We're Turning Japanese, I Really Think So

The second breakout attempt of 2016 has just failed.  It failed at the 50% retrace line, and broke back below the 38% line.  That is around the 191.50 area.  That should prove difficult to move higher though on this go around.  If 187.70 area fails we can expect a move back below 180 area.

The cause for alarm this time is Japan.  Believe it or not the market did not think Japan went negative enough.  Japan is in a deflationary collapse, and all of their efforts to reflate are not working.  Essentially they are running out of ways to arbitrate the interest rate differentials, and when you go negative, it is like quantum physics, the rules change.  Instead of forcing borrowing and credit creation which causes the inflation they want people and businesses simply leave the banking system and the country.  That is a big problem for them, and the rest of the world as it drives deflation worldwide.

We now have the three largest trading nations/blocs, all exporters, with negative interest rates or rapidly devaluing their currencies, or both.  This will crush the profit margins of our multi-nationals due to currency,  and our domestic companies through price dumping into our shores.

Remember growth cannot separate from interest rates, and margins follow growth, and stock prices follow cash flow.  All of this brought to you by the smartest people in the room.  This will not end well.  Cash, Gold, and Treasuries are the safe havens this year.