Chart created using GET End-of-Day

Late last week, the Japanese Government Bond market started taking it on the chin. The monthly chart above most definately now looks like a downward resolution to a huge "coil" pattern that has been with us all the way back to late 1998. We'd suggest a longer term target here, basis Fibonacci rhythms of approximately 117.17, basis the front-month futures contract.

Can the world withstand a JGB market at 117.17? Probably not. Such an 11% decline in that market would likely cause ripple problems elsewhere in global capital markets. People will of course expect the yen to appreciate as Japanese interest rates head upwards, even though we do not (N.B. - please respect previously suggested USD/JPY stop-loss level at 104.50 recommended in the July 18 Chart du Jour).

Meanwhile, the GET computer system labels the current U.S. T-bond rally as the final C-wave of a big A-B-C 4th. wave. As long as our 1st wave down at 103:22 is not overlapped, our advice would be to sell T-bonds for a likely decline into the autmn months.

Chart created using GET End-of-Day

If these two charts break lower, then we should have two more factors weighing on global equities, but I wouldn't expect equities to truly resolve their own congested trading range until the week of September 4th. when we face several cyclical weekly PEI panic cycles.

So for the moment, watch the bond markets -- JGBs and T-Bonds -- as a potential harbinger of problems to come.

Please support Sand Spring Advisors and purchase one of our more in-depth articles below.

Ordering by Credit Card:
Our shopping cart is designed for both physical and subscription products, so do not be confused too much when it asks you for a shipping address. A correct address is important only for credit card authorization purposes. Your e-mail information is the most important piece of information to us for proper delivery of your article(s).

Disclosure Statement

Sand Spring Advisors provides information and analysis from sources and using methods it believes reliable, but cannot accept responsibility for any trading losses that may be incurred as a result of our analysis. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities, and should always trade at a position size level well within their financial condition. Principals of Sand Spring Advisors may carry positions in securities or futures discussed, but as a matter of policy will always so disclose this if it is the case, and will specifically not trade in any described security or futures for a period 5 business days prior to or subsequent to a commentary being released on a given security or futures.