Nikkei sell-off should continue til early SeptYen buying and Nikkei selling has had spill-over effects onto other Asian and US equities.
Will take many weeks to bottom out.
NK225MC1! trade ideas
Elliott Wave Intraday Analysis Expecting Nikkei (NKD) to Extend Short Term Elliott Wave in Nikkei (NKD) suggests the Index shows short term incomplete bearish sequence from 7.10.2024 high favoring further downside. Decline from 7.10.2024 is in progress as a double three Elliott Wave structure. Down from 7.10.2024 high, wave (W) ended at 37395. Rally in wave (X) ended at 39318 with internal subdivision as a zigzag structure. Up from wave (W), wave A ended at 38785 and wave B ended at 37395. Wave C higher ended at 39318 which completed wave (X) in higher degree.
The Index has turned lower in wave (Y) with internal subdivision as a zigzag structure. Down from wave (X), wave ((i)) ended at 37405 and wave ((ii)) ended at 38010. Wave ((iii)) lower ended at 36465 and wave ((iv)) ended at 36920. Final leg wave ((v)) ended at 36165 which completed wave A in higher degree. Wave B rally is in progress to correct cycle from 7.31.2024 high before it turns lower. Near term, while below 39318, expect rally to fail in 3, 7, or 11 swing for further downside. Potential target lower is 100% – 161.8% Fibonacci extension of wave (W). This area comes at 30932 – 34135 where buyers can appear for further upside, or 3 waves rally at least.
Navigating the Key Technical Levels and Upcoming BOJ DecisionBy Eric Lee , Sales Director from Phillip Nova
The Nikkei 225 index is currently trading near its 200-day moving average (200D-MA), a crucial technical indicator that often signifies long-term market trends. At the same time, the index is hovering around the 37,000 level, a significant support that has held firm multiple times in the past.
Technical Indicators:
1. 200-Day Moving Average (200D-MA):
The 200D-MA is trending upwards, underscoring a long-term bullish sentiment.
The index's proximity to this moving average suggests it is at a critical juncture where historical trends show potential for support.
2. Support at 37,000:
The 37,000 level has acted as a robust support point, providing a floor during previous price corrections.
This level coinciding with the 200D-MA enhances its significance as a potential stronghold for the index.
3. Stochastic Oscillator:
Currently, the stochastic oscillator is in oversold territory (below 20).
Historically, when the stochastic oscillator is oversold and the index is near the 200D-MA, it has often indicated strong support, leading to subsequent price rallies.
Impact of the Bank of Japan’s Policy Decision
A potential catalyst that could influence the Nikkei 225’s movement is the upcoming policy decision by the Bank of Japan (BOJ). The BOJ is considering raising interest rates to 0.25%, a move that could significantly impact market sentiment. Investors should closely monitor the BOJ's announcements, as changes in interest rates can lead to increased market volatility and affect the index's performance. (asia.nikkei.com)
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Tech Rotation Presents a Buying Opportunity for the Nikkei 225By Danish Lim Zhi Lin, Investment Analyst
Current Performance of SGX Nikkei 225
As of 22 July, the SGX Nikkei 225 September contract has slipped below the 40,000 level, hovering around 39,710 at around 11:04 SGT.
Much of the decline can be attributed to a stock rotation out of Tech and into cyclicals and small caps across the globe. Semiconductors & Semiconductor Equipment Makers, in particular, saw a rout after an explosive first half.
Nevertheless, we believe the direction forward appears to be aligning with our previous forecast of upcoming BOJ rate hikes and Fed rate cuts to translate into an eventual easing of yen depreciation pressure- supporting equity outperformance.
We maintain our price target range of 42,00 – 43,300, with a midpoint target at around 42,650.
Latest Developments
The tech rotation was kick started by US CPI data which came in lower than expected, as well as unemployment figures which were higher than expected. The readings essentially cemented a September rate cut, with Fed fund futures pricing in a 91.7% probability for a September cut. US Treasury yields tumbled, resulting in a weaker Dollar that helped ease Yen depreciation pressure.
Hawkish BOJ
Meanwhile, in Japan, calls for another rate hike increased after National Core CPI data for June came in higher than expected.
