Annotated Nikkei
By Barry Ritholtz - September 25th, 2009, 11:30AM
Another David Singer annotation:
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Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
September 25th, 2009 at 11:46 am
I did this chart yesterday at New York’s Hotel Pennsylvania, where I was attending a Continuing Legal Education seminar up on the 18th Floor. Shout out to the little internet cafe on the first floor. The hotel has alot of foreign guests among them a smattering of some fine international talent. The international feel got me thinking “Nikkei”, especially given the raging “inflation v. deflation” debate.
A few things I was wondering about:
1) What was the relationship between Yen strength or weakness and the huge upmove in the 80′s.
2) The size of the “countertrend rally” of the 2003 lows. From 7,600 to 18,000 yet not the beginning of a “new bull market.
3) Whether the NIKKEI has bottomed, or whether there needs to be one final leg down taking out the old lows before this brutal bear can be considered over.
4) Whether anything in this chart can be useful in analyzing U.S. equities.
Anyone?
September 25th, 2009 at 11:52 am
The technicals of the Nikkei chart are compelling and it will be interesting to see if it breaks above resistance in the near future, or if this is yet another sucker’s rally in post bubble Japan.
From a fundamental view, it’s interesting to see that the current administration in Japan is talking UP the yen, contrary to the policy of the past two decades. Encouraging the carry trade hasn’t ended Japan’s problems, so doing the opposite will be interesting to observe. The potential consequences on the USD, however, may not be so fun to those of us who are primarily dollar denominated…
HCF
September 25th, 2009 at 11:59 am
Boy, he can sure draw straight lines and his handwriting is really good. That’s a hell of a chart. I especially like the numbers on the bottom and side. They make it look really important.
How come they line drawer only selected some tops and bottoms and ignored others? I can see where he could put some more lines and they will look really important, providing he took out some other lines he put in earlier. Otherwise it would just look like a chart with a lot of extra lines. Is there a rule about how many extra lines you can put on a chart or can you add a lot of lines, providing they look like they mean something?
I’ve seen some line drawers on TV mark up charts and they only added a couple of lines and they made sensational predictions, except all of them said “might, maybe, could” and other weasel words. I bet this one is guaranteed to be a genuine chart.
September 25th, 2009 at 12:00 pm
well, pre 1999, the $nikk traded inversely to our market ($spx for example). I remember Donald Cox of BMO showing a chart once of the $nikk bull (1984-1990) and our bear market, then our ensuing ~10 year bull and the nikkei bear..
September 25th, 2009 at 12:03 pm
dead hobo: Right on. At least Singer makes charting out to be what it really is, just data mining and guesswork. He even posted that yesterday with his many possible scenarios for the SPX. Any of them could be true, so what’s the point?
September 25th, 2009 at 12:07 pm
“The size of the “countertrend rally” of the 2003 lows. From 7,600 to 18,000 yet not the beginning of a “new bull market.”
LB rode that rally, more by luck than design. It was a great ride.
Harry, how about those durables? I left a post for you over on the Bankslaughter thread…
September 25th, 2009 at 12:09 pm
4) i have seen charts that show a heavy correalation between the ebb and flow of govt stimulus programs and the performance of the stock market. bascially, every time the govt tried to pull back the market went down… i’ll try to find one..
so if you think the US is going to be in a Japanese style enviroment for the next decade driven by asset deflation and deteriorating growth/demographics then you might adopt a strategy of selling stocks when the govt starts to talk about withdrawing stimulus (as we heard out of the FOMC on Weds) and buying when the govt gets scarred enough to pile it on again..
carry trade – if you borrow in yen to buy assets in other currencies and the yen goes up it costs you more to repay the loan while the value of your assets drops.
a currency move like we have seen in the last few weeks will wipe out years of positve carry.
i think the recent strength in the yen is due to carry trades that were short yen/long dollar being unwound..
September 25th, 2009 at 12:16 pm
Leftback: I replied to you over there.
September 25th, 2009 at 12:16 pm
On point 1) – the Yen was forcibly appreciated by around 80% during this period thanks to the Plaza Accord in 1985. The bulk of the appreciation occurred immediately after the Plaza Accord and the Bank of Japan adopted its loose monetary policy in response. Like any chart of the Nikkei this just shows the big bubble those two events produced.
September 25th, 2009 at 12:19 pm
@wanger
How’s that Rimm trade? Plus care to comment how wrong you were about the Durable Goods and the Housing numbers? Everyday we are seeing a worse report, not better as you claimed.
Things are getting worse, not better.
September 25th, 2009 at 12:20 pm
Barry -
These charts are great. Please keep posting them. Steve does some great work.
