Weekly market review Aug 5 – 9 , 2024 ( Yen strength is still exerting gravitational pull on worldwide stock market, WHEN will yen strength decline ? )
Will BoJ do something stupid again ? this is a question that is on everyone mind. It’s not inconceivable for BoJ governor to turn hawkish to cause an earthquake to erupt again. And as usual, we need to look to USDJPY and Nikkei 225 for clue again in the week ahead.
Nikkei 225 and USDJPY movement is still an important contextual info
Scenario 1 : if USDJPY and Nikkei 225 co-movement is strong/ positively correlated, then everything is subservient to Yen short unwind positioning risk
Scenario 2: if USDJPY and Nikkei 225 Co-movement is broken/exhibit initial signs of negative correlation, then market may likely get relief rally, and possibly emerge from Yen short unwind stress.
Order book depth
Per Goldman Sachs book depth is shallower than before, therefore We are in low liquidity and high volatility regime, which also mean less volume is needed to move price, and therefore we’re likely to see a bigger price swing.
Broad market overview
Market is relatively flat after rallying on Thursday. There are very little separating everyone.
S&P 500 11 sectors overview
Wouldn’t read too much into it until the dust settles.
MOVE index
Move index drop 4 consecutive day to 108.26.
bond price implied volatility is expected to be around 10.83% per annum. Higher MOVE points to (implied) higher bond market volatility going forward.
Bond volatility moving higher translates into more haircut to bond, in which less liquidity can be extracted from the collateral pool.
NYSE & Nasdaq market internals
after 80% up Day on Thursday, market revert back to a neutral state
On August 9 2024,
1.09 to 1 NYSE Advancer to Decliner ratio (1444/1326 )
1.19 to 1 Nasdaq Decliner to Advancer ratio (2227/1871 )
% of SPX stocks above 20D 50D 200D moving average
Breadth rebound as price rebound
% of SPX stock above 20D MA : 47%
% of SPX stock above 50Day MA : 58%
% of SPX stock above 200Day MA : 68.4%
Bitcoin
According to the foremost Global Liquidity Expert, Bitcoin track the Global Liquidity relatively closely, lagging only by about 6 weeks, it display the quickest responsiveness to changes in liquidity conditions.
Bitcoin daily chart
Price attempt to breach above 200D MA but is unsuccessful so far, 200D MA is around 62K.
USDJPY chart
As long as Nikkei 225 and USDJPY maintain a positive correlation, looking at USD JPY movement would give us a clue to next directional market movement.
USDJPY is forming a triangle and maybe breakup or break below.
There are 4 possible path for USDJPY here, join my paid subscription to know which one is the most likely scenario.
Path 1 : Break up, violate downtrend line while bringing relief to stock market.
Path 2 : Break below for a headfake movement, possibly as low as retesting Aug 5th bottom
before rising to violate downtrend line
Path 3 : Break below, subsequently retrace slightly before heading down again to create a new low while dragging down stock market worldwide
Path 4 : Break below Aug 5th bottom , retrace and then head down to create a new low while exerting strong gravitational pull on worldwide stock market
But then again, by the time USDJPY given any directional clue, stock market would have fall or rally simultaneously, rendering the effort to monitor USDJPY movement a moot point ?
What if I told you there are several clue that would allow you to judge whether this is the start of a bigger decline in stock market or we’re actually closer to the bottom ?
Think about it, if market decline is just getting started, and you bought too much into recent decline and run out of bullet, you will suffer more sleepless night and anxiety.
But if market decline is getting closer to bottom, and you bought too little recently then you will curse yourself for missing out the boat. I am sure you wouldn’t like this feeling. So stop wondering and join my paid subscription.
If you would like to know more about
1) Is Yen strength / yen short unwind getting closer to the end or Yen short unwind is not even half completed and is about inflect bigger downside to stock market ?
2) Most Important level ( line in the sand ) to watch in the current market turmoil.