There was also a suspected intervention by the BOJ following the release of the softer than expected US CPI figures. On 11 July, the USDJPY currency pair plunged from 161.69 to as low as 157.44 in a little over half an hour, gaining more than 2% against the Dollar and prompting speculation that the BOJ had intervened in the market.
Regarding the suspected intervention, Chief currency official Masato Kanda said that he’s “not in a position” to comment on whether Japan had intervened and that “our practice is basically not to say whether we have intervened or not”.
Kanda also mentioned that “many see moves as one-sided, not matching fundamentals”, and that the BOJ doesn’t “see forex moves as stable”. Crucially he also spoke about the adverse impact of the weak yen on people’s livelihoods- as higher imported inflation resulted in a higher cost of living.
We interpret his comments as hawkish tilt for the BOJ. With the path of least resistance pointing to a rate hike in the coming months. Kanda mentioned that the BOJ will disclose at month-end if intervention was conducted.
Path Ahead
Going forward, we maintain our call for upcoming Fed cuts and BOJ rate hikes to eventually normalize Yen depreciation pressure. Dollar strength will ease while Yen will see a boost from rate hikes, easing Yen weakness and boosting domestic spending that should translate into improved performance for domestic-demand stocks. We believe this could offset waning momentum in Tech and serve as the next growth catalyst for Japanese equities.
We keep an eye out for real wages to turn positive, which could occur in the coming months once annual wage hikes are more fully reflected in the data. Should costs ease and wages continue to grow, we expect to domestic demand recovery to be the next key growth catalyst for Japanese equities.
We maintain our price target range of 42,000 – 43,300, with a midpoint target at around 42,650.
Nikkei 225 Outlook & Trading Opportunity:
In our opinion, we expect BOJ rate hikes and delayed FOMC rate cuts to eventually translate into an eventual easing of yen depreciation pressure.
This will support a Yen rebound to more comfortable levels- easing imported inflation and supporting consumer spending. We expect this to enable Japanese equities to sustainably outperform in 2H 2024. Corporate governance reforms should provide support for Japanese equities over the medium to long term.
We see any near-term weakness or pullback as an entry opportunity.
Expressing Our View:
We maintain our trade setup below to express our view:
Long SGX Nikkei 225 Index Futures
The daily chart shows the contract having slipped below the key 40,000 level and hovering near the 0.236% Fibonacci extension level around 39,225.
With a Trend-based Fibonacci Extension drawn from the October 2023 low, we set our target range between the 0.50% extension level around 42,000, and the 0.618% extension level around 43,300. Stop loss is set below the key support level at 36,650. This setup delivers a reward: risk ratio of 2.37x.
• Entry Level: 38,430 (previous entry level)
• Target Level: 42,650
• Stop Loss Level: 36,650
• Profit at Target: 3620 x ¥500= ¥2,110,000
• Loss at Stop: 1780 x ¥500= ¥890,000
• Reward: Risk Ratio: 2.37x
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The Nikkei snaps a 6-day losing steakNikkei futures found some stability on Monday around the May high, before going on to snap a 6-day losing streak. The daily RSI (2) was oversold to further suggest mean reversion could be due. And with Wall Street showing signs of stability ahead of tech earnings, we suspect a bounce could be due.
The 1-hour chart shows the 14-period RSI spent some time in oversold before a 2-bar bullish reversal triggered a rebound at a key support zone. Bulls could seek dips within Monday's range on the assumption of a break above 40,000, with a minimum upside target of 40,500 in mind.
If sentiment improves from here, perhaps a move to 41k could be on the cards near the June VPOC and gap resistance.
Long Nikkei 225 futures setup into US tech earnings Nikkei 225 futures bounced strongly from the 50-day moving average overnight, mirroring the reversal in US equities during the session. With horizontal support located nearby at 39455, it provides a decent long setup, allowing for a stop to be placed below for protection targeting a push back towards the record highs struck earlier this month. While it would have been nice to have seen the overnight candle print as a bullish engulfing, there is still time during Tuesday’s day session to generate a bullish signal.
Adding to the case to consider longs, the downtrend in RSI has been broken, signaling a possible easing in bearish price momentum. MACD is yet to confirm to the signal, underlying the need for focus on position sizing and capital protection. Earlier in July, the price did a lot of work either side of 41000, making that a potential initial trade target. Beyond, 41600 and the record high of 42500 will be in focus.
