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BofA Fears The End Of 'The Japan Trade'

Tyler Durden's picture




 

"The Japan Trade is in trouble," warns BofA's Macneil Curry (and rightly so after this week's utter collapse in Japanese data and Abe's soaring disapproval rating). Over the course of the past week both USDJPY and the Nikkei have broken key technical levels which point to further substantial downside in the weeks ahead.

 

BofAML's Macneil Curry explains...

Specifically, $/¥ has closed below its 200d average (now 101.71) for the first time since Nov'12, while the Nikkei has closed below 5wk trendline support (now 15,276). In both cases these breaks of support point to new 2014 lows before greater signs of stabilization. However, we must make clear that, despite our negative medium term outlooks, both of these markets remain in long term bull trends. We will look for these long term bull trends to re-emerge around the beginning of Q4, but for now we are BEARISH.

Chart of the week: $/¥ is breaking down

Since early Feb, $/¥ has been caught in a well-defined contracting range. NOW, the closing break of the 200d (101.71) says that the range trade is giving way for a bear trend. The downside is seen to at least 99.21, potentially 97.40

The Nikkei is rolling over

Similar to $/¥, the Nikkei outlook is turning negative. The break of 5wk trendline support (now 15,276) says that further weakness is coming. Minimum downside targets are seen to the multi-month range lows at 13,995, but weakness is more likely to extend to the confluence of support between 13,194/13,107.

*  *  *

And if JPY goes, we all know what happens to risk assets around the world (especially now the PBOC has removed the 'easy' carry trade in CNY; and Treasury "fails' threaten to 'tighten' repo markets)

 

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Sun, 06/29/2014 - 20:07 | 4908270 knukles
knukles's picture

So no more little flimsy tin toys from USA, Japan?
I remember them!

Sun, 06/29/2014 - 20:17 | 4908291 DoChenRollingBearing
DoChenRollingBearing's picture

They make good bearings out of steel though...  Still!

Sun, 06/29/2014 - 20:22 | 4908310 kaiserhoff
kaiserhoff's picture

You must be older than dirt, knucks;)

Hell yes, I remember.  The small town of Usa, Japan was very helpful.  Truth in advertising.

Sun, 06/29/2014 - 21:18 | 4908415 Dead Canary
Dead Canary's picture

I remember tearing apart a toy truck (circa 1967), and part of it was made from a Hersheys coco can.

Sun, 06/29/2014 - 20:16 | 4908275 LetThemEatRand
LetThemEatRand's picture

If the Yen carry trade falls in a forest of Fed driven purchase of equities and only algos are there to hear it, will it make a sound?

We'll find out.

Sun, 06/29/2014 - 20:57 | 4908392 remain calm
remain calm's picture

It happens very quitely then it becomes deafening quickly

Sun, 06/29/2014 - 21:24 | 4908425 prains
prains's picture

only if the hello kitty vibrator is really big

Sun, 06/29/2014 - 20:08 | 4908276 AccreditedEYE
AccreditedEYE's picture

BofA... Bastion of all that is horrible advice and contra returns. Provided for free on ZH!

Sun, 06/29/2014 - 20:33 | 4908330 macholatte
macholatte's picture

 

 

I understand that quoting the minions of the Big Banks is important because there are some people who take their advice. Nevertheless, I'd like to know the track record of some of those guys. Tyler had no problem making fun of Gartman. So what about the guys from BofA and Citi and so on? How about a ZH scorecard?

 

If God dropped acid, would he see people?

Steven Wright

 

 

Sun, 06/29/2014 - 20:48 | 4908373 T-NUTZ
T-NUTZ's picture

He would see Dead people.

Sun, 06/29/2014 - 21:40 | 4908466 Dead Canary
Dead Canary's picture

I vaguely remember an article here last fall or summer I think. Somebody looked at every stock recommendation for the past two years by Goldman Sux and if you did the opposite, you would have made money on every trade.

God I love Zero Hedge.

Sun, 06/29/2014 - 20:37 | 4908340 Cursive
Cursive's picture

@AccreditedEYE

Yeah, but you gotta admit, Japan is good and fucked....so is every other country, but Japan will be first to the post.

Sun, 06/29/2014 - 20:43 | 4908360 kaiserhoff
kaiserhoff's picture

In principle I have to agree, but Iraq isn't looking too peachy, nor is Syria.

May be a rush to the fire exit soon.

