Okay folks, I need to pay attention to Japan. Opportunities like this one only come around a couple times in a lifetime. As I've mentioned here before and as it is now hitting the news you've probably been hearing about how the BOJ is manipulating their currency downward. They need to, they have zip for resources and have to rely on exports to survive. So I'm watching the EWJ, NKY, and DXJ etf's. And here is what I'm thinking:
When the Yen is falling against other currencies their industrial products get cheaper, their industry does better, and their stocks rise in Yen-value. But here's the catch. Even though their stock prices are rising in Yen the rise is muted in USD-value by the fact that the Yen is falling against the USD. So, trading the Japanese stock market is as much a currency play as it is a stock play.
Thus far the DXJ has outperformed the EWJ and the NKY because the DXJ is currency-hedged.
But now the Yen drop is extended, a 1.618 Fib extension, and could stabilize and bounce here which is better for the EWJ and NKY. The EWJ is coming into support; trendline and the center of a long congestion area and the weekly S1 pivot, all in the $9.80 area. So, it could be a buy Tuesday.
Checking the COT (Commitment of Traders) report for the Yen I see that the commercials (who are hedgers) are getting less long and the Large Specs are getting less short. The small specs (dummies) are maintaining a high short level. So, this is indicative that a long-term turn is coming but still looks to be several weeks or months away.
Checking the COT for the Nikkei, the commercials are net long, declining slightly to 62%, the Large Specs are 54% net long, and the small traders have been getting extremely short, now 66%. So I don't see a big correction coming for the Nikkei and it's safe to buy the dips.
So which one? EWJ or DXJ? Regardless of the COT, l still think the YEN is extended so I may dip my toe into the EWJ and then when a correction comes get really long the DXJ.
Sony (SN) and Panasonic (PC) are starting to look interesting too.