- The Nikkei 225 rallied a bit during the session on Friday, gaining almost 4%.
- It seems as if the stock markets around the world are all hanging around and try to figure out whether or not the Federal Reserve is going to continue to tighten monetary policy, and therefore risk appetite at bay.
- At this point, the market believes that the Federal Reserve is going to step away from tightening monetary policy, because inflation is “only” 7.7% year-over-year in America.
Because of this, we are starting to see people jump into risk assets, but it’s very likely that we will see a complete bashing of any type or risk on rally given enough time. However, the Nikkei 225 is a little bit different in the sense that the Japanese yen has been falling in strength, that helps the idea of exports coming out of Japan. All things being equal, we have been grinding sideways and now we are getting close to the top of the consolidation area we have been in for a while. If we can break above the high that we just made a couple weeks ago near the ¥29,000 level, it’s possible that we could go looking to the ¥30,000 level.
Stock Markets Likely to Fall Across the World
On the other hand, if we were to turn around and break down below the 200-Day EMA, which is currently just below the ¥26,000 level, then we could see this market fall apart. In that scenario, I would fully anticipate that the Nikkei 225 would drop down to at least the ¥24,000 level, perhaps even the ¥20,000 level. We would probably see stock markets fall apart across the world, which I do expect to see given enough time, unless of course something drastically changes.
Yes, things have been extraordinarily bullish over the last couple of days in most markets, but quite frankly it looks a whole lot like another bear market rally and most of these indices, with a massive shot of “hopium” out there. Ultimately, I believe this is a market that is one you will have to be thinking in a range bound manner, letting it tell you which direction it wants a break for the bigger man, but right now it doesn’t look like we are quite ready to do so.
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