Is Japan Losing Momentum?

The market was higher right at the open, but it quickly faded and the S&P 500 is currently flirting with the staying in positive territory.  One reason cited for the selling was a sharp rise in the Yen.  Japan funds are selling off on the yen strength and more traders are keying off Japan.

Overnight, the Bank of Japan left monetary policy unchanged.  It also kept its economic assessment unchanged following seven consecutive upgrades.  The Nikkei has been very sensitive to rises in the yen, and the recent strength in the yen seems to have taken the wind out of the sails of Japanese equities to the extent that the technical picture has now taken on a bearish tone.  Since Japan has been a leader, one has to wonder if continued underperformance in Japan will have a spillover effect?

In China, trade data improved with exports rising 5.1% and imports rising 10.9%, both above forecasts.  And in Australia unemployment held steady at 5.7%.

Europe's markets are mostly higher after the ECB commented on the current state of affairs saying that recent economic data serve as tentative signal of stabilization and modest improvement from low levels.

Other than that there isn't much in the way of market moving data in the U.S. 

The dollar is lower and that is helping most commodities.  Gold prices are back above $1300, and copper and silver prices are up quite a bit.  Oil prices are bucking the trend and trading lower near $102.50.

The 10-year yield is easing back a bit more near 2.58%.  Fears of an imminent taper seem to be lessening.

And the volatility index is hovering near the 13 level after a big spike higher yesterday morning but then reversing as the day wore on.

Trading comment: The stock market experienced a third consecutive down day yesterday, so a short-term bounce wouldn't be surprising.  That is how it looked at the open, but traders cited a spike in the yen as sparking some selling.  Some of it also could have been technical in nature as the S&P 500 bumped its head right at the 1700 level.  Big round numbers sometimes tend to have a psychological effect.  But given the run the stock market has enjoyed in recent weeks some further consolidation would not only be welcome but healthy.  So we went to be patient.