Does The Nikkei Foreshadow A 10% Drop In The S&P?
As Zero Hedge presented previously, the sharp divergence between the Nikkei and the S&P indexed in gold continues. The two reindexed indexes, which have correlated 0.91 since March, have diverged sharply in the past three weeks, and now stand at an over 11% divergence in performance since the year lows. Whether this is due to the "shocking" recent realization that Japan is caught in an ever increasing deflationary vortex (which the US likely will not avoid, at least not in the near term), or simply due to momo quants deciding that the Nikkei is no longer fun to chase, a convergence trade on the two broad indexes (long Nikkei, short S&P) seems like a rather painless way to pick 10%. Then again, ask Boaz Weinstein about "surething" convergence trades.
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on Wed, 12/02/2009 - 13:55
#149409
I see it as a realization that Japan is losing the currency wars.
We are entering "zero-sum game" terrritory in the global economy, where the winners will be those who can devalue their currency the farthest and fastest, and the new Japanese govt is being caught flatfooted.
on Wed, 12/02/2009 - 14:05
#149420
Doesn't look too good in the Euro - zone's point of wiev..
on Wed, 12/02/2009 - 14:08
#149423
Lookout - "good news" from the Fed Beige Book. Might we finally see the dollar covering / market selloff on non-bad news?
on Wed, 12/02/2009 - 14:06
#149422
Or, conversly, does the S&P 500 foreshadow a 10% rise in the Nikkei?
on Wed, 12/02/2009 - 14:10
#149427
anybody hearing these idiots on CNBC disucssing the Beige Book - BB couldn't divine the housing disaster and yet we should care that they removed a word which makes it the best in years? pathetic
on Wed, 12/02/2009 - 14:13
#149431
You can't devalue currency, only maintain interest rates. The interest rate on a money is a prime indicator of how the economy is doing, not how the Fed is doing it. 90 day bills are near zero so entities are falling for the short t-bills and lend to Australia. That money is not being created to repay and the turn is going to really tear a few heads off. 10% isn't even close to what we are going to see. The SPX has a 2% dividend, meaning the bottom was more a reflection of what the top of the trading range should be, not the bottom. 1/2 the bottom or 333 is closer to what the market should trade at with the risk we have plus the lack of growth. The value of the index reflects the value of the stocks as a whole and indicates there are few bargains of any significance in stocks and the market should be avoided on the long side for anyone other than professional traders, which means that if this advice is taken, the stock of professional traders will shrink significantly. Currently, I would venture that the market is being held hostage by pair traders, who are long one stock and short another and only need the rate of change downward on their shorts to exceed the rate of decline on their longs to make money and thus are not wedded to the direction of the market. Anything that disturbs that relationship, like a sudden need of liquidity, will cause a crash.
on Wed, 12/02/2009 - 18:17
#149830
Pity independent thought gets junked now.
on Wed, 12/02/2009 - 14:15
#149434
Ahhhh, the benefit of a 'strong dollar policy'
Be in awe Japan, be in awe at how well the Fed has done
on Wed, 12/02/2009 - 14:20
#149438
I'll be the Japs are wishing right now they had a Fannie/Freddie to create garbage to back the yen.
on Wed, 12/02/2009 - 14:18
#149436
Oh and I am giving up my expensive charting package from today onwards as I now only need the dollar and what ever I am trading for charts! And I can get them for free.
Thanks Ben, you have saved me a lot of money :)
on Wed, 12/02/2009 - 14:20
#149441
Or you could just buy Gold, go to sleep for the next five years and wake up wealthy.
on Wed, 12/02/2009 - 14:29
#149454
It does make it simpler, doesn't it?
My "asset allocation" decisions these days consist entirely of which non-USD asset to hold my wealth in - gold, silver, oil, copper, etc.
Ultimate it doesn't matter because they all seem to keep rising, but it keeps me engaged.
Buying equities? What's the point?
on Wed, 12/02/2009 - 20:31
#150004
If you tried that in 1979 you would have lost your shirt...
on Wed, 12/02/2009 - 19:46
#149952
+1 LOL
on Wed, 12/02/2009 - 14:18
#149437
I don't give a fuck about the S&P. It can stop existing tomorrow and it wouldn't matter to me.
on Thu, 12/03/2009 - 06:01
#150449
Now now. The 500 has some goodies in it. The Dow 30 can and the 30 that would replace them upon death can all die.
on Wed, 12/02/2009 - 15:05
#149523
Hey Tyler,
I just ran that chart for the past 10 years and up to 2006, Nik/Gld has been traditionally significantly lower than the SPX/GLD ratio. Granted since 2006/2007 they have been in sync again, but i am not sure if the ratio spread is that significant - at least historically.
on Wed, 12/02/2009 - 15:07
#149526
What's going on? Its like everything in the market is frozen or something.
on Wed, 12/02/2009 - 15:20
#149547
Thought of that when the Nikkei was around 9000,except couldn't find an ETF that tracks the Nikkei peformance. Anybody knows any Nikkei etf?
on Wed, 12/02/2009 - 16:12
#149636
EWJ
(EW*) is the prefix for each iShares *country* market index ETF.
on Wed, 12/02/2009 - 16:01
#149623
I've been following the Hang Seng as to when the global market rally will end.
on Wed, 12/02/2009 - 16:13
#149638
mannfm11: cant devalue a currency -- what do you think excessive money creation does?
on Wed, 12/02/2009 - 16:37
#149678
The same divergence happens in 2003.
on Wed, 12/02/2009 - 22:31
#150200
The Nikkei is working on closing that gap, up 2.4% at mid day there.
on Thu, 12/03/2009 - 03:20
#150413
The copper and crude charts tell us what's happeneing to the global economy ...
http://www.zerohedge.com/forum/market-outlook-0
on Fri, 12/04/2009 - 10:01
#152323
Why are we comparing a price-weighted index to a cap-weighted index, again? Apples and oranges...