In association with

Market Bulletin 10th September 2010

Japanese Bonds teeter on the brink of a

big bull rally
The Technical Trader’s view:
Japanese Government Bond 10 Year T Continuousøjp@LTGB.1
149
145.28 High 148 MONTHLY CHART
147
146
145 The tantalizing possibility
144
142 that technicians have
141.29 143
142 found in the Yen bond
141 market is of the
140
139
completion of a large bull
138 Head and Shoulders
137
Reversal.
136
135
134 The neckline lies above
133
the current level of the
132
market at 142.66.
Possible 131
130.84 130
H&S 129 We have closed above
Reversal 128
that level once, in the
127

126
monthly bar chart, but
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
haven’t yet had a
confirming second close
above that level

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This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
 In association with
Japanese Government Bond 10 Year T Continuousøjp@LTGB.1 147.0
146.5
145.01 All Time High from 2003 146.0 WEEKLY CHART
145.5
145.0
144.5
Potential Head and 144.0 The pull back in the weekly
Shoulders Neckline 143.5
142.00 143.0 chart has been rather
142.5
142.0 ominous.
140.55 High 141.5
140.35 High 141.0
140.5
140.0 The market has pulled back
139.5
139.0
through the support from
138.5
138.0
both the Neckline and the
137.5
137.0
horizontal Prior High at 142
136.5 and entered a no man’s land
136.0
135.5 wherein the first support
135.0
134.5 beneath the market here is
134.0
133.5 down at the band 140.35-55.
133.0
132.5
132.0
131.5
We think it highly likely that
10000
the market will want to come
x10 back and test that level…
J A S O N D 2008 A M J J A S O N D 2009 M A M J J A S O N D 2010 M A M J J A S O N

It certainly remains
vulnerable to sell-offs to that
level.

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
 In association with
Japanese Gov ernment Bond 10 Year T Sep 10

145.0 DAILY CHART

145.01 All Time High from 2003

144.5

The pull back in the day chart

144.0
has found some temporary
Bull trendline support 143.5 support at the 38.2%
retracement (and possibly the
143.0
141.29 Prior High support
141.95 High
142.08 142.5 from the Continuation Chart.
142 High cont chart 2008
142.0
23.6%
The question remains – have
141.29 High July 2005 cont. chart 141.5
the Bulls sufficient energy to
38.2%
140.85 High
141.0 get back up and above the
140.55 High Dec 2009 cont chart
140.5
Neckline at 142.66 (see
50.0%
140.35 Prior High 2008 cont. chart monthly chart). We think that
140.0
small double failure above
50000
40000
30000
that level already suggest that
20000
10000
there is more on the downside
15 23 29 5 12 19 26 6 17 24 31 7 14 21 28 5 12 20 26 2 9 16 23 30 6 13 20 (probably testing the band
April May June July August September
140.35-140.55) in the short-
term before the market can
build a base…

The Macro Trader’s view:

Over recent weeks the JGB has endured a reasonable pull-back, much like other bond
markets, as equities staged a rally fuelled by:
1. Bernanke’s recent pledge to ease further if the faltering US economic recovery continues to lose
traction, and
2. A better-than-expected US non-farm payroll report last Friday.

The Bank of Japan’s recent decision to ease monetary policy further also helped the Nikkei,
which looks hesitant compared to the S&P and FTSE. Part of the reason for this is the strength
of the Yen. Despite recent comments from Japanese officials hinting at intervention, the Yen
has remained strong against a Euro that is once again dogged by worries about the health of
German Banks, and the Yen is also making fresh multi-year highs against the Dollar, as it is
viewed as a safe haven trade.But traders in Japan fear that a strong Yen will damage the
competitiveness of exporters and act as a drag on Japanese equities. Moreover, while
deflation is still a big concern in Japan long term bond yields will remain on a downward path.

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
 In association with

Traditionally the main players in the JGB market have been domestic. But China has recently
emerged as a large buyer of JGB’s. This has alarmed the Japanese authorities because they
fear China’s purchases will further fuel the Yen’s rally. Indeed, we have often cited, Japan’s
proximity to China as a bullish factor for the Yen.

But aside from the Yen’s strength, clearly Chinas decision to diversify her foreign reserve
holdings through purchases of JGB’s will act to not only support that market, but send it higher.

So we judge there are several important factors at work that argue for a bull market in the JGB.
And when the current equity market rally loses steam as we suspect it eventually will, bonds
globally will rally hard.
In summary, the JGB is a bond market representing an economy that:
- relies heavily on manufactured exports,
- runs a large trade surplus,
- has sizeable foreign currency reserves, and
- has found favour with the world’s fastest growing and second largest economy as a store of wealth.
Whatever short-term weakness the bulls are suffering the bulls are powerfully supported in the
medium and longer-term.
Mark Sturdy
John Lewis
Seven Days Ahead

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.