Mean Reversion In Land Of Rising Sun?
Kevin Davitt | Nov 25, 2013 01:29PM ET
Year to Date the Nikkei (NKZ13) is up nearly 50% and the Yen (v. US Dollar) is down about 15%.
Ostensibly, "Abenomics" are working:
Abenomics is the name given to a suite of measures introduced by Japanese prime minister Shinzo Abe after his December 2012 re-election to the post he last held in 2007. His aim was to revive the sluggish economy with "three arrows": a massive fiscal stimulus, more aggressive monetary easing from the Bank of Japan, and structural reforms to boost Japan's competitiveness.
However, the Nikkei and the Yen have been unable to break above the May 22, 2013 highs and lows respectively.
As a reminder, on 5/22 Bernanke was before Congress (Humphrey Hawkins testimony) and hinted that Tapering could begin in 2013. His comments sent the Currency/Fixed Income/Equity markets into a tailspin.
- May 22nd Nikkei Highs: 15,740
- May 22nd Yen Lows: 96.75
- Currently: 15,600 and 98.15
I would consider SELLING the Dec Nikkei futures (NKZ13) @ 15,650 with a stop slightly above old highs. I would also consider BUYING the Dec Japanese Yen (JYZ13) @ 97.90 with a stop around 2013 lows.
You MUST be comfortable with about $1,500 in futures risk (plus frictional costs) for each 1 lot.
- Target a cover between 15,100 and 15,300 on the Nikkei depending on your risk tolerance. Try to make between $3,500 and $5,000.
- Target a cover around PAR (1.00), so try to make about $2,700.
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