Sun, 06/29/2014 - 21:00 | 4908398 AccreditedEYE
AccreditedEYE's picture

Cursive, I eagerly await the bust as much as the next ZH'er, I'm just not going to hold my breath. ( seen the Nikkei lately?)

Sun, 06/29/2014 - 22:32 | 4908582 Cursive
Cursive's picture

@AccreditedEYE

You are right.  No one knows the timing.  I'm lucky that I don't make a living in the markets....but something wicked this way comes.

Sun, 06/29/2014 - 22:36 | 4908593 Crocodile
Crocodile's picture

Japan holds the second largest amount of US Debt, assuming that China is first and also assuming that the FED is not the top-dog.  Either way, the ripple effect could be enormous in that it is the proverbial straw that breaks the current world economic system as we know it today, which much death & destruction will fall in the wake and ripple across the world...maybe by design.

Sun, 06/29/2014 - 20:12 | 4908283 ZH Snob
ZH Snob's picture

what cunning insight.  no wonder bofa is the corporate magnate they are today.

Sun, 06/29/2014 - 20:19 | 4908299 knukles
knukles's picture

corporate maggot?

Sun, 06/29/2014 - 20:13 | 4908284 intric8
intric8's picture

There are significant problems everywhere you look in the world. Someone make a case for how we will all survive, because i dont see a way out.

Civilizations come and go. We are witnessing the the 'going' part of our current one. If the strong survive, i wonder who those 'strong' are

Sun, 06/29/2014 - 20:23 | 4908312 cossack55
cossack55's picture

Superb question.  Salut'

Sun, 06/29/2014 - 20:25 | 4908317 Reaper
Reaper's picture

The clever. The devious. Those that trust no one. It'll be like being a beast in the jungle.

Sun, 06/29/2014 - 21:32 | 4908445 bunnyswanson
bunnyswanson's picture

Servants and slaves of the last man standing, as he succumbs to his wounds from the duel ... the meek.

Sun, 06/29/2014 - 21:44 | 4908481 Reaper
Reaper's picture

In the jungle, you do not fight to the death, because you could be injured and lose even if you won. You avoid and minimize all conflict in which you are not in total control. The largest bear in the woods is not the bear which won all battles, but rather the bear who avoided all those battles unessential to survival.

Sun, 06/29/2014 - 21:46 | 4908482 intric8
intric8's picture

Or peeps with a higher than normal resistance to nuclear radiation

Sun, 06/29/2014 - 22:26 | 4908570 Crocodile
Crocodile's picture

The times are unprecedented, but to one group and only one..this is expected and it will be bitter-sweet as to the final outcome.  The good news, from the human perspective, is this earth & man will be around for at least another 1007 years.

Sun, 06/29/2014 - 22:30 | 4908575 Crocodile
Crocodile's picture

BTW, who are the strong that have survived every NWO?  The people who are best at practicing, pilfering, greed & corruption backed by deadly force; I cannot think of any exceptions except one, but that was 3-5 thousand years ago.

Sun, 06/29/2014 - 20:34 | 4908331 DirkDiggler11
DirkDiggler11's picture

The Chinese have made our QE look like amateur hour for central bankers.

The Japanese are hell bent on destroying their own economy.

The Europeans are finding out socialism isn't free, and every bank in the EU is a zombie.

We all know how fucked the US economy is and that we will NEVER pay off our current debt load.

Throw in a dash of Argentine bond default, and some running of the banks in Bolivia for good measure.

How can any rational person look at the current economic situation in country after country across the globe and and say that Gold and Silver are not a good store of value ? Fucking unbelievable. That's ok though, my stacks multiply much more rapidly at our current sale prices.

Sun, 06/29/2014 - 20:33 | 4908333 T-NUTZ
T-NUTZ's picture

Sayonara Bitchez!

Sun, 06/29/2014 - 20:35 | 4908334 GS-DickinDaMuppets
GS-DickinDaMuppets's picture

Yep, Kyle Bass knocked this one out of the park over a year ago.......

Sun, 06/29/2014 - 20:40 | 4908349 scubapro
scubapro's picture

 

do a comparions/overlay of usd/jpy and the ten yr treasury.    so the yen weaker but rates up?  okaaaay.

 

its just like the heads everyday, rates must go up b/c they are low.  yet stocks will go up b/c they are high.  and stocks can go up even if rates go up (since higher rates mean econ growth)  smoke anotha!

