Charting the Crash

[wayneL]

Some are suggesting that this could be partly due to yen carry unwinding.

Could be apocryphal, but there you go.

PS Yen futures up strongly

 

[ducati916]

Well even if it wasn't [unwinding Yen carry trade] if the Yen currency starts to rise, then that in of itself will force the carry trade to unwind.........

If the Yen carry trade does unwind, that will cause uproar, this has been in place for a long time, there will be a lot of money moving in the opposite direction

jog on
d998

 

[wavepicker]

I'm seeing a few posts around the traps like this one on an English forum:



SPI is down 3% on SYCOM

and this one of another US financial site:-

Alert: Today, Tuesday, February 27th, 2007, China's stock market plunged 8.8 percent, the largest one-day drop in a decade. This comes on the heels of Greenspan's recent comments that a recession is possible later in 2007. It also comes as the technical set-up for world and U.S. stock markets warns of a coming significant decline

 

[Porper]

and this one of another US financial site:-

Alert: Today, Tuesday, February 27th, 2007, China's stock market plunged 8.8 percent, the largest one-day drop in a decade. This comes on the heels of Greenspan's recent comments that a recession is possible later in 2007. It also comes as the technical set-up for world and U.S. stock markets warns of a coming significant decline

Don't you all think you are getting carried away.

The US is down 1.5% not 15%.All we can do is sit back and see what pans out, maybe a larger correction is due, but don't forget we had this type of thing happening in May last year and look where the index is now.

As for China, yes it lost 8.8%, but what did it make in 2006 ? Well it made 130% !!

The important thing is to not jump in either way, see what the trend is after a few days, then trade in that direction, if that means going short, great, money to be made.

 

[wayneL]

Don't you all think you are getting carried away.

Probably! LOL

But for me, a few planets are lining up the right way. If Venus and Pluto would just pull into alignment, it's all over.

 

[wavepicker]

All we can do is sit back and see what pans out, maybe a larger correction is due, but don't forget we had this type of thing happening in May last year and look where the index is now.

And that May move was quite a significant tradeable correction in itself.

Just because market rebounded so strongly after the May correction does not mean it will do so in a similar manner again.

"What seems logical in the market is usually what does not happen"

Cheers

 

[noirua]

Markets appear to have been hit by a triple whammy. Announcements in China to curb the booming economy; intention of the South African Government to increase taxes on mining companies; and forecasts of a US recession later in the year.

 

[wayneL]

Well even if it wasn't [unwinding Yen carry trade] if the Yen currency starts to rise, then that in of itself will force the carry trade to unwind.........

If the Yen carry trade does unwind, that will cause uproar, this has been in place for a long time, there will be a lot of money moving in the opposite direction

jog on
d998

More on this topic:

http://www.bloomberg.com/apps/news?pid=20601101&sid=a3VGXNcEOVl8&refer=japan

Yen Gains Most in More Than 14 Months as Traders Unwind Bets

By Min Zeng

Feb. 27 (Bloomberg) -- The yen rose the most in more than 14 months against the dollar and advanced from a record low versus the euro as investors unwound trades betting on a decline in the currency.

Japan's yen also gained against the British pound and Canadian dollar after International Monetary Fund Managing Director Rodrigo de Rato said carry trades, where investors borrow in Japan and buy higher-yielding assets, may cause ``exchange-rate misalignments.'' Emerging market stocks slumped and the dollar extended losses after a report showed orders for durable goods dropped.

``There is a perfect storm brewing against yen carry trade,'' said Paresh Upadhyaya, who helps manage $29 billion in currency assets at Putnam Investments in Boston. ``The yen has further scope to appreciate as people cut back their short yen positions.'' A short position is a bet on a currency's decline.

Japan's currency climbed 1.8 percent, the most since a 2.2 percent gain on Dec. 14, 2005, to 118.57 against the dollar at 12:19 p.m. in New York, from 120.66 yesterday. The yen touched 118.53 per dollar, the strongest since Jan. 8. It also gained to 157.16 per euro from 159.13, rebounding from an all-time low of 159.65 on Feb. 23.

The yen also advanced 4.1 percent against the Turkish lira, 3.9 percent versus the South African rand and 2.8 percent against Iceland's krona as investors shunned riskier assets in emerging markets following a rout in Chinese stock market shares.

Swiss Franc

The Swiss franc, another so-called funding currency for the carry trade, also rallied against the dollar, euro, pound and Australia's currency.

At 0.5 percent, Japan has the lowest borrowing costs in the industrialized world compared with 5.25 percent in the U.S. and U.K. Switzerland's benchmark is 2 percent, while the European Central Bank's rate is 3.5 percent.

One-month implied volatility on options on the dollar versus the yen rose to 7.88 percent, the highest since Feb. 1, from 7.2 percent yesterday.

The increase may discourage carry trades, as it implies wider exchange-rate fluctuation risk. The one-month implied volatility of yen against the euro, the pound and the Australian currency also increased.

The dollar dropped to the lowest in almost two months against the euro after a government report showed orders for durable goods fell 7.8 percent in January from a revised 2.8 percent gain a month earlier, raising speculation signs of slow growth may push the Federal Reserve to cut borrowing costs this year.

Interest Rate Bets

The odds the Fed will cut interest rates 0.25 percentage point by its meeting in August rose to 72 percent, from 42 percent yesterday, according to futures contracts.

The dollar weakened to $1.3259 per euro from $1.3188 yesterday. It reached $1.3259, the lowest since Jan. 3.

