BOJ amazes – by doing nothing!

Yesterday, I lashed into the BOJ for being a serial stimulation one-trick pony. I guess my post hit a nerve with Kuroda-san and overnight, he suddenly abandoned orders for more money printing presses and went back to sleep.  Shock, horror.

This morning, the yen was 3 cents up and the Nikkei had lost several hundred points on that shock development.

My first thought was this: has the BOJ finally woken up to the utter destruction all that money printing will unleash when interest rates turn up a fraction? Could there be a proper non-Keynsian (ie classical) economist there that has somehow infiltrated the very heart of the central bank and hacked into the speech writing software?

Has the BOJ finally admitted that all of their money printing has not worked to raise inflation when the supply of goods is plentiful and prices are dropping?  And why is inflation so great, anyway?  Consumers love falling prices when their incomes/salaries are not rising and with the spectre of robotisation haunting many service sectors, they are in no mood to tolerate rising prices when jobs are at risk.

If so, this is a watershed moment for the global economy.

And a few hours previously, Janet of the Fed proposed maybe raising rates in June, perhaps.  But the tone, like Kuroda-san’s, was veering more on the hawkish side than since December, when she almost promised to raise rates in four steps.  This is a sea change for the Fed.

So, are the central banks laying the ground for a general monetary tightening over the rest of the year?  With the Dow off 150 pips as I write, has the stock market caught wind of this possibility?

Here is the Dow hourly from the April 20 high

I have a lovely five down and three up to yesterday’s pre-BOJ high, followed by a sharp decline.  The blue lines are my tramline trio and the market is testing the lower line.

My best guess is for a slight rally over the next few hours and then a resumed decline against the C wave high at 18,100 area.

The key to this forecast is that markets need to fall hard next week.