Saved by the bell - for now, the Nikkei stopped just short of breaking through fragile support ~ 14,000. All things considered, we are looking for the Nikkei's retracement decline to continue and are encouraged by the tensions evident - but not yet converted - in the yen's rather muted range year-to-date and its' tightening correlation with 10-year yields.
The fact remains that the underlying potential energies in both the yen and 10-year yields have yet to materially awake in the market. While a narrowing of the range could continue over the short-term, we suspect the tremors felt over the past few weeks more likely indicates these potential energies will become broadly kinetic - introducing greater volatility in the markets.
Despite the strong downdraft in Japan last night, the SPX continues to hang tough, bucking the relative weakness today in the higher beta corners - such as the Nasdaq, Russell and biotech indexes.
