2011-04-07th (Thurs)

The descent of Nikkei 225 from 9830 (2011-04-01) to 9393 (2011-04-07) was almost completely retraced today in one fell swoop in the last trading day of the week (2011-04-08).

Nikkei 225 is currently 9773.1 (2011-04-08, 01:54 am EST) and will end their week of trading in 6 mintues.

This morning Japan was hit by its largest aftershock of 7.1.  Fortunately the Fukushima Dai-ichi nuclear power complex where workers have been frantically trying to cool overheated reactors since they lost cooling systems on March 11th, 2011 reported no new abnormalities.

If you can... and I am not saying I could.. how could anyone possibly do so... put aside the emotional impact and focus purely on the data it is a fascinating intellectual exercise.  I have no doubt financial practitioners will be studying these March and April months to fine tune existing crisis management policies and procedures.

Examining the 1-Min Candles you can clearly see intervention represented by short bursts of Buying followed immediately by a gradual descent and this was repeated 4 times.  Imagine yanking the strings of a kite to make it rise quickly, and then it falls some; and then you yank the string again to make it rise quickly again, and then it falls some again.

What an elegant piece of empirical evidence of intervention with surgical precision.  My hats off to the central bankers for their decision to participate and protect their market.  We have seen this kind of determination before in the days immediately after March 11th.  In the next week we will have to keep a watchful eye to see which firms are executing such trades, although we have a good idea where the money is coming from, it will be note worthy to see when the ammunition will run out and how fast the Nikkei 225 will retrace back as the volatility subsides again.

All this will weaken the Yen against the USD, and hence the Thesis to Long USDJPY which I am on the opposite side of the trade.

Contra The Herd
I believe the USD printing presses are running faster, and continue to be hurt by my Short USDJPY position.  $300 Billion Yen is a drop in the bucket compared to $1.4 Trillion USD and some may argue with the accuracy of my numbers.  Although this is a weak Thesis, if I only believe in the weakening USD then I should Short USD against some other currency.  There is more but I prefer not to disclose.

As of this moment the fourth White House emergency budget meeting is over with no deal made, and President Obama postpones his trip to Indiana.  European Central Bankers are debating the Portugal situation.  I expect defaults as this is the only way for the debt to go away.  Kicking it down the road by refinancing will only extend the pain to the next generation and hurt them more.

Currently I have the following positions;
Long 50 contracts Copper May 2011 with ACB of 437.88
Short 100000 USDJPY with ACB of 82.458
Short 1300 contracts Nikkei 225 with ACB of 9557.38

Copper May 2011 is currently at 446.55 (2011-04-08, 02:23 am EST)
USDJPY is currently at 85.14 (2011-04-08, 02:23 am EST)
Nikkei 225 closed at 9762.80 (2011-04-08, 02:23 am EST)

Could have should have would have.

I stood my ground when Nikkei 225 was In The Money, and got kicked back into the red by today's spike.  Next time just ride the trend if you are really a day-trader dummy!  Now I am itching to increase my Short but I tell myself not to and instead to use tomorrow, Sat, Sun to research more.

I am standing my ground on Copper May 2011 currently 446.93 (2011-04-02, 02:35 am EST) and not taking gains off the table although recent price-action hints tomorrow Friday as possibly a large reversal day that can bring me back into the red.

I am considering turning around my USDJPY trade from Short to Long, but am standing my ground for reasons already mentioned earlier in the Contra The Herd paragraph of this report.

Stay Tuned.

Jeff
(2011-04-08, 02:40 am EST)