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Dennis Gartman: BofJ to Unleash Fire Power, Weaken Yen

Thursday, 17 Mar 2011 | 1:27 PM ET

On Thursday the Street was talking about the bounce in the S&P with investors snapping up beaten-down shares.

Natural resource led the market with a weaker dollar lifting commodities and tensions in the Middle East and North Africa driving oil.

However CNBC’s Fast Money traders were much more focused on the yen and the G7 conference call scheduled for Thursday afternoon.

The traders along with the rest of the Street expect the meeting to address a sharp overnight surge in the yen that Japan has blamed on speculators.

As you may know, the yen surged to its highest level in 16 years overnight against the dollar, with gains largely blamed on traders speculating that the Japanese government, insurers and other companies will have to repatriate billions invested overseas to pay for earthquake damage and rebuilding.

Although a stronger yen might sound like a good thing at first, it’s undesirable long-term because it harms Japanese companies that export by increasing costs and reducing competitiveness. In turn, that drags down the economy.

Strategic investor Dennis Gartman is looking for a major announcement late Thursday.

Stocks Rebound on Yen's Slide
As the yen slides, stocks are swinging higher, with the Fast Money team.

Although the Bank of Japan is typically reluctant to intervene he says this time is different. “They intervene when the markets are unstable. And when the yen moves from 80 yen to the dollar, to 76 yen to the dollar in 30 seconds that’s instability – that will probably trigger intervention,” Gartman says.

But that's not all. He also tells us not to underestimate the BofJ. “They have the firepower. If the Ministry of Finance says go, they have all the firepower they need.”

And we're not just hearing this from Gartman.

According to Anthony Scaramucci of Skybridge, hedge funds in Japan have already positioned in anticipation of this move.

He says “several prominent hedge funds located in Japan are going long dollar and short yen. They’re putting that trade on right now.

However, this is the kind of trade that requires dexterity.

In fact, if you’re not a market pro Dennis Gartman suggests looking elsewhere. “I’m scared to trade yen at all. This is not a place for the public to be trading," he says.

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MARKET BOUNCE OR RECOVERY?

As we mentioned above, the S&P traded higher on Thursday as investors went bargain shopping after Wednesday's sell-off.

The bulls were encouraged by FedEx, after the world's largest cargo airline forecast improved revenue, boosted by strong demand.

What should you be watching?

Guy Adami thinks the 1272 level is key, technically. "It had been support and now my sense is it becomes resistance." He thinks Thursday's gains are nothing more than a short covering rally in a bigger move to the downside.

Trader Steve Cortes shares Adami's bias to the downside. "I don’t believe in the bounce," he says. "He's particularly focussed on the financials which he says, "are underperforming."

Steve Grasso is in the middle. He's watching yesterday’s high of 1281 and yesterday’s low of 1249. "Those are your wides," he says. "Thursday's high of 1276 is a lower high," he explains and that's bearish. However, he also concedes that a positive headline about the nuclear woes being contained could be a fundamental catalyst that takes the market to 1300.

Jon Najarian is more bullish. He agrees that the market is currently trading at a level that will prove to be resistance or support but his bias is support..


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Trader disclosure: On Mar. 17, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Steve Cortes Owns (TM). Steve Cortes Owns (EXC). Steve Cortes Owns (SO). Steve Cortes Owns (SDY), Is Short S&P. Steve Cortes Is Long U.S. Dollar vs. Australian Dollar, Canadian Dollar, Japanes Yen. STeve Cortes Is Long Crude. Steve Cortes Is Short (F). Steve Cortes Is Short (C). Steve Cortes Is Short Gold. Steve Cortes Is Short Silver. Steve Grasso Owns (ASTM), (BA), (BAC), (C), (CSCO), (D), (JPM), (LIT), (LPX), (MHY), (NDAQ), (PFE), (PRST) and (S). Jon Najarian Owns (AAPL), Is Short (AAPL) Calls. Jon Najarian Owns (CBOE), Is Short (CBOE) Calls. Jon Najarian Owns (CNW), Is Short (CNW) Calls. Jon Najarian Owns (CME), Is Short (CME) Calls. Jon Najarian Owns (NYX), Is Short (NYX) Calls. Jon Najarian Owns (FCX) Is Short (FCX) Calls. Jon Najarian Owns (HPQ), Is Short (HPQ) Calls. Jon Najarian Owns (KWK), Is Short (KWK) Calls. Jon Najarian Owns (NKE), Is Short (NKE) Calls. Jon Najarian Owns (CHS), Is Short (CHS) Calls. Jon Najarian Owns (MTW), Is Short (MTW) Calls. Jon Najarian Owns (WNR), Is Short (WNR) Calls. Jon Najarian Owns (PAAS), Is Short (PAAS) Calls. Jon Najarian Owns (SLV), Is Short (SLV) Calls. Jon Najarian Owns (HK), Is Short (HK) Calls. Jon Najarian Owns (CSTR), Is Short (CSTR) Calls. Jon Najarian Owns (CRM), Is Short (CRM) Calls; Cortes Is Short (FXI), Is Long S&P; Jon Najarian Owns (BRK.B)

Comcast Is The Parent Company Of CNBC
Comcast Is The Parent Company Of NBCUniversal
GE Owns 49% Of NBCUniversal
GE Owns 49% Of CNBC

STEVE GRASSO
Stuart Frankel & Co. And Its Partners Own (AMGN)
Stuart Frankel & Co. And Its Partners Own (CSCO)
Stuart Frankel & Co. And Its Partners Own (CUBA)
Stuart Frankel & Co. And Its Partners Own (GE)
Stuart Frankel & Co. And Its Partners Own (GERN)
Stuart Frankel & Co. And Its Partners Own (HPQ)
Stuart Frankel & Co. And Its Partners Own (HSPO)
Stuart Frankel & Co. And Its Partners Own (MSFT)
Stuart Frankel & Co. And Its Partners Own (NYX)
Stuart Frankel & Co. And Its Partners Own (PFE)
Stuart Frankel & Co. And Its Partners Own (PRST)
Stuart Frankel & Co. And Its Partners Own (SDS)
Stuart Frankel & Co. And Its Partners Own (XRX)
Stuart Frankel & Co. And Its Partners Own (SDS)
Stuart Frankel & Co. And Its Partners Own (UAL)
Stuart Frankel & Co. And Its Partners Own (XRX)
Stuart Frankel & Co. And Its Partners Are Short (QQQQ)
Stuart Frankel & Co. And Its Partners Are Short (AAPL)

DENNIS GARTMAN
Funds Manged By Gartman Are Short Euro, British Pound, Yen
Funds Managed By Gartman Are Long Crude
Funds Managed By Gartman Are Long Natural Gas
Funds Managed By Gartman Are Long Swiss Franc
Funds Managed By Gartman Are Long Australian Dollars

BRIAN MEREDITH
(VR) Is Or In Past 12 Months Has Been An Investment Banking Client Of UBS Securities LLC
(RNR) Is Or In Past 12 Months Has Been A Non-Investment Banking Client Of UBS Securities LLC (Securities-Related Services)
(RNR) Is Or In Past 12 Months Has Been A Client Of UBS Securities LLC (Non-Securities Services)
UBS Securities LLC Has Recieved Compensation From (RNR), (VR) In Past 12 Months


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