Lessons From Japan
- Posted by Greg Harmon
- on May 24th, 2013
You have all heard it before in one version or another. “The market can stay irrational longer than you can stay liquid.” “Just because the market is extended does not mean it can’t get more extended.” “A Relative Strength Index at 90 can always go to 90 before reversing.” Good sound advice but did you ever wonder just how long this stuff does go on? Well the Japanese Market ($EWJ) is giving a live example. I first wrote about the possibility of a top on March 20, 2013, a little over 2 months ago in The Japanese Market Move Could be in its Final Stages. A bit premature sure, but the story was unfolding and the technical indicators were there. And hey, I did not tell you to sell then. Then about a month later on April 26, 2013 in
Top 5 Reasons the Japanese Market is Overdone I got a little more aggressive about a top being near. Still not the top though. Thank goodness I did not suggest selling then either. It still had another month to move higher. I reached a peak in boldness just two weeks ago in Who’s Your Daddy! – Kuroda and Abe Are Dominating the Currency Wars on May 10, 2013. I have marked these dates on the $EWJ chart. The 50 day Simple Moving Average (SMA) caught it for Thursday, but the Bearish Crab extension calls for a move lower to at least 10.92, if not to 9.98. And the high volume, and falling RSI and MACD support more downside. Maybe its time to use the bounce last night to take your profits, if you were not stopped out Thursday, and wait for the dust to settle.
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Gregory W. Harmon CMT, CFA, has traded since 1986 and held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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