Should the trade work in your favour, consider using a trailing stop or raising your stop to entry level to provide a free hit on upside.
As for obvious risks to consider, intervention from the BOJ to strengthen the Japanese yen would have negative implications for exporter earnings, creating downside risks for the Nikkei. However, with key inflation and GDP data arriving later in the week, such a move appears unlikely in the near-term. Tech earnings from Alphabet and Tesla after market close on Wall Street on Tuesday will also be important, likely flowing through to the performance of Japanese equities.
DS
Analytical Perspective on Correlation between Nikkei225 & GBPBy Eric Lee , Sales Director of Phillip Nova
Substantial Upward Trends in GBP/JPY and Nikkei 225 from 2020 to 2024
Over the past 4 years, from 2020 to 2024, both the GBP/JPY exchange rate and the Nikkei 225 index have shown substantial upward trends. The chart below indicates a close correlation between these two financial indicators, particularly from late 2022 to mid2024. The GBP/JPY (in blue) and the Nikkei 225 (in red) have both risen significantly over the observed period, with the Nikkei 225 reaching a recent peak around 40,500 and the GBP/JPY exchange rate climbing to approximately 203.886
Strong Correlation Between GBP/JPY and Nikkei 225 Movements
There are notable periods where the movements of the GBP/JPY and the Nikkei 225 are closely aligned, suggesting a strong correlation between the two. This is particularly evident from late 2022 onwards, where both indices exhibit synchronized peaks and troughs. The Nikkei 225 has experienced periods of high volatility, with sharp rises and falls, particularly in 2023. According to Nikkei Asia, one significant factor contributing to the rise in Japanese stocks is the influx of foreign investment, notably $51 billion led by the U.K. This influx has boosted the Nikkei 225, highlighting the importance of foreign capital in driving market performance
asia.nikkei.com
Impact of GBP/JPY Exchange Rate on Japanese Equity Investments
A strong GBP/JPY rate can indicate increased purchasing power for British investors, enabling them to invest more heavily in Japanese equities. The recent surge in the Nikkei 225 aligns with the period of increased foreign investment, as highlighted by the $51 billion influx led by U.K. investors. Currency strength often reflects broader economic sentiment. A rising GBP/JPY rate can signal confidence in the U.K. economy, encouraging investment in higher-yielding assets like Japanese stocks. Conversely, a weaker JPY can make Japanese exports more competitive, boosting corporate profits and positively impacting the Nikkei 225. Fluctuations in the GBP/JPY rate can influence global risk appetite. A stronger GBP against the JPY might indicate a shift towards riskier assets, including equities in robust markets like Japan
UK Consumer Confidence and Its Correlation to GBP and Nikkei 225
According to data from GfK, the Consumer Confidence indicator in the UK rose to -14 in June 2024 from -17 in May, marking the third consecutive month of improvement and reaching its highest level since November 2021, surpassing forecasts of -16. That may explain the strength in GBP and its correlation to Nikkei225 as well.
Global Financial Interconnectivity and Strategic Insights for Traders
In conclusion, the global financial market is highly interconnected. The influx of foreign capital, particularly from U.K., has significantly boosted Japanese stocks, driving Nikkei225 to new heights. Thus, when trading a stock index such as Nikkei225, traders should consider the influence of currency movements and the dynamics the economic performance of related countries can have in providing valuable insights in their strategic decision making
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*For applicable terms and conditions and a full risk disclaimer, please refer to www.phillipnova.com.sg. This ad has not been reviewed by the MAS
Analytical Perspective on Correlation Between Nikkei225 & GBPBy Eric Lee , Sales Director of Phillip Nova
Substantial Upward Trends in GBP/JPY and Nikkei 225 from 2020 to 2024
Over the past 4 years, from 2020 to 2024, both the GBP/JPY exchange rate and the Nikkei
225 index have shown substantial upward trends. The chart below indicates a close
correlation between these two financial indicators, particularly from late 2022 to mid2024. The GBP/JPY (in blue) and the Nikkei 225 (in red) have both risen significantly over
the observed period, with the Nikkei 225 reaching a recent peak around 40,500 and the
GBP/JPY exchange rate climbing to approximately 203.886.
