- The Nikkei 225 gapped lower to kick off the Thursday session, and then simply fell from there.
- The index is in a very well-defined trading range, and I do plan on continuing to take advantage of it. On the downside, somewhere near the ¥26,000 level, there’s a lot of support.
- On the upside, somewhere around the ¥28,600 level has a lot of resistance. In other words, it’s a ¥2600 range.
The Stochastic Oscillator has not quite gotten into the overbought condition yet, but I do find it interesting that we are at least getting close to that level since the market has been at the very bottom of the consolidation area for a moment now. The 50-Day EMA sits just below the ¥27,000 level and is dropping. If we were to break down below the little bit of a “double bottom” that we have formed in the last couple of weeks, that would be the market breaking out of this range, and the measured move at that point would be to get down to the ¥24,000 region.
On the other hand, if we were to break above the 50-Day EMA, then it opens the move back toward the ¥28,600 level. When you look at the 50-Day EMA, it is dropping, but at the same time we have seen it go back and forth from up to down against the 200-Day EMA which of course has been relatively flat.
Choppiness Ahead
Japan is a special market now, since the Bank of Japan continues to keep interest rates low, thereby printing the yen. If they can keep those rates low, then the Nikkei 225 has a chance to go higher. On the other hand, if the Japanese yen suddenly spikes in value due to the bond markets giving way and rates rising, that will be toxic for the Nikkei 225, and we will break down significantly.
Another thing that you need to keep in mind is that equities around the world are struggling over the last couple of days, so I think the Nikkei won’t be any different. After all, global demand seems to be slowing down, and as Japan is a major exporter, that could cause some issues as well. The only thing I think you can count on is a lot of choppiness, but I am watching the overall range for guidance.
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