The JGB market was the barometer to watch in the 1 Quadrillion Yen Japanese debt market-JGBs, whether BOJ leader, Kuroda and Japanese Prime Minister Abe who set the country on this ambitious, QE on steroids course, look very much like they have lost control as I suggested days after they announced the true QE policy Bazooka, that trend continued overnight. For anyone who has looked at historical moves in Japanese JGB's, you know these are historical moves and acutely suggest Abe and Kuroda have lost control as we saw the next day after QE was announced (which was the biggest ever-doubling the BOJ's monetary base in 2 years) as the Yen started seeing accumulation that hasn't stopped and JGB futures went limit and tripped circuit breakers for days in a row.
Only the temporary move of USD/JPY over $100 which was the BOJ's target and an area that has the G7/G20 now speaking out whereas they were quiet before as they were engaging in the same currency destruction.
10-Year JGB futures, as mentioned, have now seen the biggest 2-day sell-off since 2008 during the Lehman Crisis. 5-Year JGB yields have moved to their highest Yields in 13 months at the fastest pace in 30 months.
The Implied volatility of Japanese Interest rates will pressure banks (Japanese) to reduce risk by unwinding positions including equities as well as others that will effect Europe's sovereign interest rates as well as FX rates.
As mentioned last night, the risk on currencies of the Euro and AUD looked like they'd head higher overnight, I suspected in to distribution and the $USD and Yen looked like their larger trend would win out with 5 min positives, here's the currencies as of now, thus far the signals I saw last night and my expectations have played -out right on time.
1 min Euro with a negative divergence in to a slight overnight gain going in to the open...
And as expected the $USD and Yen have positive 1 min signals as you'd expect from the Euro chart above, as well as...
The 5 min positives as seen above in the Yen here. The $USD looks very much (as it has for the last several weeks) as it is coming out of the pullback from the completed base. The Yen is looking like it will make a move higher as it continues to accumulate fro a larger move higher, the same thing we saw the day after the BOJ announced their QE and every day since, the length and size of the divergence suggests BOJ policy is a failure.
4 hour Yen 3C chart with an enormous Leading positive divergence.
4 hour chart of USD/JPY, I believe the BOJ spent all of its ammunition to get the pair to their target of $100, note the huge leading negative divergence on a 4 hour chart, rarely seen past a 15 min chart with pairs.
As for the Carry pairs, as suggested last night, they'd move higher and see distribution in to those moves, that happened, they moved higher again in the earlier morning hours and saw the same distribution again, I'd think whatever is left of the Carry Trades, they are being aggressively shut down as traders sell in to any strength, again, the herd breaking up.
EUR/JPY sold last night as I suspected and again this morning.
The same with the other carry pair, the AUD/JPY, you can see from last night's decline they were sold in to any small strength and again this morning with a negative divergence-these are the risk pairs that support the market when they rise.
The other risk pair (although not a carry pair), the EUR/USD also has a negative divergence right now.
As I suggested last night, the markets not being open and the position of the risk pairs as well as Treasuries is what had CONTEXT so out of whack, as you can see, it has changed...
From +20 to +14 when I wrote last night, it fell to 7.5 as the overnight risk pairs were sold, they ran up again sending CONTEXT off the early a.m. lows and are being sold again to put CONTEXT at a differential of + 9.7, I expect it to continue to fall.
Also moving CONTEXT, as I expected last night, any weakness in US futures (10/30 year) would be aggressively accumulated, they were.
10 year 1 min Treasury futures, they did gain overnight-further sending CONTEXT down...
10 year 5 min positive has grown even larger, exactly as expected, weakness in Treasuries or safe haven assets being accumulated, strength in risk assets being distributed. The more important 30 year...
1 min as it moved higher overnight on accumulation and the 5 min chart below...
An even stronger leading positive divergence, again, more proof the TLT move was a head fake not only for the normal reasons, but to save the SPX Thursday from an epic collapse, as the WSJ's Hilsenrath suggested Friday after the close, the F_E_D is not only looking for their exit, but trying to manage downside catastrophe, not hold up the market-trying to keep the sell-off as orderly as possible which is nothing new-the same thing they have done since the late 1980's.
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