Thursday, April 17, 2014

Green Shoots Get Clipped

As expected, the equity markets found support and bounced this week - albeit from a serpentine base established through Tuesday's volatile session. Our expectations going into next week is that risk aversions should seep back into the markets, with the yen poised to break higher out of the flagging and narrow range it has traded in this year - and the Nikkei turning back towards fragile support ~14,000.  

The more we weigh certain equity indexes and trends - namely the SPX and our European counterparts in Spain, the more we see a cyclical top being completed. While the euro has loosely followed the deflationary currency machinations of the yen during Japan's initial commencement of QE in 2001, the broader equity market trend established by the secular top in the Nikkei through the cyclical peak in 1996, also rhymes closely with what has transpired in Spain's IBEX over the last decade. 

From our perspective, the green shoots in Spain that have grown tall with the IBEX's strong showing since 2012 will be clipped just as they were repeatedly in Japan.    

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