Strong Correlation Between GBP/JPY and Nikkei 225 Movements
There are notable periods where the movements of the GBP/JPY and the Nikkei 225 are
closely aligned, suggesting a strong correlation between the two. This is particularly
evident from late 2022 onwards, where both indices exhibit synchronized peaks and
troughs. The Nikkei 225 has experienced periods of high volatility, with sharp rises and
falls, particularly in 2023. According to Nikkei Asia, one significant factor contributing to
the rise in Japanese stocks is the influx of foreign investment, notably $51 billion led by
the U.K. This influx has boosted the Nikkei 225, highlighting the importance of foreign
capital in driving market performance
asia.nikkei.com
Impact of GBP/JPY Exchange Rate on Japanese Equity Investments
A strong GBP/JPY rate can indicate increased purchasing power for British investors,
enabling them to invest more heavily in Japanese equities. The recent surge in the Nikkei
225 aligns with the period of increased foreign investment, as highlighted by the $51
billion influx led by U.K. investors. Currency strength often reflects broader economic
sentiment. A rising GBP/JPY rate can signal confidence in the U.K. economy,
encouraging investment in higher-yielding assets like Japanese stocks. Conversely, a
weaker JPY can make Japanese exports more competitive, boosting corporate profits
and positively impacting the Nikkei 225. Fluctuations in the GBP/JPY rate can influence
global risk appetite. A stronger GBP against the JPY might indicate a shift towards riskier
assets, including equities in robust markets like Japan.
UK Consumer Confidence and Its Correlation to GBP and Nikkei 225
According to data from GfK, the Consumer Confidence indicator in the UK rose to -14 in
June 2024 from -17 in May, marking the third consecutive month of improvement and
reaching its highest level since November 2021, surpassing forecasts of -16. That may
explain the strength in GBP and its correlation to Nikkei225 as well.
Global Financial Interconnectivity and Strategic Insights for Traders
In conclusion, the global financial market is highly interconnected. The influx of foreign
capital, particularly from U.K., has significantly boosted Japanese stocks, driving
Nikkei225 to new heights. Thus, when trading a stock index such as Nikkei225, traders
should consider the influence of currency movements and the dynamics the economic
performance of related countries can have in providing valuable insights in their
strategic decision making
Trade Nikkei 225 at only 50 cents* now
Capitalise on the Nikkei 225’s movements—trade SGX Nikkei 225 Index Futures at only
50 cents* now and stand to win a pair of air tickets to Japan. Learn more here .
*For applicable terms and conditions and a full risk disclaimer, please refer to
www.phillipnova.com.sg. This ad has not been reviewed by the MAS
FAVORITE TRADE: NIKKEI225 & is this the beginning of the end?$NKD1
Key Points from the News:
Japan's Industrial Production:
Japan's industrial production jumped by 3.6% in May. This is a significant positive indicator for the Japanese economy, suggesting robust manufacturing and industrial activity.
Nikkei 225 Index:
The Nikkei 225 Index closed 2.35% lower. This decline in the index could be influenced by various factors including market sentiment, global economic conditions, and recent economic data.
Japanese stocks have been volatile amid a surge in the Yen and speculation about possible intervention by the Japanese government or central bank.
Yen Movements:
The Yen has been choppy on intervention jitters, indicating that traders are nervous about potential government intervention to control the currency's strength.
Yen's movements are affecting Asian shares, with a focus on weekly gains.
Nikkei 225 Breaches 41,000- Where Next?By Danish Lim Zhi Lin, Investment Analyst
Current Performance of SGX Nikkei 225:
As of 9 July, the SGX Nikkei 225 September contract briefly topped the 41,000 level, gaining 1.32% as of 11:01 SGT. The movements tracked overnight gains in US semiconductor shares, as investors remain optimistic ahead of Powell's semi-annual testimony to congress and inflation readings later this week.
As of 10:35 SGT, gains were led by Fujikura Ltd (+11.66%), Tokyo Electron (+3.88%), Advantest (3.17%). This comes ahead of TSMC's earnings results next week, where it is widely expected to post an earnings beat and raise guidance.
We maintain our previous thesis of BOJ rate hikes and delayed FOMC rate cuts to translate into an eventual easing of yen depreciation pressure- supporting equity outperformance. We update our price target to a range of 42,00 – 43,300, reflecting updated information. This puts our target price at the midpoint of the range at around 42,650.