Sun, 06/29/2014 - 20:52 | 4908380 dragoneyes74
dragoneyes74's picture

Yeah it sure looks like the USD/JPY wants to breakdown soon.  The next BoJ meeting is Thursday July 10th, so maybe it hangs around till then.  If it does breakdown, the stock market reaction will be very interesting.  

Gold and silver still look fine, but with NFP and ECB this Thurs, and Yellen speech on Wed, there's plenty of potential catalysts for one more stop run spike down before they (hopefully) head higher toward $1360.  Gold has a lot of support in the 1290/1300 area, so I expect buyers to come in, but I'm totally cool with just going higher from here too.

Looks like NFLX wants to make the $16 run at its highs.  If I was a big hedge fund guy with a monster position I'd be hanging around the highs for anyone who wants to take them from me.  

 

 

Sun, 06/29/2014 - 20:59 | 4908399 Caviar Emptor
Caviar Emptor's picture

If Japan goes, so goes the empire. Like losing India to the British, East Germany to the Russians, Galia and Brittania to the Romans.

Sun, 06/29/2014 - 21:26 | 4908429 Dead Canary
Dead Canary's picture

I want chaos and I want it NOW!

(I have a shitload of silver and I am eager to use it to become warlord of the Pacific North West!)

Sun, 06/29/2014 - 21:26 | 4908432 Joebloinvestor
Joebloinvestor's picture

They finally reveal just how fucked the island is.

Sun, 06/29/2014 - 22:38 | 4908602 Crocodile
Crocodile's picture

At least it is "glowing".

Mon, 06/30/2014 - 02:23 | 4908862 Dead Canary
Dead Canary's picture

Gotta love those 40 pound, self cooking Fukushima lobsters! Yum.

Sun, 06/29/2014 - 21:29 | 4908435 flyonmywall
flyonmywall's picture

Pm. Abe and the BOJ are complete amateurs compared to the printing POWAH of the Yellenator ! We have not yet begun to print!

Japanese policies might seem insane, but I'm predicting you haven't seen real insanity yet. You haven't seen it, until it's in your own house, staring you in the face.

 

Sun, 06/29/2014 - 22:40 | 4908605 Crocodile
Crocodile's picture

LOL.."we have not yet begun to print!"...Thanks for the laugh, still laughing.  Anyone know who supplies the paper for the money printing; looks like the future growth is good; perhaps a good investment.

Mon, 06/30/2014 - 15:30 | 4910894 combatsnoopy
combatsnoopy's picture

and DUHmericans are amateurs at heding our purchasing power in the country that we import most from.  Read up on "Mrs. Wantanabe's" purchase of AUD when PM Abe drops the value of the Yen and how DUHmerican boomer realtor/real estate flipping trash and company won't even allow us enough purchasing power to hedge in OPEC's basket of currencies.
Abe's RATINGS may drop, Japan's economy won't though.  

Sun, 06/29/2014 - 21:52 | 4908497 AdvancingTime
AdvancingTime's picture

The writing is on the wall. Japan is facing a wall of debt that can only be addressed by printing more money and debasing their currency. This means paying off their debt with worthless yen where possible and in many cases defaulting on promises made. Japan's public debt, which stands at around 230% of its GDP and is the highest in the industrialized world.

 The moment the Japaneses stock market fails to rise enough to offset inflation this will turn into a tsunami of  money fleeing Japan and constitute the end of the line for those left holding both JGBs and the yen. This has been a long time coming and I contend the cross-border flow of money leaving Japan is why some stock markets have remained so resilient . When Japan crumbles it will be felt across the world. More on this subject in the article below.

 http://brucewilds.blogspot.com/2014/05/japan-sliding-towards-abyss.html

 

Sun, 06/29/2014 - 22:18 | 4908552 Spungo
Spungo's picture

I have an interesting idea to test if technical analysis is bullshit. Give one team of analysts an unlabeled chart of USD/JPY then give another group of analysts an unlabeled chart of JPY/USD. If what they're doing is science, the two charts should come to the same conclusion (one say buy, the other say sell).

Sun, 06/29/2014 - 22:38 | 4908600 Tartarus
Tartarus's picture

Don't worry! China will sav- . . . . oh shit.

