Paying For Losses

  • August 15, 2001
  • Marc Dupee

Following up on its confirming up-bar yesterday that
left it at a six-week closing high, the
Japanese yen
(
JYU1 |
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News |
PowerRating) gapped open and surged to the top of an island
reversal formation left last June. Adding to the recent view that the US
economy — and the USD/yen — is weaker than previously believed is
yesterday’s annual report from the International Monetary Fund (IMF),
stating the US current account deficit will weaken the dollar and that it
could fall an additional 20%. 

The yen is also benefiting from repatriation buying
as Japanese bring home yen to write off losses
in bonds and stocks. The Nikkei 225 stock index fell has fallen this year to
a 16-year low. The Japanese fiscal year ends next month.

The yen made good on an Off The Blocks
 entry, a set up appropriate in markets that show momentum by either
registering on the Momentum-5
List or the
New 10-Day Highs List. It also surged out of a Haggerty Slim Jim-like
formation. But with negative news continuing to come out on the Japanese
economy –  falling industrial production and machine tools orders
today, for instance — as well as the large gap left from this morning, look
for a reversal in this market. 

Also from the Momentum-5
List,
euro FX futures
(
ECU1 |
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PowerRating) and Swiss francs
(
SFU1 |
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PowerRating) continue
with their upside inertia. Watch the gaps below here as well and we are
getting into overbought territory. 

T-bond futures
(
USU1 |
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News |
PowerRating) are lower after leaving wicks
in candlestick patterns in resistance areas specified in
Levels From The Bond Pit. There is talk that the Fed may not cut
rates as aggressively as thought and short-term debt is pricing in a reduced
chance of the Fed cutting by 50 basis points by Christmas. The December federal
funds
(
FFZ1 |
Quote |
Chart |
News |
PowerRating) went from pricing in a full 50-point cut to pricing in a 72%
chance of a 50 b.p. cut today. 

From the
Implosion-5 List, cotton is making good on an Off The Blocks
 short entry.