This week’s Chart of the Week goes to the i-Shares MSCI Japan Index Fund (symbol: EWJ). See figure 1 a weekly chart.
Figure 1. EWJ/ weekly
There is a mountain of resistance as represented by almost 4 years of sideways price movement. This issue would seem “shortable” and a very low risk entry as prices move towards the 40 week moving average. A break below 8.66 would see prices head towards 7.11.
On Japan, John Hussman had this to say: “On the subject of deficits, the situation in Japan seems increasingly strained. The gross debt/GDP ratio in Japan is now beyond 215%, and net debt is about 130%. During the entire post-war period, Japan has enjoyed a significant trade surplus, which has allowed it to run growing government deficits. Meanwhile, household savings have declined from nearly 15% in the 1990’s to next-to-nothing today. Needless to say, that large and persistent trade surplus has enabled economic dynamics that normally would not be sustainable. But over the past year, Japan has fallen into a trade deficit, which has deepened recently due in part to tensions with China. We are now observing an ominous combination of a significant trade deficit, a deep government deficit, non-existent household savings, a steep debt/GDP ratio, and a contraction in both manufacturing and service sectors according to the latest purchasing manager’s surveys out of Japan. While Europe remains our primary source of concern, I am concerned that both China and Japan are likely to have a more destabilizing impact than is widely assumed. “