Yen Devalued 40% !
Exec Spec Yen Shorts Gain>100%. Technical analysis works, sometimes with surprising precision!
Desperate to guarantee economic growth, the Bank of Japan (BOJ) has used the US Bernanke playbook to engage in massive Quantitative Easing (QE) over the past 3 years. This money creation monetary stimulus has sent their fiat currency, printed out out of thin air, into the economy to buy assets at a rate of over $700 Billion a year (domestic & foreign stocks and bonds as well as real estate). This inflationary effort has mirrored the US experience with an enormous paper asset stock market rally of >150% in Japan in 3 years and by depreciating their Yen it has also supported US stocks in a carry trade flow of funds to higher interest bearing markets (US stocks up 60% over the same period). Exec Spec advise has been to Sell Yen this year in our broad macro-newsletters and in our shorter term KDelta futures trading system model we have post frequently.
Previous Exec Spec reports can be reviewed, however below we show the current Yen currency charts with previous reprints of Yen Sell signals and forecasts to belie the validity image of technical and fundamental analysis that allowed us to forecast in what direction a commodity would move, when it would start doing so, when it should be sold and where it should be exited. All of this was stated boldly well ahead of the actual price movement as we show in the following charts. Later we will update our outlook.
Two months ago in early April we revealed a longer term technical read of the Commitment of Traders stating that we were once again at a level where Hedge Funds (Large Speculators) had become too optimistic in their positions expecting the Yen to rally. In March we advised Selling above 84.
https://execspec.net/investors-yen-stocks/ This Link (you can cut & paste into your browser) should take you to one of our previous reports detailing our Bearish position on the Yen. In early April (chart below) we talked of the timing for a downside resolution near the 6 month mark. At just under 6 months the Yen broke lower dramatically to reach our summer target.
Our last 2 of 3 Yen Sell signals are shown below as prices were breaking down. These “go short” Sell signals were not publicized in hindsight, but stated as pending trades in our KDelta Futures report dated way back on February 12th 2015. Exec Spec gave the entries 3 months ahead of time and as seen here we also revealed the price to exit the Sell signals in advance. Our forecast was for a low in the 7944 to 7950 Yen to dollar zone with an advised exit at 7950: THE LOW thus far is 7945.
Our first chart lists the profit per Yen futures contract per dollar invested with gains of 213%, 144% and 109%. The later 2 trades took only 11 days to achieve. We are now neutral with a growing modest bias to the upside, with no specific signals pending.
What’s Next For The Yen
Forecast Analysis in any endeavor is an art form based upon assumptions and probabilities breaking down the complex into granular clarity that is proven over time to meet or exceed expectations to be valuable. We can estimate a sales forecast and we can use precise calculations to value a company before and after an asset sale or merger or determine the estimated market value for an IPO: but it’s still up to the artist to prove a consistent methodology that is more accurate and valuable than their peers.
Fundamental and technical analysis have merit as we tried to show here without digging too far into the shorter term technical weeds of our models. This recent Bearish Yen analysis was perhaps a more dramatic short to medium term forecast, but by no means is it unique if one reviews current and past KDelta model signals.
In order to attain high confidence to be more accurate and valuable to investors we don’t always have a position of risk in every market. There are no Yen trades currently as our major downside objectives have been achieved. We now heed the Bulls since the BOJ President stated that the Yen has fallen far enough and he now has switched from desiring a sharp depreciation to wanting stability. Japanese leaders want to sit back and see if the animal spirits of inflation can kick the Japanese economy into a higher gear. All quiet on the Eastern Front so far.
As we show below and stated in an earlier report on June 10th, we are noting this BOJ effort to jawbone the Yen a bit higher since the Large Spec commitments (see below) are back down to overly pessimistic Selling levels that have marked previous lows. Our broader work indicates we should be looking for either buying the pullbacks from higher levels or expecting to buy any retest or modest new low in the Yen over the summer. We will post if such a setup arrives.
Disclaimer and Notice: Nothing herein, including any attachments, should be construed as an offer to sell or as a solicitation of an offer, or a recommendation, to buy any interest in any investment or other product. This may contain information on investments that are high risk and have substantial risk of principal loss. It is for informational purposes only. Statements in this communication that are not statements of fact are merely opinions or forward looking statements from a potentially biased source(s) that involve known and unknown risks, uncertainties and other factors that could cause actual future results to differ materially from any prior or projected results. Statements in this communication may be inaccurate and/or unsuitable for you. You must perform your own due diligence. Your investment decisions should always be made based on your specific financial needs, suitability, objectives, goals, time horizon and risk tolerance. Any decision is at your sole discretion and at your sole risk. You are advised to consult with your individual investment and tax professionals before making any investment. Past performance is no guarantee of future results.