BOJ Hike in the Cards:
Government data released Monday showed that Japanese workers saw their average base pay climb 2.5% YoY in in May, the fastest pace in 31 years; and higher than the headline figure which grew 1.9%. Overtime wages, a leading indicator of labour demand, grew by 2.3% YoY.
This comes as this year’s “shunto” wage negotiation was able to secure an average wage increase of 5.1%, the largest since 1991.
However, on an inflation-adjusted basis, real wages continue to lag behind inflation, as real cash earnings fell by -1.4%, in negative territory for the 26th straight month. We believe falling real wages further highlights the need for the BOJ to tighten monetary policy.
At the same time, the BOJ’s June Tankan Survey indicated that corporate sentiment improved, with all-firms current sentiment index unchanged at 12, while the forecast index ticked up to 10 from 9 in March. Sentiment among both manufacturers and non-manufacturers also improved.
Thus, we believe the improvement in wages will give the BOJ confidence that the wage-price cycle they seek could be emerging, giving room for the BOJ to normalize policy. This could help ease yen depreciation pressure- which has weighed on consumer sentiment and spending due to higher imported inflation.
We keep an eye out for real wages to turn positive, which could occur in the coming months once annual wage hikes are more fully reflected in the data. The BOJ said it forecasts private consumption to recover in the coming months after 4 quarters of decline, underpinning an economic recovery.
Should costs ease and wages continue to grow, we expect to domestic demand recovery to be the next key growth catalyst for Japanese equities.
Nikkei 225 Outlook & Trading Opportunity:
In our opinion, we expect BOJ rate hikes and delayed FOMC rate cuts to eventually translate into an eventual easing of yen depreciation pressure.
This will support a Yen rebound to more comfortable levels- easing imported inflation and supporting consumer spending. We expect this to enable Japanese equities to sustainably outperform in 2H 2024. Corporate governance reforms should provide support for Japanese equities over the medium to long term.
We see any near-term weakness or pullback as an entry opportunity.
Expressing Our View:
We maintain our trade setup below to express our view:
Long SGX Nikkei 225 Index Futures:
The daily chart shows the contract having broken above the 0.382% Fibonacci extension level and has been hovering around psychological resistance at 41,000.
With a Trend-based Fibonacci Extension drawn from the October 2023 low, we set our target range between the 0.50% extension level around 42,000, and the 0.618% extension level around 43,300. Stop loss is set below the key support level at 36,650. This setup delivers a reward: risk ratio of 2.37x.
•Entry Level: 38,430 (previous entry level)
• Target Level: 42,650
• Stop Loss Level: 36,650
• Profit at Target: 3620 x ¥500= ¥2,110,000
• Loss at Stop: 1780 x ¥500= ¥890,000
• Reward: Risk Ratio: 2.37x
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Capitalise on the Nikkei 225’s movements—trade SGX Nikkei 225 Index Futures at only 50 cents* now and stand to win a pair of air tickets to Japan. Learn more here .
*For applicable terms and conditions and a full risk disclaimer, please refer to www.phillipnova.com.sg. This ad has not been reviewed by MAS
Impact of Japan’s Largest Pay Raise on Nikkei 225Impact of Japan’s Largest Pay Raise on Nikkei 225: Market Insights & Trading Ideas
Historic Pay Raise Boosts Japanese Economy
By Eric Lee , Sales Director from Phillip Nova
On March 22nd, Japan’s largest union group, Rengo, announced that Japanese firms have
agreed to raise salary by 5.25% this year. This is the biggest raise the country had seen
since 2013 . Given that Personal Consumption constituted 55% of Japan’s GDP, the pay
raise is deemed to be positive for the economy and stock market as well.
Source
Correlation Between Disposable Income and Nikkei 225
Attached is the monthly chart comparing the performance of Nikkei 225 (in blue) with
the 12-Months Average of Japan’s Disposable Personal Income since 1996. Their
correlation explained the impact having higher disposable income had on the stock
prices.
Since its bottom in December 2023, the 12-Month Average Disposable Personal Income
had been rising. Market should expect this to rise further with the announcement of
higher salary by the union group
Nikkei 225 Breaks Above Symmetrical Triangle Formation
On a short-term basis, Nikkei 225 had broken above the Symmetrical Triangle formation
it’s been in since April. Based on Classical Technical Analysis technique, we can set the
target level for such formation at 42,700 and the cut-loss level at below the triangle
formation which is at 37,900 at the moment.
