How to Play the Stock Market When They Keep Changing the Rules?
By Aaron Tyrrell
I’ve got a cousin who likes to play board games. But no one will play with her. Because she has a habit of changing the rules as the game goes on…
I’m sure you know the type.
Just when you think you’ve got the rules down pat, she makes up new ones.
Or changes old ones.
Or knocks your pieces off the board.
And all you can do is go back to square one and adjust – that’s if you want to keep playing.
This is where we’re at in today’s market.
Just when you think you can see what is meant to happen, the government intervenes and – BANG! The rules change.
Reuters reports the Group of Seven (G7) sold an estimated Y530 billion on Friday 18 March to weaken the Japanese Yen. And according to an article on Yahoo news, traders think the Bank of Japan bought back about $25 billion with yen, to boost supply and weaken the currency’s value.
Kris talked about what this is doing to the Aussie dollar last week.
According to Murray Dawes, (the technical genius behind Slipstream Trader) the central banks have basically come out and said they’ve capped the Yen. They won’t allow it to climb.
And this manipulation is stuffing up the market.
Murray has spent over 20 years in the markets. He’s battled it out in the trading pits. He’s handled multi-million-dollar accounts for some real high rollers.
But right now he’s incredibly frustrated.
Because – thanks to this outside interference – it’s almost impossible for him or any experienced trader to tell where the market is going to go next.
Below is a chart Murray knocked up of the Aussie Yen versus the ASX 200. The AUDJPY is in blue. The ASX200 is the black line.
AUDJPY vs ASX200
Source: Slipstream Trader
As you can see, they are about as closely correlated as they could be.
You see that sharp selloff to the right of the screen? The low was the same day as the G7 intervention… now take a look at that turnaround!
The ASX200 can’t keep pace with the rally. But it’s trying to.
Murray called the rally to 4700 – using his technical indicators – but just when the market should have fallen, the G7 stepped in and propped it up again.
The market is like a feather floating on the breeze. And the central banks are using a big cash fan to keep the feather afloat.
Eventually they’ll blow it so far it’ll fly out of reach… then nothing they can do will stop the crash from happening.
But here’s where you’re at today…
The US dollar is weakening.
The yen is weakening to the US dollar.
So, versus the Aussie dollar, we’re seeing a large sharp spike in that Aussie yen which is feeding through to strong buying in the equity market.
And things could be about to get interesting…
You see, Murray says the market has rallied into a key sell zone.
Source: Slipstream Trader
Over the last two years, this area (around the 5000 mark) has provided amazing resistance… you can see the market has failed to break through it four times.
We’re rallying strongly into that zone. And Murray expects we’ll meet resistance here… but if we continue to rally through and break out to the upside – and the strength of this market continues unabated next week – who knows where it could go?
Instead of looking for ways to cash in on this rally – or a crash – you might be better off waiting to see what the market will do next. Because we’re still waiting for the smoke to clear from the G7′s latest effort. And you need clear vision if you’re going to profit from what happens next.
Aaron Tyrrell
Money Morning
