Friday, January 29, 2016

Japan Surprises World By Expanding QE to Negative Interest Rates

News
Headlines of economic weakness are getting hard to deny. The global economy is contracting with alarming speed. The Economic Activity Composite (EAC), a leading proxy for US economic activity and negative since early 2015, is negative and contracting fast. The trend, a message that significantly increases the odds of an officially-recognized recession in the United States in 2016, won't elude recognition for long. The majority, always a day late and dollar short in terms of timing, will PANIC only after economic reality completely invalidates their opinion-driven beliefs that the US economy can be an island of economic strength.

Negative interest rates, the favored policy of the interventionists within European and clearly now Japan, charge depositors to park their money in banks. Japan's unexpected and hardly decisive (5-4 vote) move, represents would could be the last desperate attempt of Japanese central planners to reinvigorate its economy through an unorthodox expansion of version of QE and Abenomics; the fact that all other versions of QE have failed to stimulate growth for nearly a quarter century suggests the depth of their desperation. Don't expect the Japanese media to point that out at least initially.

A string of bearish setups within increasing Q3 distribution from August 2015 to January 2015, a long-term bearish message for the Yen, suggest that the invisible hand understands the situation unfolding in Japan. Agreement of price, leverage, and time is needed to focus the down impulse or decline (see Review of Yen).

Headline: Stocks surge on Japan's negative rates surprise

It's the last trading day of January and it's off to a positive start thanks to a surprise move by Japan's central bank.


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Market-driven money flow, trend, and intermarket analysis is provided by an Insights key.