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only 50 cents* now and stand to win a pair of air tickets to Japan . Learn
more here
Bullish SGX Nikkei 225 Futures on delayed BOJ hike and Fed cutBy Danish Lim Zhi Lin, Investment Analyst
Current Performance of SGX Nikkei 225:
As of 26 June, at 10:40 SGT, the SGX Nikkei 225 Index Futures contract was up by 1.52%, led by
semiconductor-related stocks Tokyo Electron and Advantest. Sumitomo Pharma surged following
reports it is considering layoffs and a new plant. This would mark the 3rd consecutively daily gain, underpinned by dip-buying activity following a weak April (-5.03%) and May (-0.05%).
Based on our technical target levels, the contract looks to have breached immediate resistance at around 39,225. We believe this puts it on track to hit our target level at around 42,050 by end-2024.
Continued Yen Depreciation:
As of 27 June, the Yen has continued to depreciate, weakening to almost 160.9 per Dollar, the lowest level since 1986, ramping up intervention risks by the BOJ. Top currency official Masato Kanda reiterated that the government will take appropriate measures if there are excessive currency moves.
This comes as last week’s CPI ex fresh food reading rose by 2.5% YoY in May, up from 2.2% in April. We believe the reading gives room for the BOJ to consider hiking rates in the coming months. However, the Yen continues to depreciate due to its interest rate gulf with the US, further exacerbated by the timing of Fed rate cuts being pushed back later into the year.
Although a weaker yen has traditionally benefitted exporters, we believe yen weakness has gone too far and has resulted in higher imported inflation, eroding consumers’ purchasing power. Our research shows the correlation between the Nikkei 225 and USDJPY started turning flat once USDJPY went past 155.
Corporates have cited levels around 120-130 against the USD to be “preferable”. As such, we believe a sustainable equity rebound would require further easing of yen weakness.
Nikkei 225 Outlook & Trading Opportunity:
In our opinion, we expect delayed BOJ rate hikes and delayed FOMC rate cuts to eventually translate into an eventual easing of yen depreciation pressure.
This will support a Yen rebound to more comfortable levels- enabling Japanese equities to sustainably outperform in 2H 2024. Corporate governance reforms should provide support for Japanese equities over the medium to long term.
We see any near-term weakness or pullback as an entry opportunity.
Expressing Our View:
We maintain our trade setup below to express our view:
Long SGX Nikkei 225 Index Futures
The daily chart shows the contract having broken above the 0.236% Fibonacci extension level and is headed towards the 0.382% extension level at around 40,780.
With a Trend-based Fibonacci Extension drawn from the October 2023 low, we set our target level at the 0.50% extension level around 42,050. Stop loss is set below the key support level at 36,650.
This setup delivers a reward: risk ratio of 2.03x.
• Entry Level: 38,430 (previous entry level)
• Target Level: 42,050
• Stop Loss Level: 36,650
• Profit at Target: 3620 x ¥500= ¥1,810,000
• Loss at Stop: 1780 x ¥500= ¥890,000
• Reward: Risk Ratio: 2.03x
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Ride the waves of the Nikkei 225—trade SGX Nikkei 225 Index Futures for as low as 50 cents* and you could win a pair of air tickets to Japan. Discover more here.
*For applicable terms and conditions and a full risk disclaimer, please refer to
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Nikkei reversal risk with futures extremely overboughtNikkei futures are extremely overbought on a 4h timeframe having surged to more than two-month highs earlier Wednesday. On each of the past five occasions RSI has exceeded 77, as it has today, it has coincided with a near-term market top.
By coincidence, today’s rally stalled at 39775, a level that acted as both supply and demand on multiple occasions earlier this year, including when last tested in April. While it goes completely momentum and comes just a few days before quarter-end, a short setup has presented itself.
Having missed an earlier entry opportunity when futures failed above 39775, I’m prepared to wait to see whether we get another test during the European or North American session.
If we were to fail again at 39775, you could initiate shorts with a stop above 39800 for protection. 39500 would be the initial target, a minor level that acted as resistance and support in April. Below, 39345, 39200 and 39025 are other downside levels to consider.
