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MV Weather Report: Rising Sun for the Yen


Rain or shine, we review the day's biggest stock stories.

We haven't had a trading day like this in some time: Traders who bought the 2-month trading range sold into today's panic, bonds and the yen rallied, crude oil sold off again -- and did I mention that the market as a whole rallied late in the day to close unchanged?

Here's the play-by-play: Let's start with the range buyers. From May to June, the S&P 500 ranged from 875 to 956. Many traders who missed the rally bought in this area, thinking it was the pause. Today, the S&P 500 breached that level briefly intra-day. This led to some panic selling, and the S&P traded to a low of 869.

At 1:00 p.m., there was a 10-year note auction. The results were quite strong: The high-yield was 3.36% versus estimates of 3.398%. The bid to cover was 3.28 times, compared to an average of 2.42 times; indirect bidders were 43.9%, compared to an average of 27.8%.

On today's Buzz and Banter, Professor Fil Zucchi gave his thoughts on the auction.

"So the 10yr. Treasury went great and the long end of the Treasury market is ripping. The 30yr (US1) is now above the 120 price level and yesterday registered a Perfected Sell Setup. However, the chart shows little reason for the march up in price to end here. I am going to sit tight and revisit the chart nearer to the TDST Up level, in the 123 - 123'19 range.

"Incidentally a very sharp bond watcher recently suggested that there won't be any problems financing our ever growing deficits because the jump in the consumers' savings rate is creating all kinds of demand for safe assets.

"So let me get this straight: Joe Six Pack is now getting drawn into financing a debt that there is no way in the universe can ever be repaid in our lifetimes, other than by borrowing the money from someone else (can you say Madoff). When will the bag holding by the public end?"

The market loved the results of the auction and rallied off the lows. The S&P 500 closed the day down just 0.17%, at 879. The NASDAQ and the DJIA closed up. This is quite an improvement from earlier trading. If the market closed below 875, bear alarms may have gone off.

The big action today was in crude oil to the downside and the yen to the upside. Crude traded down on poor inventory numbers; oddly enough, oil-related stocks -- Transocean (RIG), Weatherford (WFT), and Schlumberger (SLB) -- didn't see much of a reaction.

The yen rallied to a 4-month high against the dollar and the euro, most likely because the yen is seen as a safe haven due to Japan's trade balance.

Today on the Buzz and Banter, Professor Mark Bloudek gave his take on the yen:

"The carry trade is under massive pressure again. The yen is the strongest currency on the screen followed by the dollar while the weakest currency is the Aussie dollar. This has been the classic environment when asset prices (AKA Equities) are put under pressure. There are some 1 minute candles that are breath taking in the USD/JPY."

A quick side note for those looking to trade the yen: The FXY ETF is probably the best way to do so.

What a day -- I'm beat. Have a great night!
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No positions in stocks mentioned.

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