After the Bush Administration got done, we have more in common with Japan than many might think. In terms of gross domestic product, the United States ranks as #1, and Japan ranks as #2. It is the world's second-largest economy. Now with a low Japanese Yen encouraged and all those exports of well-made economical cars, coupled with high oil prices, one might think the Japanese economy is booming. But in actuality it is having a hard time for much the same reasons as that in the U.S. Huge deficit spending by the central government has weakened capital available for investment in industries. Public spending to stimulate the economy has had little effect other than to introduce new problems. These sorts of "quick fixes" simply do not work. Japan pays a very low interest rate, even lower than the 2% or so the Fed is trying to reach in this country, making Japan's currency attractive for "carry trades." These are spreads where one buys the currency of the country paying the highest interest like, say, Great Britain, and sells the currency of the country paying the lowest interest, say, Japan. For a long time Japan paid zero percent, but its central bank now reluctantly doles out 0.5% per year.
If corporate leaders in Japan were successful in convincing their government that prosperity lay in exports and a weak national currency to help those exports, then they haven't been too different from those in America who favor a very weak U.S. Dollar. Meanwhile, however, the rest of us suffer from gross inflation.
June Japanese Yen:
05-15=2008: June Japanese Yen: Number 2 Economy Similar To Number 1's
Introduction
Parabolic Chart
June Japanese Yen:
Japan's economy recently has been a struggle but improving. Real GDP was up 2.1% for all of 2007, down from 2.2% in 2006. Unemployment improved to 3.8% in March from 3.9%. Consumer prices were up 1.2% in Japan over the past year, the biggest annual gain in ten years. The Bank of Japan raised interest rates to 0.5% in February, the highest in over ten years. The Bank of Japan says it expects real GDP to increase 1.5% in 2008-2009 and 1.7% in 2009-2010. Their fiscal years ends on March 31st. Public spending to stimulate the economy has not had the desired effect in Japan. Japan's budget deficits have soared, just as they have in the U.S. A value-added tax did not help reduce the deficit by much but did weaken the overall economy. Japan believed that exports were the key to prosperity and the government there has intervened to keep the value of Yen low. By undermining their own currency, just as has been done in the U.S., investment in their economy was discouraged. The key to their recovery appeas to be the need for a less burdensome public policy. Periodic carry trade interest in the Yen (selling Yen and buying higher interest-paying currencies) has resurfaced, putting pressure on the Yen. As some economists are backing down on their U.S. recession predictions, strength in the Dollar puts further pressure on the Yen. Calmer-than-expected U.S. inflation readings have helped the Dollar against most major currencies including the Euro. Inflation statistics have not shut the door on a possible June Fed rate cut, however. This may set the stage for prolonged Yen weakness. With a GDP of $5 trillion in 2006, Japan has the second-largest economy in the world, second only to the U.S.
108.0I R 5/14
I IMM - Jun-08 Japanese Yen, 12.5 m yen, c/y Cm.=0.03 Lim.= 2.3
I
I
I
105.5I_________________________________________________________________________
I
I
I
I
103.0I____X___________________________X________________________________________
I X XO XO
IX XOXO XO
I OXOXO XO
I OXOXO XO
100.5I_OXO_O__________________________XO_______________________________________
I O O X XO
I O XO XOX
I O XO XOXO
I O XO XOXO
98.0I_____O________XO________________XOXO_____________________________________
I O X XO XO O
I O XO XO X OX
I O XO XO X OXO
I OX XO XO X OXO
95.5I_____OXOXO____XO______________X_X__OXO___________________________________
I OXOXOX X XOX XOX O
I OXO OXOXOXOXOX XOX
I OX OXOXOXOXOXO XOX
I OX OXOXOXO OXO X XOX
93.0I_____OX__O_O_O___OXO________X_XO_________________________________________
I O O OX X X
I OXO X X
I OXO X XOX
I OXO XO XOX
90.5I___________________OXOX_XO__XOX__________________________________________
I O OXOXOX XOX
I OXOXOXOXOX
I OXOXOXOXOX
I OXOXO OXO
88.0I_____________________OXOX__OX____________________________________________
I OXOX OX
I O OX O
I OX
I OX
85.5I_______________________OX________________________________________________
I OX
I OX
I O
I
83.0I_________________________________________________________________________
I
I
I
I
80.5I_________________________________________________________________________
I
I
I
I
78.0I----I----I----I----I----I----I----I----I----I----I----I----I----I----I---
11 11 111
67778822112333457778122378990121234455
31221312012012210121212021011332211101
09160049677974487481417957789015880794
Our computer says a non-conventional reactive interpretation of point-and-figure chart signals works best for the Japanese Yen. Therefore, the above signal is taken as a buy signal.
We are headed toward a cyclical high and a seasonal down period.
Our best-performing internal program is "Thrust." It is giving a sell signal.
Results of "Thrust" for Japanese Yen (blue lines = successful trades, red, unsuccessful): (Always in the market.)
Our third system is working on a longer-term sell signal. (Note, disregard the year date on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)
The point value is $1,250. Initial margin on a single contract is $3,105. Use of options is advised.
Scale trade sellers are entering the market for the long term in this price range.
In the chart below, the yellow line is the futures price, read on the right axis. All other colors are read on the left axis. Red is small speculators. Green is large speculators. Blue is commercials. Large speculators with the best track record are remaining long.
The average volatility shown below suggests that the major direction of up remains intact from a volatility low point.
Our option trade recommendation is to sell the December Japanese Yen 93 Call @ 4.83 or better.
Here's an intraday chart for the previous day ( 5/14 ).
Risk Versus Opportunity Report
________________________________
JYM8 June Japanese Yen
High Price: 96.95
Current Price: 95.13
Low Price: 91.45
Risk: -0.039
Opportunity: -0.078
(O/R) Ratio = 2.022
Level Table:
| Factors | Weighted Points |
|---|---|
| Parabolic Chart | - 1 |
| Nirvana Chart | - 1 |
| News | - 1 |
| Point & Figure | + 1 |
| Cyclicals | + 1 |
| Seasonals | - 1 |
| Internal System 1 | - 1 |
| Internal System 2 | 0 |
| Third System | - 1 |
| Commitment of Traders | + 1 |
| Historic Range | - 1 |
| Range/Volatility | + 1 |
| Level Table | - 1 |
| Other Factors | - 1 |
| Total | - 5 |
Place 4 June Japanese Yen on a Sell Watch with stoploss @ +1.79 above the get-in point (when the recent decimal placement represented as 95.10.)________________________________________________________________________________________________________C.T.
