Until U.S. stocks regain their composure, Mr. Hiroshi Arano
2020/03/09 07:00 Broadcast
Until the yen reaches a high
The trend of falling stocks, lower crude oil prices, and a stronger yen is depriving stock prices of a catalyst to stop their decline.
Calm in U.S. stocks is a necessary condition for Japanese stocks to stop their slide, but an additional condition is that the yen must reach a high value.
For the past few years, there has often been a pattern where a high yen coincides with a low stock price.
The price-to-book ratio (PBR) has fallen below 1, and we are losing sight of a lower bound. In the first half of the week, we may have to be prepared for a temporary drop below 20,000 yen.
The range of fluctuations is too large
It is not a question of direction such as rise or fall; rather, the daily price range is too wide, which is the impression about U.S. stocks.
This two-week's daily range of the Dow Jones and the VIX index are shown in the table below.
(Dow Jones daily range) Change (volatility) VIX index
January average: 242 dollars, 0.84%, 13.94
(Weekly)
2/24: 490 dollars
2/25: 1,151
2/26: 651
2/27: 1,022
2/28: 813
(Average) 825, 3.10%, 31.94
3/02: 1,314
3/03: 1,378
3/04: 816
3/05: 728
3/06: 767
(Average) 1000, 3.80%, 36.76
Will the unstable market continue for about a month?
In January, when new highs were being set, the average daily range was in the 200-dollar range, intraday volatility was below 1%, and the VIX index was in the teens, but in these two weeks intraday volatility has exceeded 3%, and the VIX has surged into the 30s.
There have been 4 days out of 10 trading days where the intraday range exceeded 1,000 dollars, which is a level of stock price fluctuation never before experienced, and regaining calm will not be easy.
Unstable markets stem from high volatility; as volatility subsides, we await calmer U.S. stocks. Even so, with the VIX having risen into the 40s, it is expected to take about a month to drop below 20, and with yen appreciation added, the movement in the bottom price range for Japanese stocks and the downshift trend are expected to continue through March.
Buying opportunities will be delayed due to the progression of yen strength.
Kouya Hiro's 'From the Technical Room'
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