Yen Depreciates and Stocks Threaten Another Breakout

Nasdaq 5-28-15

Stair stepping higher! The Nasdaq and all US stock indices have been mired in a trading range in recent months that has confounded Bulls and kept many investors and forecasters either on the sidelines or calling for a summer correction.  We would like to join the correction camp, but the potential for another leg up with all time periods showing higher highs and higher lows keeps us wanting. The market has frustrated many with the constant gyrations in a congestion zone that allows negative divergences and doubt to surface. Earnings are sluggish, the economy is weak and fears of a Fed rate hike are popping up more frequently, yet stocks are within 1% of their highs.

For us the carry trade support of the recent Japanese Yen breakout to the downside adds support to our stock market. As the Yen depreciates, thanks to Quantitative Easing (QE), it sends Japanese investors into US and Japanese stocks where returns are more attractive. Thus far US stocks have not surged to record highs as the Yen broke down this week, but there is still time.

Readers will recall many times in recent weeks we have expected a Yen correction to new multi-year lows to resume. Our KDelta futures trading model forecasted and executed a Yen Sell signal that was actionable well ahead of this recent short position based upon our published reports.

Jan Oil

Now let’s see if US stocks led by the Nasdaq (QQQ) can join the Japanese stock market (Nikkei) with new record highs soon.

nikkei

 

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