It may be America's decade, but looks like it is Japan's year
The land of the rising sun continues to energize trade, blasting rates and FX in particular in convulsive directions. JGBs have had both their most bullish and most bearish week this month in more than 10 years (percentage range and percentage change).
This isconsistent with a blow off base in yields and emerging bear market. We are watching upside support near 1.05% accordingly. While this has put pressure on overly comfortable JPY shorts, we think this should be seen as an opportunity to fade near-term JPY strength.
The volatility has stopped the decline in gold but the precious complex is anything but uniform: silver and platinum are range-bound while palladium has been bid. Overall, price action is a symbolic welcome to what should be expected at the onset of the Northern
Hemisphere's summer and the choppy tone it tends to shepherd in.
Weekly focus: Revisited: DJIA at all-time new highs, what now?
Similar to the historical trajectory in the fourth year of the Presidential Cycle that the DJIA followed so closely last year, we are following the trajectory we published earlier this year when the market makes an all-time new high. We identified nine new all-time highs in the DJIA using data since 1900 (a previous high must have held for at least two years before a new all-time high is to be declared). We then computed returns on an investment made at the close of the fresh all-time high held for 365 days. The average of these returns is then compared with the current year's returns since the DJIA made a new all-time high in March. While 2013 has been more aggressive to the topside, the
April/May correction suggests the tone is the same. This keeps our eyes peeled for another setback in June but adds confidence to our ongoing bullish view for equities into the end of the year.
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