Oil, USO, traded up 1.95% to close at 116.8 as oil went past $144 on news that US oil supplies have fallen lower, Adam Schreck, of the Associated Press reports. West Texas Intermediate Crude, $WTIC, closed at 142.

There was a massive unwinding of the yen carry trade today; to complement two others that occurred on June 6, 2008, and June 20, 2008, which can be seen in the BRICs, EEB, falling 3.8% today.

The spigots of investment liquidity have been turned off
The chart of the Brics, EEB, shows that the twin spigots of liquidity have been turned off.

The first spigot of liquidity, the Alan Greenspan, Ben Bernanke Federal Reserve liquidity has exhausted, as seen in the TAF, TSLF, and PDCF rally of March 18, 2008 to May 19, 2008, ending, with a doji and island reversal dark cloud cover candlestick.

The second spigot of liquidity, the Bank of Japan, BOJ, liquidity of 0.5% interest lending, has been turned off by risk aversion due to oil based inflation, a market place loss of value, and a higher yen, FXE, at 94.

Yen carry traders massively sold out of stocks today
Yen carry traders massively sold out of their deep trades made long ago as seen in the following ETFs falling sharply:
metal and mining producers, XME, 12%
coal producers, KOL, 10%
steel producer, SLX, 10%
solar, TAN, 8%
basic materials, IYM, 7%
agriculture, MOO, 6%
water, FIW, 5%
alternative energy, GEX, 5%
transportation, IYT, and additional selling pressure came from today's higher oil price, 4%
Russell 2000 Growth, IWO, 3.3%

Today's massive sell off in interest rate differentially favored investments can be seen in the fall of the following stocks:
James River Coal, JRCC, 22.1% (producer of both steam and metallurgical coal)
Cleveland-Cliffs, CLF, 17.2% (producer of iron ore pellets)
Consol Energy, CNX, 14.6% (producer of steam coal)
AK Steel Holding Corp, AKS, 13.6% (steel manufacturer)
United States Steel, X, 12.5% (US based steel manufacturer)
Intrepid Potash, IPI, 8.2%
BHP Billiton Ltd, 6.2%, (producer of base metals)
Peru Copper, PCU, 5.8%,
Aluminum Corp of China, ACH, 3.9%

The Russell 2000, fell heavily: 3.2%; the reason being that it has seen a lot of yen carry trade investment, i.e. the case of the small US natural gas producer, Cabot Oil And Gas, COG, which fell 3.4%.

The Russell 2000, got oversold on March 18, 2008 with the collapse of US investment banking which produced the Federal Reserve assisted JP Morgan buyout of Bear Stearns; and then "the RUTT" got overbought on June 6th and June 19, these being the days that the yen carry trade really started to unwind, as can be seen in the chart of the Russell 2000 compared to the S&P, IWM:SPY.

In addition to the BRICS, other investments which were inflated by the yen carry trade, saw disinvestment today: Chinese real estate, TAO, and latin america, ILF, both fell 4%.

BRIC components fell as follows Brazil, EWZ, 4.3%, Russia, RSX, 3.0%, China, FXI; 3.6%, India, INP, having fallen a lot of late rose 0.7%.

The barometer of the yen carry trade, EUR/JPY, was up today on the ECB's high interest rate policy, and on activation of lending to go long commodities, RJI, oil, USO, gold, GLD and agricultural products, DBA ... EUR/JPY, FXE:FXY, closed at 1.69.

It's going to be just like July 2007 all over again. The weekly chart of EUR/JPY, FXE:FXY shows a double top: we have three weeks now of 1.68 or above which makes for the second double top that matches the former top in July 2007.

At that time Gary Dorsch writing in Safehaven.com article Stock Market Gyrations and the "Yen Carry" Trade wrote: "The sharp unwinding of "yen carry" trades from July 19th through August 16th, highlighted by the US dollar's slide from 123.50-yen to as low as 112.10-yen, contributed significantly to the downfall of the Dow Jones Industrials from the 14,000 level to as low as 12,500 ... This time, with the dollar falling under the March low at 116-yen, the unwinding of the "yen-carry" trade hit the stock markets like a hurricane. Global traders, who leverage about 10 times their own cash to trade stock index futures contracts, were unwinding losing positions with the trigger of automatic stop-loss limits. The dollar quickly plummeted 4.5-yen to as low as 112.10-yen on August 16th."


Many investment sectors fell hard today
Small cap value, which trades much like the Russell 2000, RZV, fell 3.3%; home construction, XHB, 3% and the industrials, XLI, 3%.

The HUI indexed precious metal, GDX, fell 2.8% lower with the basic materials; I have consistently warned investors that gold stocks are disconnecting from the price of gold, and no longer serve as leverage over gold. The chart of gold stocks relative to gold, GDX:GLD weekly shows the ongoing disconnect and failure of gold mining stocks.

Silver mining exploration company Silver Standard Resources Inc, SSRI, fell 3%; and silver producer Pan American Silver PAAS 4% on silver's, SLV, 1.9% rise.

Energy service shares, OIH, fell 3.9%, and energy producers, XLE, fell 3% even though oil rose today.

Needless to say, the days of profitable natural resource investing are over.

Investors sold out of the "global stock leaders"
First Trust IPOX-100 Index, FPX, fell 3.5%; in as much as it trades as a hyper-variant, a volatile multiple of the Russell, 2000: one can expect the IPOX companies to begin to fall very quickly now.

Global design, build and construction, PKB, fell 5%, evidencing that global deflation in stock wealth is at hand, even though that stock wealth be based on gulf nation oil reserves and recent booming construction.