Kabushiki
Shinbun

March 11, 1997

A Direct Hit to Mr. Armstrong, a Worldwide Analyst

The Focus: The New York Stocks/Foreign Exchange

Mr. Martin Armstrong, Chairman of Princeton Economic Institute Inc. in the US, visited Japan this time and accepted an exclusive interview by this journal. At the last interview early this year, he stated his sensational view that a correction phase of the New York stocks will be in a short time. He pointed out this time as well that the New York stocks could have hit a temporary high in February. In addition, as to the Dollar Yen exchange rate, he made his outlook clear that, although it could swing to Yen’s appreciation during March due to Japanese fiscal-term-end factors, the intermediate trend of higher Dollar remains intact and it will move into the basic condition of higher Dollar again in April and onward. In the last volume, a detailed report on Japanese stocks and commodities will follow.

The New York Stocks are most Likely to have Hit a Temporary High in February

Two Patterns of the Scenario

Q: You pointed out at our interview early this year that a correction of the New York stocks would be near.

A: It seems the New York stocks hit a temporary high in February. Two months of correction phase until April will be unavoidable. The important targets for turning points this year are June and July and the next major one is June 22 next year. There are two patterns of the scenario. They are the one pattern in which we see S&P 500 Futures latest Basis month to make a shallow decline to 782 and the other in which we see a deep plunge to 749. In the former case, the New York Dow will come back to 7,400 – 7,600 following an April low and be followed by a correction towards June 22 next year. In this case, we see the Dow will hold 5,800 – 5,200 area and rally afterwards towards 2003. In the latter case, the market will move to search a low in June – July period and, with a bottom being in place there, to reach a peak on June 22 next year. In that case, the target objective is 10,000 in the Dow, which will be followed by 2 year correction into 1999 – 2000 with the downside target objective being 5,800 – 5,200 and then by a rally again towards 2003.

Q: What is the reason for temporary correction?

A: International Capital flow has brought the stock-price hike and capital has concentrated into the US. Presently, currency is the most important issue. Due to the currency factor of the Dollar’s appreciation, Japanese and German investors are making much more money than the US investors. Profit taking by those foreigners (from the American’s view-point) could cause the correction.

The Intermediate-Term Basic Conditions for a Higher Dollar Remain Intact

It Will Gather Momentum if 126.00 would be Closed Over

Q: What is the direction of the foreign exchange?

A: Money is now flowing out of Europe and into the UK and the US due to concerns over the currency unification. In the midst of this, a big problem Japan holds is that Yen’s appreciation against the European currencies could develop. That is to say, it is possible, when we list up currencies in the order of their strength, that the US Dollar comes first, the Japanese Yen does next and then the European currencies do. Now, in the dollar Yen, an important resistance lies at 125.00 – 126.00 and supports start at 120.00 followed by 119.00 – 118.00. Holding 120.00 by the first half of this April, the Dollar would be very strong. A weekly close over 126.00 would cause a sharp move towards 134.00. And a further dreadful move would cause to reach 145.00 by the next year. The current move to higher Yen is just caused by Japan’s fiscal-year-end factors. The Dollar’s strength is intact against the European currencies. There exists many Japanese enterprises who intend to resume their investment into the US.

ProfileMr. Armstrong is 47 years old. He was named as the top North American Economist by Equity Magazine in 1990. He provided the Brady Commission with his research report who was to investigate the causes of “Black Monday” and also provided advice to Presidents Reagan and Bush. Funds managed by him performed a high rate of annual return of 29.67% on the average (in terms of Yen, excluding the commissions) during 1991 – 1996.