Thursday, May 23, 2013

Idio(syncra)tic Japan: Nikkei Cannot Even Manage a "Dead Cat Bounce", Down 468 Right Now

(UPDATE) Nikkei ended the day up 128, afternoon swing of over 600 points. Both BOJ's Kuroda and Finance Minister Aso call the moves of yesterday and today as "just normal, daily fluctuations". Daily fluctuations of 1,000, 1,500 points is apparently the "New Normal" for so-called "Abenomics".


It was down 176 when I started to write the post...

Today's high was 15,007, and the low was 13,981(for now). The intraday swing of 1026 points is about two-thirds of that for yesterday. I was watching the Fibonacci 38.2% bounce from the yesterday's close (around 14,920), and sure enough the index overshot a little in the opening, stayed around that level for the morning but couldn't break that level.

For those of you who wonder "What's the big deal if Nikkei goes back to what it was in early May?", a normal, functioning stock index that reflects fundamentals does not go back to that level in one trading day.

The reason for the afternoon swoon, as I gather from Nikkei Shinbun, is BOJ Governor Kuroda's speech. He apparently only talked about generalities like "It is desirable that the long rate will move in a steady manner". He didn't even mention yesterday's stock market collapse. So, the market participants decided Kuroda had nothing new to offer either to stabilize the long bond rate or the stock market, and started selling index futures.

Earlier in the morning, when the market was up 500 points, Chief Cabinet Secretary of the Abe administration declared it was a sure sign that the Japanese economy was steadily improving. There was even a bizarre comment by a Japanese investment manager that the very fact that Nikkei dropped so much in one day shows they were not in a bubble.

Now, with 25 minutes to go, Nikkei is minus 55. It was jumping 100 points up or down every few seconds for a while. It's broken.


Anonymous said...

That is the whole point: from december until now Nikkei stopped reflecting any fundamentals.

Maju said...

Dead cats only bounce when they touch ground...

arevamirpal::laprimavera said...

Maju, excellent point. LOL.

Post a Comment