese stocks, and in the yen.
September Nikkei 225 futures
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steep down trending channel to close at their second lowest level ever at
11645.0.
The
Japanese yen
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the past three weeks. With the contract now within striking distance of
setting a new low, look for it to make a measured move lower out of its
head-and-drooping-right-shoulder pattern on the daily chart.
In other currencies, the Canadian dollar
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From Lows market. Canadian dollars are also tracing a head-and-shoulders top
and the .6550 area likely could provide the resistance for another
head-and-drooping-right-shoulder pattern which would imply a move to new
contract lows here. The CDU1 is also setting up to make a larger-than-normal
move in the nearer term due to its standing on the Multiple Days Low
Volatility List.
September T-bonds
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List or
New 10-Day Highs List — making them eligible for Off The Blocks
entries — rallied late in the session to move above Friday’s last-hour
high and make good on the setup. T-bonds added 8/32 to 103 23/32 and
10-years closed at a new three-month high, up 4/32 at 105 24/32.
Natural gas
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rallied more than 5% intraday following a lap-up rush that served as a good
follow-through momentum indicator from the contract’s July 25 expansion bar
off the lows. The 3.350 area is now a
key area. Look for this area to hold for possible continuation out of a
pullback and a move up.
November soybeans
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me here is that beans held above the July 26 low. Friday’s bar was an inside
day so the violation of its low is not as significant as the violation of
the 7/26 low. Again, beans could be in wave five of a five-wave Elliot
pattern. Big moves such as the pattern implies often take time to
develop.
Pork contracts moved to new contract highs after recent momentum pulses.
But their topping patterns suggest some backing and filling from high ground
might be in store before a continuation of the momentum. August pork bellies
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have been leading here. Look bellies to close the July 24-25 gap.