Did Japan show the way?

BY ANDREW GIOVINAZZI

March 20, 2024

Yo Pit Crazies,

Mark is going live with a special Trading Desk 11am Fed Extravaganza. Sign up if you don’t want to miss it.

The chart below is of the MSCI Japan Index (Ticker: EWJ). Note over the last few days it has opened higher and closed higher than the previous days. This would not be a big deal except for the fact that Japan Inc. is leaving yield curve controls. Yes, giving up Modern Monetary Theory (MMT) Madness. In case you don’t know what MMT is, think of the new math and use it to create trillions of dollars out of thin air.

This means the Japanese Fed is done with negative interest rates and will start to normalize. Rates in Japan are going up and stocks…rallied! Two years ago the equity sky would have fallen.

EWJ 1 month chart

What does that mean for our own FOMC today?

The Japanese Ministry of Finance (MOF) tipped the Feds hand

There is no way the US Federal Reserve can cut rates while Japan just ended their experiment.

In fact, it gives Fed Chairman Powell cover to keep rates where they are. Sen Bernie Sanders and Eliz.

Warren wants the Fed to cut and they are wrong about just about anything when it comes to finance.

32 hour work week in an inflationary environment?

Oh my gosh.

US stocks looked red this am on the rate news pre-open and then Viola, rally ho.

It is almost as if the traders want the Fed to get out of the rate manipulation business.

For this reason, I think we rally hard into the end of the week if Jpow holds the line.

The glove was tossed today.

If Jpow goes weak, then a short term selloff for sure but I believe the rate gauntlet is thrown and lower rates will not be back for a while. Thank you Bank of Japan for the dose of reality.

I left some long calls open in the Trading Desk with just a light call hedge.

I plan on closing them with SPDR S&P 500 Trust (Ticker: SPY) over $520 this week.

To Your Trading Success,

-AG