``The durable goods report is dreadful,'' said Michael Woolfolk, senior currency strategist at the Bank of New York in New York. ``I think the market is writing the same conclusion: it is time to sell the dollar. Yield differentials are moving against the dollar right now.''

The difference in yield between benchmark two-year U.S. and Japanese bonds reached 3.88 percentage points, the least since Jan. 4.

The U.S. currency briefly pared some of its losses after reports showed existing home sales in January rose more than economists forecast and a gauge of consumer confidence this month unexpectedly rose to the highest in more than five years.

Riskier Assets

The yen also benefited as the decline in emerging-market equity markets also pushed investors out of riskier assets.

China's shares tumbled the most in 10 years on concern the government may crack down on illegal investments that helped drive benchmarks to records. Russian and South African shares also fell from all-time highs. Turkey's index had its biggest decline since June.

Japan's currency also strengthened as Iran defied a United Nations Security Council deadline for the country to stop uranium enrichment, which can be used for civilian power generation and building a nuclear weapon.

``Geopolitical risk is increasing on concern the U.S. may take action against Iran,'' Upadhyaya said. This boosted the yen's status as a safe-haven currency, he said.

`Nervousness in the Market'

``There seems to be a lot of nervousness in the market,'' said Steven Butler, director of foreign exchange trading at Scotia Capital Inc. in Toronto. ``The market has been unwinding carry trades.''

Disorderly global imbalances could be worsened by the increased usage of the ``yen carry trade,'' according to de Rato's prepared remarks last night before Harvard Business School alumni in Washington.

The yen has snapped two months of losses against the dollar after a government report this month showed Japan's economy grew the fastest in almost three years in the fourth quarter and the central bank last week raised borrowing costs.

The Washington-based Commodity Futures Trading Commission last week said the difference in the number of wagers by hedge funds and other large speculators on a fall in the yen compared with those on a gain -- so-called net shorts -- was 116,195 on Feb. 20, compared with net shorts of 167,505 a week earlier.

 

[wayneL]

Reuters take on YCT

http://www.reuters.com/article/reut...?src=022707_1311_INVESTING_comment_n_analysis

Is the party over for the yen carry trade ?
Tue Feb 27, 2007 1:09PM EST

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) - The party for yen "carry trades" may be ending sooner than expected, after a 9.0 percent slump in Chinese stocks on Tuesday prompted investors to reduce some risk in their leveraged portfolios.

The Japanese yen jumped more than 1.5 percent against the U.S. dollar, and was up about 1.0 percent against the euro on Tuesday, as investors unwound trades in which they had borrowed yen at low interest rates and used the proceeds to invest in higher-yielding assets in other currencies.

The yen had slid to a four-year low against the dollar in January, as low Japanese interest rates and low volatility in global financial markets, resulted in the "carry trade" value soar to an estimated $1 trillion.
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The Bank of Japan's decision last week to raise its benchmark interest rate to a decade-high of 0.5 percent did little to restrain investors from selling the yen and buying instruments with higher yields, until now.

Tim Lee, founder and president of Pi Economics, an investment advisory firm in Stamford, Connecticut, said the end of the carry trade regime could be a "devastating financial collapse."

"We would be seeing a lot of hedge funds and investment banks which have benefited from carry trades go under. When these trades reverse, they all reverse together and the yen is a crucial part of it," he added.

Analysts say the warning signs have been evident for the last few weeks. ====$$$$>>>>CONTINUED<<<<$$$$====

 

[ducati916]

The massive short's on volatility are about to be handed their lunch if what is being proposed by the articles comes to pass.

Whereas, if you're long volatility, you're going to be scooping it up with a bulldozer.

Market liquidity will evaporate.

jog on
d998

 

[Atomic5]

I just think Greenspans mouth wants the "Weapon of Mass Destruction Award" for 2007 YTD.

He's anticipating Bernanke's mouth repeat expected shot for the title (2 years running) on Wednesday.

 

[wayneL]

The massive short's on volatility are about to be handed their lunch if what is being proposed by the articles comes to pass.

Whereas, if you're long volatility, you're going to be scooping it up with a bulldozer.

Market liquidity will evaporate.

jog on
d998

VIX up 43% to circa 16%

A stunning one day rise from historic lows

 

[Realist]

intention of the South African Government to increase taxes on mining companies.

Isn't that good news for Australian mining companies in Australia?

 

[noirua]

Isn't that good news for Australian mining companies in Australia?

Hi, As long as they have no interests in South Africa. All the major mining stocks fell from 3% to 8% in London. Dow is down 225.8 and the FTSE closed down 2.31%. Nothing but a sea of red.

 

[wayneL]

Hi, As long as they have no interests in South Africa. All the major mining stocks fell from 3% to 8% in London. Dow is down 225.8 and the FTSE closed down 2.31%.

noirua,

Dow is down ~360

 

[wayneL]

Holy Crap

-425

<edit> just printed a low -486

 

[ducati916]

Hi, As long as they have no interests in South Africa. All the major mining stocks fell from 3% to 8% in London. Dow is down 225.8 and the FTSE closed down 2.31%. Nothing but a sea of red.

I recommend the backstroke, conserve that energy.
S&P500 -48.64

jog on
d998

 

[wayneL]

Just tick -500

-533

lol I cant keep up

 

[BSD]

Woah - the DOW just GAPPED 180 points

Those program traders are a real good risk managment tool aren't they!


Down 530 now

 

[ducati916]

I think it has actually entered the *panic* stage now.
Wild ride.
Always wanted to trade an historic day.

jog on
d998

1 hour to go