David Stockman’s warning that the Federal Reserve’s quantitative easing is steering the world’s largest economy toward a crash is at odds with nine quarters of job growth, record stock prices and unprecedented corporate earnings, former fiscal and monetary policy makers said.
This is quite correct. However, there is nothing preventing these facts from changing. And if they do, the fallout could be severe. That is what his message was. I wholeheartedly agree with him, too.
But until such time, there is likely more upside. Yesterday's session ended with two very important levels, one of which looks to be exceeded today in the regular session . . . 1564.07. Above that level creates a three-wave structure thus yielding a correction. To the downside, 1551.90 is a hard stop should the correction morph into something more complex (which is always possible, though perhaps not probable).
New highs should eventually follow a rise above 1564.07.
Japan's Nikkei cracked 12,000 last night and things are not sounding good there. Another new low may create a five-wave impulse down which would cause me to bail on my last 1/3 position. Since I'm expecting an eventual bottom around 5,000 I don't want to get too cute with this trade.
Japanese Prime Minister Shinzo Abe is already taking heat for his weak yen policy. Finger pointing has started between him and Finance Minister Taro Aso, Bank of Japan Governor Haruhiko Kuroda, and Former Bank of Japan Deputy Governor Kazumasa Iwata.
Zero Hedge had a great piece on it last night:
The past 10 days have seen the Japanese Yen strengthen 3% against the USD - its largest such move in two years - with today's rally prompting a rather painful 'crash' in the Nikkei 225 at the open and envoking the anger of Abe:
- *ABE SAYS CURRENCY CORRECTION HELPING EXPORTERS COMPETITIVENESS (except that there is no evidence of this in any macro data at all)
- *ABE SAYS IT'S POSSIBLE BOJ WILL FAIL TO REACH INFLATION TARGET (like for the last two decades)
- *ABE SAYS ECONOMY SUBJECT TO UNFORSEEN CIRCUMSTANCES (unpossible)
- *ABE SAYS BOJ MUST EXPLAIN IF IT FAILS TO REACH INFLATION TARGET (not my fault!)