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Friday, October 31, 2014

Japan breakout has already happened


So Japan blew up today:


A few short weeks ago, when people were grasping for fundamental explanations for the hedge fund position adjustments that caused world markets to drop, everybody was so damn sure that that Japan was still mired in deflation and the sales tax hike was going to destroy the country.

I didn't worry, because Michael Shaoul was providing proper empirical commentary on Japan that showed it was still recovering and the tax hike has caused no damage.

By the way, nowadays Shaoul is really showing his spots as a sadomonetarist hard-money inflationista. He has some strong underlying biases that are not intelligently informed by economics. But his commentary is still useful. I just have to remember to ignore parts of what he says.

Anyway, today the US Japan ETF gaps up and suddenly the threatened 18-month channel fail turns around to a threatened 18-month channel breakout.

I'm tempted to sell, because a 4% pop in one day is silly and (looking at this chart) I really think the breakout can't happen in the next couple days. Too fast too soon.

But I won't sell. Because I don't own EWJ, I own this:


This TSX-based ETF hedges out CAD/JPY forex distortions. And it says Japan already pretty much has broken out in CAD terms.

Target? I dunno. But just in case the US markets have little upside left in them for this year, and I do like to aspire to beat the performance of SPY (or VFV.to anyway), I'm going to hold half my money in Japan instead.


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