DS
NIKKEI225 Forms A Bullish Triangle? Elliott Wave AnalysisNIKKEI225 is moving in a strong five-wave impulsive bullish cycle, which looks to be unfinished. Currently we can see it consolidating and it can be forming and potentially finishing a bullish triangle pattern in wave (4), which can push the price even higher for wave (5) from Elliott wave perspective.
Bullish confirmation is above 40k, while invalidation level remains at 34k.
Has Japan’s Stock Market Peaked? Buy on DipsBy Danish Lim Zhi Lin, Investment Analyst
Current Performance of SGX Nikkei 225:
The SGX Nikkei 225 Index Futures contract underperformed in April (-5.03%) and was nearly flat in May (-0.05%) as the rise in 10-year JGB yields following the BOJ’s March and May meetings weighed on semiconductor names and other growth stocks.
Impact of Yen Depreciation:
However, despite rising yields, due to interest rate differentials and carry trades, the Yen continued to depreciate against the Dollar. Although a depreciating currency previously helped the Nikkei 225 climb to new record highs, it has also resulted in higher imported inflation, weighing on companies including retailers and railway operators that rely on domestic spending.
A survey conducted by Teikoku Databank on May 17 reported that about 64% of firms surveyed said the recent depreciation of the yen has eroded their profits.
Nikkei 225 Outlook & Trading Opportunity:
In our opinion, yen depreciation, once a key growth driver, now exerts downward pressure on the stock market. We note that the correlation between a weaker yen and stronger stock prices started turning flat once the yen depreciated past ¥155/$.
Nevertheless, we anticipate delayed BOJ rate hikes and delayed FOMC rate cuts to translate into an easing of yen depreciation pressure- supporting a Yen rebound and enabling Japanese equities to outperform in 2H 2024. Corporate governance reforms should provide support for Japanese equities over the medium to long term.
We see any near-term weakness or pullback as an entry opportunity.
Expressing Our View:
We favor the hypothetical trade setup below to express our view:
Long SGX Nikkei 225 Index Futures
The daily chart shows the contract consolidating around the 38,000 – 39,500 level.
With a Trend-based Fibonacci Extension drawn from the October 2023 low, we prefer to take entry at around 38,430, as we view current weakness as an entry opportunity. The 14-day RSI indicates that the contract is currently not at overbought levels.
We set our target level at the 0.50% extension level around 42,035. Stop loss is set below the key support level at 36,650. This setup delivers a reward: risk ratio of 2.03x.
• Entry Level: 38,430
• Target Level: 42,050
• Stop Loss Level: 36,650
• Profit at Target: 3620 x ¥500= ¥1,810,000
• Loss at Stop: 1780 x ¥500= ¥890,000
• Reward: Risk Ratio: 2.03x
Trade Nikkei 225 at only 50 cents* now
Capitalise on the Nikkei 225’s movements—trade SGX Nikkei 225 Index Futures at only 50 cents* now and stand to win a pair of air tickets to Japan. Learn more here .
*For applicable terms and conditions and a full risk disclaimer, please refer to www.phillipnova.com.sg. This ad has not been reviewed by MAS
Analysing the Nikkei 225: Insights from the 50D-Moving AverageBy Eric Lee , Sales Director from Phillip Nova
50-day Moving Average and Historical Scenario
The 50-day moving average often serves as a key consolidation level for the Nikkei 225.
Historically, after significant up or down movements, the index tends to consolidate around
this average before resuming its trend. A notable example occurred between mid-July and
mid-November 2023. Following a rise from 26,000 to 34,000 points from mid-March to midJune 2023, the index consolidated around the 50-day moving average for 5.5 months before
breaking out and continuing its uptrend.
Current Market Performance
Currently, since early April, the Nikkei 225 has been oscillating along the 50-day moving
average. The suggested resistance level is at 39,460 points. A break above this level could
indicate a resumption of the uptrend. Conversely, if the index falls below 36,700 points, it
would be prudent to exit positions as this level serves as a cut-loss point. Monitoring these
levels can help in making informed trading decisions.
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Nikkei (NKD) Has Reached Support ZoneShort term Elliott Wave view in Nikkei Futures (NKD) suggests that rally to 40960 ended wave 3. Pullback in wave 4 is currently in progress as a double three Elliott Wave structure. Down from wave 3, wave (a) ended at 40025 and wave (b) ended at 40805. Wave (c) lower ended at 39285 and this completed wave ((w)) in higher degree. The Index then bounced in wave ((x)) which ended at 40324 as the 1 hour chart below shows.
