When you look at the Nikkei 225, you also must keep in mind that there are a lot of different things going on at the same time.
The Nikkei 225 tried to rally during the trading session on Wednesday but continues to give up gains above the ?27,600 area. It’s also worth noting that we are near an area that previously had been supported, so I think a bit of “market memory” is starting to come into play.
Stock markets are crashing again
When you look at the Nikkei 225, you also must keep in mind that there are a lot of different things going on at the same time. To begin with, you have the Bank of Japan buying unlimited bonds, which has the benefit of keeping interest rates down to 0.25% on the 10-year note, but also has the negative effect of watching the Japanese yen get eviscerated. One would have to think that sooner or later, that cheap money and unfortunately cheap yen should continue to weigh upon corporate profits. The Bank of Japan is a bit different than many other central banks though because they do get involved in their domestic stock market at times.
With that being said, the 200-Day EMA is near the ?27,400 level, and the 50-Day EMA is nearly ?27,300 level.If we were to break through all of that, it’s likely that the Nikkei 225 would fall apart, and kick off the next bear Ron down to the ?26,000 region.On the other hand, if we were to turn around and break above the highs of the last couple of days, there’s not much to keep the Nikkei 225 from reaching the ?28,000 level, and perhaps even as high as the ?28,500 level.Keep in mind that the Nikkei 225 does tend to be more of a grinder than a momentum driven market, although it does have its days.
You will have to keep an eye on the USD/JPY parent, because if the pair continues to grind higher, that could continue to lift the Nikkei 225, to a point. However, there does come a point where the yen becomes “too cheap”, and profits get smoked. Furthermore, you should also pay attention to oil because Japan imports 100% of its oil, so that can have an outsized effect when oil gets out of hand as well. Either way, it does look like we are approaching an area where rollover is very possible from these levels.
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