The Bank of Japan has recently pledged to double its government bond holdings in two years, thus actually surprising the market with its extreme level of aggressiveness in trying to combat and reverse deflation that is plaguing Japan. The central bank concluded a two-day policy meeting with a statement that it would pursue quantitative easing as long as it needed to achieve its 2% inflation target. This policy announcement jerked Japanese markets in a big way. The yen got smashed downwards, trading down almost 400 ticks to the 1.04 level, and conversely the Nikkei is having a huge up day, spiking up more than 700 points on the announcement of massive stimulus and asset purchases by the BOJ.
We believe the key level to watch on the Nikkei is 12,500. Today, the market blasted up through that level all the way to 13,000. We could see a slight retracement to the high 12,000′s, but we believe that with the BOJ blatantly stating they will be buying Japanese bonds and assets, the Nikkei seems to be in a very bullish environment, mainly because of the BOJ’s actions.
RBOB gasoline is also down again today after a big down day yesterday. Today this market is down $.02 to $2.90. The Energy Information Administration changed the market’s positions by reporting a big uptick in oil supplies and refinery runs. Our first key resistance level is at around $3.03. If this market can stay below $2.90, we would not be surprised to see more big selling to the low $2.80s, especially considering a potential U.S. dollar rally continuing.
Other key commodities are down today, such as gold, silver, corn, soybeans, & crude oil. We believe the U.S. dollar rally is having a very bearish impact on commodities and we also believe this trend will continue.
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