{"id":33916,"date":"2016-04-17T16:27:03","date_gmt":"2016-04-17T23:27:03","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=33916"},"modified":"2016-04-17T16:27:03","modified_gmt":"2016-04-17T23:27:03","slug":"watch-out-for-the-nuances-of-the-japanese-yens-relationship-to-the-sp-500","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2016\/04\/17\/watch-out-for-the-nuances-of-the-japanese-yens-relationship-to-the-sp-500\/","title":{"rendered":"Watch Out for the Nuances of the Japanese Yen&#8217;s Relationship to the S&#038;P 500"},"content":{"rendered":"<p><strong>(This is an excerpt from an article I originally published on Seeking Alpha on April 11, 2016. <a href=\"http:\/\/seekingalpha.com\/article\/3964506-watch-nuances-japanese-yens-relationship-s-and-p-500\" target=\"_blank\">Click here to read the entire piece<\/a>.)<\/strong><\/p>\n<p>The Japanese yen (FXY) rang in the new year with loud alarm bells. At the time, I wrote about the implications for the surge of strength in &#8220;<a href=\"http:\/\/drduru.com\/onetwentytwo\/2016\/01\/04\/the-japanese-yen-flashes-red-for-2016\/\" target=\"_blank\">The Japanese Yen Flashes Red for 2016<\/a>.&#8221; The S&#038;P 500 (SPY) continued a steep sell-off from there that did not end until <a href=\"http:\/\/drduru.com\/onetwentytwo\/2016\/02\/13\/t2108-update-160212\/\" target=\"_blank\">the last oversold period bottomed out in mid-February<\/a>. The whole episode was another reminder of the inverse relationship between the yen and the stock market. However, the yen is now even stronger than it was to start the year while the S&#038;P 500 has managed an impressive rally off its February lows. {snip}<\/p>\n<p><center><br \/>\n<figure id=\"attachment_33917\" aria-describedby=\"caption-attachment-33917\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/04\/160408_FXY.png\" rel=\"attachment wp-att-33917\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/04\/160408_FXY.png\" alt=\"CurrencyShares Japanese Yen ETF (FXY) has soared in 2016...\" width=\"550\" height=\"375\" class=\"size-full wp-image-33917\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/04\/160408_FXY.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/04\/160408_FXY-300x205.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-33917\" class=\"wp-caption-text\">CurrencyShares Japanese Yen ETF (FXY) has soared in 2016&#8230;<\/figcaption><\/figure><\/p>\n<p><figure id=\"attachment_33918\" aria-describedby=\"caption-attachment-33918\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/04\/160408_SP500.png\" rel=\"attachment wp-att-33918\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/04\/160408_SP500.png\" alt=\"...yet the S&amp;P 500 (SPY) has managed to fight through the yen&#039;s weight and now trades around flat year-to-date.\" width=\"550\" height=\"375\" class=\"size-full wp-image-33918\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/04\/160408_SP500.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/04\/160408_SP500-300x205.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-33918\" class=\"wp-caption-text\">&#8230;yet the S&#038;P 500 (SPY) has managed to fight through the yen&#8217;s weight and now trades around flat year-to-date.<\/figcaption><\/figure><br \/>\n<strong>Source: <a href=\"http:\/\/www.freestockcharts.com\/platform\/v1\" target=\"_blank\">FreeStockCharts.com<\/a><\/strong><br \/>\n<\/center><\/p>\n<p>Yet, even with the presumed inverse correlation failing over a longer timeframe, <a href=\"http:\/\/www.bloomberg.com\/news\/articles\/2016-04-08\/yen-strength-trips-up-u-s-stocks-as-carry-trade-reverses-chart\" target=\"_blank\">Bloomberg was able to note a significant inverse relationship in a recent one-paragraph article<\/a>:<\/p>\n<p>{snip}<\/p>\n<p>So what gives?<\/p>\n<p>Well, basically both the timeframe and the cross-section of data matter when understanding the yen&#8217;s relationship with U.S. stocks.<\/p>\n<p>Bloomberg&#8217;s observation definitely holds in the data (<a href=\"https:\/\/drive.google.com\/file\/d\/0B7LPxp0nWPsSdVgtdlRRaW14Qlk\/view?usp=sharing\" target=\"_blank\">uploaded here<\/a> for those who want to review for themselves). {snip}<\/p>\n<p>Given the rarity of big FXY up days, one can imagine how the S&#038;P 500 can still manage to rally enough over time to work off the otherwise inverse relationship. {snip}<\/p>\n<p>With the Japanese yen capturing so much attention, I expected speculators to accumulate larger and larger bullish positions in favor of the yen. {snip} <\/p>\n<p><center><br \/>\n<figure id=\"attachment_33919\" aria-describedby=\"caption-attachment-33919\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/04\/160410_cot-USD_JPY.png\" rel=\"attachment wp-att-33919\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/04\/160410_cot-USD_JPY.png\" alt=\"Recent history suggests that speculators are now at maximum bullishness on the Japanese yen. Will they eventually push their bets even higher or have they simply scrambled to get well ahead of a big catalyst that will drive the yen to fresh levels of strength?