Extension

Who to trust: Shinzo Abe or the president of the fund that manages the world’s largest pool of pension savings. One is conducting a very large experiment with other people's money. The other gets paid to manage other people's money, and evidently does it well, because he manages $1.2 trillion for Japan's Government Pension Investment Fund.

This man, Takahiro Mitani, says the Bank of Japan’s unprecedented monetary easing will fail in its goal of spurring 2 percent inflation. I agree.

If this happens, it will put the Nikkei into a tailspin and counter-intuitively strengthen the yen (even though I still feel the yen will weaken considerably in the next 10 years). We may be seeing the first gyrations of such a scenario: the Nikkei is down over 3% in the last two days. Not much, but on the heels of a 100% red Europe for the second day in a row (ex-Iceland; no more debt), it's worth noting that our troubles here may not be Taper-related or Black Friday-related but globally related: as in the global liquidity experiment, joined at the hip with Abenomics.

Yesterday was the first time in a long time that the market extended to the downside, completing a 200% Fibonacci extension with more looking to come. A 261.8% extension targets 1781.91. The last swing point, which the Dow blew through yesterday, is 1777.23, and is also game.

Nonetheless, I'm a buyer for a hedge trade against January VIX 15 calls and Dec 17s. I'm adding a bit of SSO and using January SPY 180 calls. Holding 181s at a loss from yesterday.