- New Science in old markets -

That Yen move and equities update

The Yen experienced a 'flash crash' moment yesterday in reverse as it soared and then dipped. This reminded some commentators of the experience of the British Pound in the 'outrun period' from the UK Brexit vote but there are important differences:

  1. Although both seemed like 'climaxes' that came after existing trends the earlier example was due to panicky selling of the pound, not panicky buying of the other currencies. Yesterday's event was caused by heavy (most likely domestic) buying of the Yen, which is qualitatively different. The Japanese regard their own currency as a flight haven (uniquely in the world) but a fit of prudence doesn't have the same urgency as a spasm of fear.
  2. The Yen rose from a recent weekly-scale compression signal (see first chart below) and this argues that there is more strength to come once the daily-scale extensions that occurred yesterday have 'worn off'. The British pound fell into the low point of October 2016 after a prior fall of some three months as the second set of charts show.  The £ was a buy for the next 18 months but we don't think the Yen is an equivalent 'sell'

Yen daily and weekly

Here is the £ history in the few weeks after the Brexit vote (these charts end in early 2o17):

£ daily & wkly post Brexit

Next, here's an update to the four equity index charts we sent out in the December 26th edition when we advised buying stocks more aggressively. The rallies since then have seemed strong (9% in the S&P,  5% in the Eurostoxx) but these charts show that there is plenty more potential. Keep buying dips.

Valua, R2K, Belg, Port wekly bott2

All signals courtesy of software supplied by our friends at Parallax Financial Research www.pfr.com