With Samurai Strength the Nikkei is Ready to Make a 25 Year High

Another market that has been screaming along lately with the US market is the Japanese market. When investors talk of Japan the first thing that comes to mind is ‘the lost decade’ or negative interest rate policy. These things sound scary. Especially when combined. A country that has had a lost decade asking you to take money from them to borrow your money, and pay you back with less? Another good reason to follow the price action and not the news.

The Japanese Nikkei has been a great place to put money to work since 2012. The chart below shows the story. An 80% rise from 2012 to the first stall in 2013, then a slight pullback and another move higher to 21,000. That was a level that had not been seen since 1996. And it could not hold up. The Nikkei pulled back over the next 18 months. But it found support at a special place. The falling trend line that extends back more than 20 years stopped the fall. It settled there for a few months and got reacquainted with its 50 month SMA, then started back higher. A classic break out and retest before moving up.

The initial move back up off of support took the index to about 19550. It consolidated there for a couple of months and early in March looks to be breaking to the upside. A second leg up would target 23,200. That price level has not been seen since January 1992, just over 25 years ago. It is still a far cry from the peak in December 1989 at almost 39,000, but nonetheless historic. Momentum is on its side, as the RSI is moving higher int he bullish zone with lots of upside room. The MACD is only now starting to cross up. How far will the Nikkei go? I do not know. But it sure seems like it has a lot left in the tank.

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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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