Counter-Trend Rally underway

We formed a very strong "Hammer" on the major index candlesticks on Friday. And tonight we're seeing Japan up 3% on word they are going to intervene to keep the Yen from appreciating.

But it's evident that the Nikkei's move tonight is bringing it smack dab into formidable resistance:

Nikkei chart

We can see that previous rallies have stalled at the 60 day MA, which is currently about 9500 for the Nikkei. So it will require confirmation tomorrow to see if the rally is sustainable.

Also, intervening against a continuing rise in the Yen means that Japan will have to buy US Dollars. And a strong US dollar may have a negative impact on Big Cap US stocks. But from the futures we're seeing, it's probably the US markets will also rally. However, I believe that rally will be unsustainable.

To see how interconnected the global markets are (especially the Currency markets), it's wise to review what some folks, who are much smarter than I, are saying.

Kyle bass made a fortune predicting the sub-prime mortgage meltdown and positioning himself to take advantage of it. His "street cred" is unimpeachable and he presents his views in clear, concise, and impeccably logical manner.

Deep Thoughts: Kyle Bass' take on Japan and the world.

Additional comments on Bass' views.

Interesting CNBC interview with Kyle Bass (starts 50 seconds into the clip).

Video link to CNBC interview

S&P 500 Chart possibilities

When Kyle Bass says he sees no reason to be in US equities, I think wise investors have to take note. And when he says he sees global GDP declining to -4%, that had better wake some people up.

But in between there will be these kinds of counter-trend rallies and the nimble can still take advantage of them for profit, while long-term retail investors can use them to sell into.

Scrutinizer