The Chart du Jour
Late last week, the Japanese Government Bond market started taking it on the chin. The monthly chart above most definately now looks like a downward resolution to a huge "coil" pattern that has been with us all the way back to late 1998. We'd suggest a longer term target here, basis Fibonacci rhythms of approximately 117.17, basis the front-month futures contract.
Can the world withstand a JGB market at 117.17? Probably not. Such an 11% decline in that market would likely cause ripple problems elsewhere in global capital markets. People will of course expect the yen to appreciate as Japanese interest rates head upwards, even though we do not (N.B. - please respect previously suggested USD/JPY stop-loss level at 104.50 recommended in the July 18 Chart du Jour).
Meanwhile, the GET computer system labels the current U.S. T-bond rally as the final C-wave of a big A-B-C 4th. wave. As long as our 1st wave down at 103:22 is not overlapped, our advice would be to sell T-bonds for a likely decline into the autmn months.
If these two charts break lower, then we should have two more factors weighing on global equities, but I wouldn't expect equities to truly resolve their own congested trading range until the week of September 4th. when we face several cyclical weekly PEI panic cycles.
So for the moment, watch the bond markets -- JGBs and T-Bonds -- as a potential harbinger of problems to come.
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