Japanese Stocks Hit Bear Market

Joining its partner in economic destruction and currency devaluation (Argentina), Japanese stocks have just crossed over to the dark-side. After a glorious "well, the market is up, so everything must be great" rally of 85% in six months, the Nikkei 225 is now down over 20% from its highs - signifying a 'bear market'. This is the largest 10-day plunge in 27 months as volume has exploded on the downside. We wonder how the herds representing these five charts are feeling now? At the same time, JPY has broken back below 99 against the USD (and AUDJPY is at 5 month lows) as the entire JPY-funded rampage comes undone - seems like the message from the FX option market was spot on again. This is the lowest level in two months since Kuroda first spoke at the BoJ. Get that porta-potty ready, Abe... What next? Blame speculators? Short-sale ban? Shorting ban?

 

Initially sparked by a 5.0 earthquake - which was quickly saved - once the Japan's 30Y bond sale had passed (and ramped JGBs), equities started to fade rapidly... then the desperate defense of USDJPY 99 began (which sent JGBs lower)...

 

and then "it" happened... (just look at the two 250-300 point ramps that were tried to spark some momentum before it finally failed)...

 

From its highs at 16,020 on 5/22, the Nikkei 225 has now dropped 20% (12,815) - officially entering bear market territory. The low before it bounced was 12,810.

 

 

This is the first time near the 100DMA (green line) since the rally began...

 

leaving the Nikkei return (hedged for JPY) only 7.2% YTD... (and at three-month lows)...

 

It seems the BoJ has indeed lost control of the triumvirate of JPY, JGBs, and Stocks - as the latter now place each other in jeopardy at a higher and higher beta to JPY's swings.

 

Charts: Bloomberg