In a corrective market, showing that extra moment of patience before you act can often mean the difference between getting chopped up in your trades, versus having capital and confidence intact as you objectively read the action. Specifically, the reaction after the initial reaction of news in a corrective market is often something worth waiting for, as we are seeing this evening in Japan.
Granted, the Nikkei may rally back sharply, for all I know. But what we are seeing is a notable change in price action. The Prime Minister of Japan was out with more jawboning tonight–The likes of which had previously sparked a surge in stocks. Tonight, we saw an initial rally, and it appeared at first that we were back to the pre-correction days from last November into mid-May of this year when the Nikkei ran from 8,619 to 15,942.
Only this time, as you can see below on an intraday chart, all of those gains were rather immediately given back, and then some. The correction off recent highs in Japan has been far from orderly, which means timing a bottom to it has much higher risks than if it had been an orderly pullback without much volatility.
Here were the bullet points of the announcement (source):
- *ABE VOWS TO SLAY DEFLATION MONSTER WITH FISCAL, MONETARY POLICY
- *ABE CALLS GROWTH STRATEGY CENTERPIECE OF ECONOMIC POLICY
- *ABE WILL THOROUGHLY REMOVE ALL BARRIERS TO CORPORATE ACTIVITY
BOOM
Boom indeed
The can not lose DXJ is gonna get raped in the morning.
I’m probably just a complete fool here, but why has the Nikkei 225 average outperformed the iShares MSCI Japan Index ETF (EWJ) and the MAXIS Nikkei 225 Index ETF (NKY) (each by approximately the same amount, roughly 2-to-1) since 1/1/2012 (or on any other relatively recent timeframe you wish)? I could understand the delta with EWJ, but weird with that index ETF that is designed to track the index.
Here’s a chart (hope it shows up):
http://tinyurl.com/mboxono
The EW?’s are not the indexes. Most are heavily weighted to the financials. Basically they are what they are.
Thanks — still don’t understand why the ETF purporting to track the index would underperform it (and track EWJ almost exactly), though.
Gold drops like a rock and other markets have no reaction. The yen drops, the Nikkei zooms up, and everything is peachy. Bernanke opens his mouth and bonds get hammered. Meanwhile, the S and P goes on its merry way. This is like turkeys at Thanksgiving, pull one out of the flock for dinner and the rest ignore it. Well, it finally looks like the axe is about to clip US stocks as they get rotated into position.
Nice post