Tuesday, July 31, 2007

The Yen's a Movin'



The above chart of the FXY, which is my preferred vehicle to play the Yen, shows some excellent developments with the Yen. Remember that the Yen has been a major, if not the major pillar underneath this market. In similar fashion to our mortgage market over the last 4 years where NINJA (no income no job, no assets) and liar loans were commonplace, there has been virtually free money in Japan for anyone who wanted it. All that was necessary was a pulse and that criteria could be waived under proper circumstances. Regardless this carry trade(borrow yen and invest elsewhere) has been all the rage and we all know how herd like the 'smart money' is.
The chart shows the most recent gap now open 3 days which is the 'all clear' sign to buy it. Volume is surging and you can argue that this is short covering(remember those corpses who borrowed it now have to repay it). Remember the quote in Reminiscences of a Stock Operator, he who sells what isn't hisn' must buy it back or go to prisn', I always liked that one. Anyone debated what kind of volume it is truly is meaningless. Do not be like that 4 year old nephew everyone has who always asks 'why'! It's fine for him to do it but not for us as investors, so forget the post mortem.
Good trading to you all.

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