September 25th, 2009 at 12:22 pm
“so if you think the US is going to be in a Japanese style enviroment for the next decade driven by asset deflation and deteriorating growth/demographics then you might adopt a strategy of selling stocks when the govt starts to talk about withdrawing stimulus (as we heard out of the FOMC on Weds) and buying when the govt gets scarred enough to pile it on again..”
Precisely.
Bear in mind that USG’s # 1 priority is the Treasury market, as a blowout would impact all private, municipal and corporate credit adversely. Until deficits and debt are reduced they cannot and WILL NOT risk blowing up the bond market. Equities are expendable, relatively speaking. This is why I bought long bonds in June.
September 25th, 2009 at 12:23 pm
HarryWanger Says:
September 25th, 2009 at 12:03 pm
At least Singer makes charting out to be what it really is, just data mining and guesswork.
reply:
———-
H Wanger, there may be hope for you yet.
September 25th, 2009 at 12:33 pm
dss: I replied regarding RIMM, AAPL, Durables and Home Sales on the other thread.
September 25th, 2009 at 1:05 pm
Vermont Trader @ 12:09
“so if you think the US is going to be in a Japanese-style environment for the next decade driven by asset deflation and deteriorating growth/demographics then you might adopt a strategy of selling stocks when the govt starts to talk about withdrawing stimulus…and buying when the govt gets scared enough to pile it on again”
I think we’ll continue to get Fed stimulus and/or govt stimulus until one of two things happens: (a) the 2012 presidential election comes and goes, or (b) inflation becomes obvious to everyone.
September 25th, 2009 at 3:14 pm
Nikkei still trending up and is still above 50% of trend range.
Chart: http://tinyurl.com/yd8axdj
the 50% is at 10182.67 and is where I’d pay attention. My .02
September 25th, 2009 at 3:25 pm
@AmenRa
For sure, this recent rally is still in tact… What is the level you are using to calculate your 50%? I see the 13 week MA just crossed above the 55 week MA, but both are still well below the 233 week MA.
September 25th, 2009 at 3:36 pm
I use the high and low of the TLB as a guide. If it breaks 50% the chance of a reversal increases. Then I look to see if there are any reversals on the daily TLB. Yes, the 13EMA did cross the 55EMA. I’m waiting to see if the Nikkei close below the 55EMA also (which means it would have also closed below the 50% price).
September 25th, 2009 at 4:11 pm
I found a NIKKEI chart I did in JAN of 2008…
http://singerprofitcharts.blogspot.com/2008/01/nikk-nikkei-225.html
September 25th, 2009 at 9:42 pm
not current to this posting, but thanks david, for the S&P Scenarios post. Probably confirmation bias, but i’m thinking the inverse Head and Shoulders. (i’m not a TA guy, but that’s where my fundamental target lies for the bottom). It is rather interesting with both H&S top and bottom mirror that could play out. There is no doubt that stupid humans follow patterns, looking at all the shenanigans these days however.
September 25th, 2009 at 10:45 pm
BTW, the references to which i was referring are:
http://www.ritholtz.com/blog/2009/09/annotated-dow-update/#comment-217150
and
http://www.ritholtz.com/blog/2009/09/thursday-reading-2/#comment-218893
(1078 being coincidentally, or maybe not, 1.618×666)
Like the charts David. Very interesting, though i tend to believe primarily in my voodoo analysis for the 474 eventual bottom. Yes, I am a charlatan.
September 25th, 2009 at 10:46 pm
it left out singer’s link: http://singerprofitcharts.blogspot.com/2009/09/five-scenarios-for-s-500.html
September 25th, 2009 at 11:30 pm
Here is a gem Diggidy:
http://www.stockvision.org/books/Dickson_G_Watts-Speculation_as_a_Fine_Art_and_Thoughts_on_Life-EN.pdf
September 25th, 2009 at 11:51 pm
thx david, i searched and found your site and am going to read up on that. Already read confessions and am trying to currently digest mandelbrot and social darwinist behavioral books. . . have to add it to the list. It’s quite hard in this environment working 60 hrs a week to survive.
September 26th, 2009 at 1:06 am
Don’t trust any chartist that uses a pencil, especially a pencil with a worn eraser.
September 26th, 2009 at 11:29 pm
speaking of charts/charting..
anyone (follow/is a fan of) ‘Andrews’ Pitchfork’, or Pitchfork Charting?
September 28th, 2009 at 1:57 pm
@Hoffer
I don’t know why these channels with a median line are useful, but in my experience they are…
Apparently, this is the rationale behind the Andrews Pitchfork, which i don’t use as a tool, but is essentially the same thing…
http://www.investopedia.com/articles/forex/05/AndrewsPitchfork.asp