The Bank of Japan surprisingly expanded their asset purchases to $80 trillion per year or around US$727 billion. This action pushed the Japanese stock market up 4.83% while sending their currency into new lows with the dollar yen trading above 110. This action has surprised all market participants and we are seeing a sharp increase in prices across the board.
The central banks continue to make real price discovery an illusion as they are driving asset prices higher while getting very little action in the actual economy.
There is a panic going on at least in Japan and possibly in Europe about deflation. Germany released its inflation numbers earlier and showed a 0.7% annualized rate, well below the 2.5% targeted. Japan is also struggling to get there inflation rate above the 2 percent level. With oil prices continuing to be under pressure this is causing massive amounts of deflationary pressures across the entire planet. This response by the world markets is interesting as you would’ve thought that the BOJ was putting money in all of the economies of the world.
The subject is very complex and I would make sure that I tune into the market thunder broadcasted today to go over all the details that are affecting the markets and their actions. Our meetings are now password protected. Please see the dashboard or check your email for a passcode. If you cannot find the passcode, please send an email to support@VPMpartners.com
Be sure to tune into Market Thunder at 12:00 noon Eastern Time today for a complete review of all the technical aspects of the S&P 500, treasuries, US dollar and more.
Looking at the technical viewpoint, the markets were able to surge one more time closing at the 1994.65 level. This suggests that the market is experiencing an extension in the move to the upside. Should the market open where they are indicated as of the writing of this commentary, it is likely that we could see a historical high on the S&P.
When looking at the VPM Daily models, they have not been able to detect a lot of trends, even on a short-term basis as the short-term database bullish percent is currently 39%. The global equity daily models currently have IJR and SPY as long positions. And it appears, should the market close firmer today, that there could be a weekly buy come in on the small cap IJR and the Russell 2000.
The key level on the upside for today is 2005.95. Penetration of this level will suggest a further advance to the 2017.30 level which is the extreme resistance posted below.
On the downside, the key level is 1989.30. A penetration would suggest a decline toward 1977.35. There is currently only a 30% probability for that to occur.
In the end, this rally will most likely represent the blow-off top that we been waiting for. Our run for Monday will reflect what this rally has been able to turn around, if anything. There continues to be a very narrow participation over all in these stocks. While it has broadened out slightly, this is far from anything that would resemble a robust uptrend.
The market should open higher, with a 60 percent probability to close higher, should the market remain above the S1 level today
Today’s Key Levels
|Prior Close||1994.65 +12.35|