Citi Speaks Technically Asia ...

Yutaka Yoshino, technical analyst at Citigroup Global Markets Japan Inc., poses the question today - "How will inter-market distortions be resolved?". In the summary of opinions he writes:

Major market timbre — We believe the tide that has prevailed since March— low interest rates leading to dollar weakness and euro strength, resulting in rebounds for equities and commodities—is beginning to turn. The euro/dollar rate looks to have peaked, and equities could be entering a correction phase globally. Gold, on the other hand, looks likely to keep rising. Our focus is on what happens to long-term yields in the US.

Japanese equities — TOPIX broke below 867 (10/5), confirming to our eyes that it has embarked on a near-term second leg corrective wave. If the Nikkei breaks below 9,400, it could ease back to 8,980 or 8,450 before the year is out. Jasdaq and other small-cap markets are also in a corrective phase but nearterm bottoms may be close at hand.

Click on chart to enlarge, courtesy of Citigroup Global Markets.

Overseas equities — Shanghai peaked in August, South Korea in September, and Australia and the SOX in October. We sense the DJIA and Hang Seng may also peak in November and join the global correction.

Forex — We are set to move from dollar weakness to yen strength. The euro/dollar rate hit a near-term peak at $1.5064 (10/26) and could fall back to $1.42. We see the dollar falling through ¥87.01 (1/21) sooner or later and sliding down to ¥82.30 or ¥80 by next spring. We caution on intensifying corrections for other yen pairs, such as the euro/yen.

Commodities — Gains for gold continue. We think it could rise to $1,190 or $1,300 before the end of the year. WTI crude could peak at $85 and LME copper at $6,800, and they could then be subjected to big shakedowns.

There is something brewing in Japan. Probably the macro trade of the decade?

However, this all was no problem for Citi strategists over the pond in the US, as they were "succumbing to the surge" on Wednesday.