JAPANESE YEN AND STOCKS ARE RISING ON STRONG JANUARY NUMBERS -- COMMODITIES RISE MORE ON FALLING DOLLAR -- FREEPORT MCMORAN COPPER AND GOLD BREAKS OUT

JAPANESE YEN JUMPS AGAINST OTHER CURRENCIES... On Monday, February 14 I wrote an optimistic article on Japan entitled "Land of the Rising Sun, The Rising Yen, and Maybe Even a Rising Stock Market" (February 14, 2005). I'm revisiting that bullish story today because the Japanese yen is jumping against the dollar and other major foreign currencies while the Japanese stock market has reached a new seven-month high. The reason is the January report of stronger-than-expected Japanese industrial production and retail sales. In the February 14 piece, I showed the yen starting to rally from an area of important chart support. In today's report, Chart 1 shows the yen moving up to challenge last week's high and its 50-day moving average. I expect it to clear both of those initial chart barriers. That's also giving support to Japanese iShares which benefit from a rising Japanese stock market and a rising yen.

Chart 1

WHY JAPAN ISHARES ARE LEADING NIKKEI HIGHER... Chart 2 shows Japan iShares (EWJ) gapping up to the highest level in six weeks. Its relative strength line shows it outperforming the S&P 500. Chart 3 shows that the EWJ has completed a bullish triangle (see converging trendlines) and is moving close to a new four-year high. A comparison of Charts 3 and 4 show that the rising yen (or a falling dollar) has given a much bigger boost to the iShares than the Nikkei 225 Index. As I pointed out on February 14, while the EWJ has already exceeded its 2002 peak, the Nikkei 225 has yet to clear that major chart barrier. The Nikkei jumped today to 11740 which is a new seven-month high and appears to be on the verge of a major bullish breakout of its own. The reason why the EWJ is stronger than the Nikkei is that the EWJ is priced in dollars while the Nikkei is priced in yen. That's why a rising yen helps the EWJ more than the Nikkei and why the EWJ is probably a better way to play the Japanese market.

Chart 2

Chart 3

Chart 4

FREEPORT MCMORAN BREAKS OUT ON COMMODITY RISE... While the yen is rallying today, the dollar is falling against most major currencies. That's boosting copper, gold, oil and most other commodities. The CRB Index is climbing 2.45 points to a new 24 year high. That's giving a boost to energy, precious metal, and mining shares. Last week I showed Phelps Dodge achieving a bullish breakout. Freeport McMoran Copper and Gold is doing it today. The daily bars in Chart 5 show FCX breaking through its November high. The weekly bars in Chart 6 show that FCX has completed a bullish "symmetrical triangle" and appears ready to clear its October peak. Its relative strength line has started to climb as well. Commodity stocks are still hot. With commodity prices rising today, Australia and Canadian iShares are also rallying along with their currencies.

Chart 5

Chart 6