The Index extended lower in wave ((y)). Internal subdivision of wave ((y)) is unfolding as a zigzag structure. Down from wave ((x)), wave (a) ended at 38815 and wave (b) ended at 39995. Wave (c) lower is in progress as a 5 waves. Down from wave (b), wave i ended at 38830 and wave ii ended at 39540. Wave iii lower ended at 38335 and wave iv ended at 38695. Expect the Index to soon end wave v of (c) of ((y)). This should complete wave 4 in higher degree as well. Afterwards, the Index should extend higher or turn higher in 3 waves at least. The support area comes at 37582 – 38626 blue box area where the Index may potentially find buyers.
Where my 40k NKD target came from & why it could go higher laterI've been giving warnings ever since the c0v1d black swan, and especially since the 25k re-test, that Nikkei will grow wings but here's a seeing-is-believing look at where my 40k target comes from
For sure it could go higher later and break this key resistance but I would expect at least one more re-test of the navy blue channel beforehand
In theory there's no reason why a solid year can't be spent consolidating under that resistance a la 2006
Some very notable calls in recent years:
SPREADEX:NIKKEI and TVC:DJI both to 40k (over 1y in advance)
CRYPTOCAP:BTC pico bottom at 15k and recent local top at 70k
FX:EURUSD pico bottom & TVC:DXY pico top at 115
TVC:USOIL pico bottom at 68
NASDAQ:SMCI mega breakout at 100
NASDAQ:NVDA mega support at 120
NASDAQ:TSLA pico bottom at 105
NASDAQ:NFLX pico bottom at 165
Looking for buys1. Low of the week
2. Overall buy
3. Imbalance above
4. 15min bullish ob (tpd 3x)
5. BSL 15min
Definitely believe price will push up first before doing back down some more.
Nikkei (NKD_F) Looking to End Impulsive RallyShort Term Elliott Wave view in Nikkei (NKD) suggests pullback to 38136 on 3.12.204 low ended wave 4. Index then turns higher in wave 5. The rally from 3.12.2024 low is in progress as a 5 waves impulse. Up from wave 4, wave ((i)) ended at 39055. Pullback in wave ((ii)) ended at 38155 as a zigzag. Down from wave ((i)), wave (a) ended at 38310, wave (b) ended at 38740 and wave (c) lower ended at 38155. Index then resumed higher in wave ((iii)).
Up from wave ((ii)), wave (i) ended at 38650 and wave (ii) pullback ended at 38390. Wave (iii) higher ended at 39850 and pullback in wave (iv) ended at 39505. Final leg wave (v) ended at 40960 which completed wave ((iii)). Down from there, wave ((iv)) unfolded as a zigzag Elliott Wave structure. Down from wave ((iii)), wave (a) ended at 40490 and wave (b) ended at 40680. Wave (c) lower ended at 40025 which completed wave ((iv)). Nikkei has resumed higher in wave ((v)). Up from wave ((iv)), wave (i) ended at 40530 and dips in wave (ii) ended at 40275. Near term, as far as pivot at 38136 low stays intact, expect Index to extend higher.
NIKKE 225 Analysis - Continuous, Just as the Markets !This is a Thread, so Follow for Technical Analysis performed with TrapZone Pro & UMVD Indicators.
* Trend is Based on TrapZone Color
* Bar Colors give us Momentum Green from strong Up Moves. Red Bars point to strong Down Moves.
* Red UMVD = Selling Pressure & Green UMVD = Buying Pressure. Purple is for Divergence = Battle of Supply & Demand
>> USE PAGE DN to go DOWN To the LATEST Post <<
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2-24-2024
Strong Upside Momentum with wide GREEN TrapZone established now and GREEN UMVD continues. Class A Entry at the top of the TrapZone.
Correlation between JPY strength and NIKKEIWe cannot treat the Japanese market similar to how we treat the west.
Traditionally, when a currency strengthen, the respective stock index will dip.
However, here we see that whenever USDJPY drops (aka JPY strengthens), the NIKKEI actually continues to rally or at least consolidates sideways.
