Another short Morning Call--Beware of Japanese bearing gifts

The Morning Call

5/11/16

The Market

         

    Technical

            I thought that I would give you a look at the S&P after yesterday’s moonshot.  Note that it did not break a very short term downtrend.

    Fundamental

            Yesterday’s ‘let’s get jiggy’ move up seemed most likely a response from the ‘money for free’ crowd to a Japanese officials comments that the government was considering actions to reduce the value of its currency---‘comments being the operative word.  Remember both the Chinese (G20 meeting) and the US (Treasury) have made implied threats regarding further moves from major economic countries toward additional competitive devaluations via monetary policies.

            If I were the Japanese, I might take the Treasury threat as idle (given this administrations record with enforcing threats) but not the Chinese.  That doesn’t mean that the Japanese won’t take further steps to weaken the yen; it does mean that if they do, there are likely to be consequences that won’t be pleasant for them or the markets.

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