\" width=\"550\" height=\"550\" class=\"size-full wp-image-33919\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/04\/160410_cot-USD_JPY.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/04\/160410_cot-USD_JPY-150x150.png 150w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/04\/160410_cot-USD_JPY-300x300.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-33919\" class=\"wp-caption-text\">Recent history suggests that speculators are now at maximum bullishness on the Japanese yen. Will they eventually push their bets even higher or have they simply scrambled to get well ahead of a big catalyst that will drive the yen to fresh levels of strength?<\/figcaption><\/figure><br \/>\n<strong>Source: <a href=\"https:\/\/www.oanda.com\/forex-trading\/analysis\/commitments-of-traders\" target=\"_blank\">Oanda&#8217;s CFTC&#8217;s Commitments of Traders<\/a><\/strong><br \/>\n<\/center><\/p>\n<p>{snip}<\/p>\n<p>While speculators are not scooping up ever-increasing bullish positions, Japanese citizens are apparently hoarding cash. {snip}<\/p>\n<p><center><br \/>\n<figure id=\"attachment_33929\" aria-describedby=\"caption-attachment-33929\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/04\/160410_GBPJPY.png\" rel=\"attachment wp-att-33929\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/04\/160410_GBPJPY.png\" alt=\"The British pound (FXB) has fared even worse against the Japanese yen than the U.S. dollar (UUP) mainly thanks to Brexit fears.\" width=\"550\" height=\"375\" class=\"size-full wp-image-33929\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/04\/160410_GBPJPY.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/04\/160410_GBPJPY-300x205.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-33929\" class=\"wp-caption-text\">The British pound (FXB) has fared even worse against the Japanese yen than the U.S. dollar (UUP) mainly thanks to Brexit fears.<\/figcaption><\/figure><br \/>\nSource: <a href=\"http:\/\/www.freestockcharts.com\/platform\/v1\" target=\"_blank\">FreeStockCharts.com<\/a><br \/>\n<\/center><\/p>\n<p>Be careful out there!<\/p>\n<p>Full disclosure: long USD\/JPY, short AUD\/JPY, short GBP\/JPY<\/p>\n<p><strong>(This is an excerpt from an article I originally published on Seeking Alpha on April 11, 2016. <a href=\"http:\/\/seekingalpha.com\/article\/3964506-watch-nuances-japanese-yens-relationship-s-and-p-500\" target=\"_blank\">Click here to read the entire piece<\/a>.)<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>(This is an excerpt from an article I originally published on Seeking Alpha on April 11, 2016. Click here to read the entire piece.) The Japanese yen (FXY) rang in the new year with loud alarm bells. At the time, I wrote about the implications for the surge of strength in &#8220;The Japanese Yen Flashes &#8230; <a title=\"Watch Out for the Nuances of the Japanese Yen&#8217;s Relationship to the S&#038;P 500\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2016\/04\/17\/watch-out-for-the-nuances-of-the-japanese-yens-relationship-to-the-sp-500\/\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[20,997],"tags":[420,1513,513,626,138,115,454],"class_list":["post-33916","post","type-post","status-publish","format-standard","hentry","category-forex","category-sp-500-analysis","tag-bank-of-japan","tag-commitment-of-traders","tag-fxy","tag-gbpjpy","tag-japanese-yen","tag-monetary-policy","tag-usdjpy"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Watch Out for the Nuances of the Japanese Yen&#039;s Relationship to the S&amp;P 500 - ONE-TWENTY TWO: Trading Financial Markets<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/drduru.com\/onetwentytwo\/2016\/04\/17\/watch-out-for-the-nuances-of-the-japanese-yens-relationship-to-the-sp-500\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Watch Out for the Nuances of the Japanese Yen&#039;s Relationship to the S&amp;P 500 - ONE-TWENTY TWO: Trading Financial Markets\" \/>\n<meta property=\"og:description\" content=\"(This is an excerpt from an article I originally published on Seeking Alpha on April 11, 2016. 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Click here to read the entire piece.) The Japanese yen (FXY) rang in the new year with loud alarm bells. At the time, I wrote about the implications for the surge of strength in &#8220;The Japanese Yen Flashes ... 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