A Deep Dive into the Nikkei

Japan is known as the Land of the Rising Sun. It has a long history and a culture steeped in tradition. It also was home to one of the biggest stock market corrections in history. On December 29, 1989 the Japanese Nikkei made its all-time high at just under 39,000, capping a bull run of more than 25 years. A little over 1 year later it was cut in half. It kept moving lower, eventually finding a bottom in April 2003 at 7600, a drop of 80%. The time after the fall was labeled the lost decade and it grew to be a very long span of time. The chart below shows the price action.

On this very long time scale there are two important places to note. The first is the failed run higher to the peak in 2007 that resulted in a lower low in 2009. Coinciding with the global financial crisis, this also marked a double bottom when it finally broke above the 2007 high in 2015. The second is today’s price action. The rise from the 2009 low is now making new 25 year high prices. This is very bullish price action.

Shifting now to a slightly smaller scale below, the technical picture is building for a long run higher. With the Nikkei breaking a long term falling trend resistance and the move to new 25 year highs it truly is day break in The Land of the Rising Sun. This chart shows the Golden Cross in 2015 re-enforcing the bullish turn. A retest of the trend break held and the Nikkei has been moving higher ever since.

In November it made a higher high, over the 2015 top, and has continued into January. Momentum is strong with the RSI over 70 and the MACD rising and positive. And with resistance levels that date back nearly 30 years, there is not much in the way to stop it from moving higher. Currently it has almost retraced 50% of the drop. That would come at about 23,250. And then the 61.8% retracement above that comes at about 27,000. Those are the next price levels to look for as the sun rises over Japan.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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