3) my thoughts on latest market development
then join my Paid subscription
Cost vs Benefit of joining paid subscription
For a price of USD 15 per month ( USD 0.50 per day ) or USD 149 per year (less than USD 0.42 per day ) I will give multiple big ideas per year to capitalize on biggest trends and shift in financial market to accelerate the growth of your savings / investment accounts.
That’s right, for the price USD 0.50 or less than USD 0.42 per day, you could gain 4 digit in USD annually with a small account ( 4 digit - low 5 digit account ) if you catch any 1 of the biggest trends from my ideas & suggestions. I deliberately keep it low to make it extremely affordable and accessible for those with small savings to access high quality research, market leading indicators/charts.
The following sections are for paid subscribers
Paid subscribers get access to high quality indicator & charts to get a better handle on the market, and triangulate your entry point at Buying/accumulating your 401K ETF product. Conversely, I will also share strategies and timing ideas to avoid upcoming risk and protect your portfolio should there be incoming market risk in the near term horizon.
As long as BoJ do not suddenly shock market with it’s hawkish view, then we are able to lean on the following 3 evidence, to infer that market bottom may be in ( a retest of low still could not be rule, but dips are buyable ), therefore probability of each USDJPY path are , path 1 = 30 , path 2=50% , path 3 = 20%, path 4 = 0%
5 Supportive evidence that USDJPY bottom and stock market bottom is in,
Evidence 1 : 10Y yield differential jaw/gap with USDJPY is closed down
USDJPY has been tracking US 10 Year Yield & Japan 10 Year yield differential closely.
as US 10 Year Yield & Japan 10 Year yield differential go down since April (due to surging
Japan 10 Year yield , a Jaw/gap is created)
Jaw/Gap was subsequently narrow as USDJPY decline accelerated around mid july till now
This is one of the supportive evidence for USDJPY bottom
Evidence 2 : Commitment of trader, speculative positioning for Japanese Yen
According CFTC Commitment of traders report, Yen non-commercial ( speculative ) net positioning data shows a sharp move from -180K to -11k
This shows that Yen short positioning has been reduce significantly, from more than 180K short in early July to 11K short by this week ( Aug 9 release for aug 6 data ), the significant paring back in Yen point suggest that the unwind is getting closer to the end, and Yen exertion should weaken going forward which will allow stock market to emerge from it sooner than expectation.
Evidence 3: Removed and remain hidden
Evidence 4 :VIX backwardation
high ratio of of 1M VIX vs 3M VIX indicates backwardation, aka, extreme fear of current month vs future months, potentially pointing to a bottom
Evidence 5 : GS prime book – highest money flow into info tech sector since April this year.
Hedge fund has been buying tech from Aug 1 – 7, per Goldman Sachs
As always, we will continue to monitor the charts, assess the bullish/bearish evidence day-by-day to make appropriate capital allocation and investment decisions on all time frame ( short, mid & long term )
Disclaimer : The information presented here are for research and education purpose only, and does not constitute investment advice, trading recommendation, author shall not liable for any action taken by any individual/company with regards to the information presented here or any part of the website - https://marketcycleedge.substack.com/
The views expressed on this website represent the current, good faith views of the authors at the time of publication. Please be aware that these views are subject to change at any time and without notice of any kind. Marketcycleedge.substack.com and its author assumes no duty and does not undertake to update these views or any forward-looking statements, which are subject to numerous assumptions, risks, and uncertainties, which change over time. All material presented herein is believed to be reliable, but we cannot attest to its accuracy. The information contained herein (including historical prices or values) has been obtained from sources that marketcycleedge.substack.com and its author considers to be reliable; however, marketcycleedge.substack.com and its author makes no representation as to, or accepts any responsibility or liability for, the accuracy or completeness of the information contained herein, or any decision or action taken by you or any third party in reliance upon the data. All traders and investors are urged to check with Financial advisors before making any trading /investment decision.