Sun, 06/29/2014 - 22:46 | 4908617 Yen Cross
Yen Cross's picture

       lmao "Macneil Curry says both trades are in a bull trend." (usd/jpy and Nikkei)

    What's happening is all the weak longs will get flushed out of usd/jpy over the next several months as the carry unwinds and Japans' macro situation continues to deteriorate. Then the bond (JGB) market will start to crack and usd/jpy will go parabolic.

Sun, 06/29/2014 - 23:14 | 4908692 Jimmy Carter wa...
Jimmy Carter was right's picture

Listen up folks! Coming this fall to an archipelago with four seasons near you! Spot on.

Sun, 06/29/2014 - 23:13 | 4908689 Jimmy Carter wa...
Jimmy Carter was right's picture

This is exactly right tomodachi!

Sun, 06/29/2014 - 23:47 | 4908742 disabledvet
Mon, 06/30/2014 - 09:05 | 4909200 Notsobadwlad
Notsobadwlad's picture

Surprised that financialization leads to moral, ethical and cultural ruin? Not-so-much.

The temptation to take the easy way and to band with others of a similar ilk and parasitically feed off of the work of others must be something unbearably attractive to some.

Why are we so weak?

Mon, 06/30/2014 - 15:44 | 4910967 combatsnoopy
combatsnoopy's picture

WHo is smart enough to hedge  purchasing power in the country that we import most from.  Read up on "Mrs. Wantanabe's" purchase of AUD when PM Abe drops the value of the Yen and how DUHmerican boomer realtor/real estate flipping trash and company won't even allow us enough purchasing power to hedge in OPEC's basket of currencies. 

Abe's RATINGS may drop, Japan's economy won't though.  

The problems are going to be located in China.   Not Japan. 
And I'm sure that unlike DUHmerican "flip real estate to rob innocent AMericans instead of protecting purchasing power..."---

China has no external area to invest in anything, the barrier from China investments to the US is held up.  The Hong Kong Dollar is backed by the U.S. Federal Reserve, and they have no outlets outside of Asia to invest?

Does anyone want to see the second coming of the ASEAN crisis?  Oh wait, if Macau doens't take enough of their money we will see another ASEAN crisis.  From OVERinvestments.  The US markets should be taking up Asian volume.  But nobody here wants to fix anything.  

Asian oligarchs exaggerate their problems to keep the currency low.  
You all know that "gullible" was taken out of the Merriam Webster dictionary.

Hence, here's the big almighty reason why I strongly believe that Japan will come out ahead (and that YEN should be a bargain soon....)

HEALTHCARE SECTOR.

Japan is the one country who through easy access to healthy FRESH REAL food and healthy habits caused them to keep illnesses at bay and they have the most affordable healthcare in the world.
Their "socialized" healthcare sector is not considered a money maker so these companies/pharmaceuticals don't have the money to lobby against the welfare of their citizens. 

China and the U.S. are infested with monetary influenced conflicts of interest.  China's scapegoating Glaskosmithkleine. which is stupid since they used that as an excuse to spy on some guy having sex with his own girlfriend (having sex with your own girlfriend isn't exactly scandelous in anybody's book).   In my humble opinion, the Chinese failed. 

A large number of people have to work with QUALITY INFORMATION ("science" in Asia is often bought off) and access to healthy foods/exercise.  Japanese smokers were the oldest living humans.  

The point is that their "socialized" medicine remained at mercy of the invisible hand- which was perfectly implemented with PERSONAL RESPONSIBILITY.  And in part, their culture impresses PERSONAL RESPONSIBILITY.  In the U.S., patients are nothing like this.  We don't need EVERYBODY?  But with the markets being made up of 60% algo trades, look at it this way.  Most of the companies listed on any exchange now is more illiquid than perceived by the fundies.

Which means it won't be as difficult to bankrupt Bristol Myers Squibb as they think we can.

Unlike Petroleum, we don't NEED so many drugs to keep us healthy.  We do need good tasting FRESH healthy food.  We can't get out of using gas to drive to work.  But we can eliminate the chemicals in our food.  

Also it's not dangerous to be poor in Asia like it is here in the U.S.  They don't have mortgage broker funded blockbusting or "white flight" in Asia.

But without the excessive burden for healthcare for the aging Japanese - unlike the U.S. and China, they will pull out ahead of the U.S..  And they deserve it.    

If I had the money, I WOULD buy Japanese bonds.  I would buy something so they can innovate accessories?  ANYTHING to encourage, enable and entertain personal responsibility because coming forward this is already where the demand is at.  

 

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