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MKT Japan



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Last week the yen underwent a sharp reversal which suggests that the long
term bear trend may now resume. A sharp break below the previous pivot low
of 8188 would tend to confirm this. On the other hand, the Nikkei appears
poised for another breakout to the 17200+- area before any meaningful
correction. Assuming my analysis is correct, this demonstrates the kind of
situation which is a profit killer: a rising foreign market combined with a
declining foreign currency. This means that the foreign market will rise in
local currency but not prove particularly rewarding in US currency. In fact,
this suggests we may be close to a setup for an interesting futures trade:
long the Nikkei and short the Yen. On a fundamental basis, this week's
Barron's carried a (another) column suggesting that the devaluation of the
Chinese Yuan may be close at hand.

Earl

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