The Nikkei 225 rallied quite nicely on Monday as traders are reacting to the idea that the Middle East might see peace break out as the Americans and the Iranians are discussing actually signing some type of an agreement.
The reality though is that we have heard this story before, so it'll be interesting to see how this plays out.
Short-term pullbacks I do think make a certain amount of sense in this market. But Japan itself has been particularly sensitive to the situation in the Strait of Hormuz as Asia gets a lot of its energy through that route.
All things being equal, Japan has been very strong for some time and recently it bounced from the crucial 50-day EMA and now is breaking out to a fresh new high.
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The Next Leg to the Upside
If the market were to continue to go higher, perhaps trying to break above the 66,000-yen level, I think we just kick off the next leg to the upside. I think short term pullbacks are buying opportunities in this market, and I would continue to see the fairly weak Japanese yen as a bit of a positive driver for this market as well.
If we do get peace breaking out in the Middle East, one would assume that the exporters would do fairly well as well as the Nikkei 225 is highly levered to a lot of major exporters coming out of Japan that people would know.
The size of the candlestick is somewhat impressive, and it is worth noting that the gap that kicked off the week simply gapped over the previous resistance. Pretty interesting and very bullish to me.
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