Europe Stinks, China is Slowing, the US is Disfunctional, what about Japan?

There is a lot of focus on the European economy recently. Will Greece, Spain, Italy…….pull down the entire Euro-zone and hurt the rest of the world? Before this latest heat up it was the slowdown in the Chinese economy that gained attention. Throughout this whole time the slowdown in the US is also weighing on global markets. Is there anywhere in the world that is not experiencing a slowdown? What about Japan? Turns out their market is in the crapper as well. Take a look.

Japanese Nikkei Average, $NKY

The Japanese Nikkei Average, $NKY, took a tumble during the financial crisis as shown in the weekly chart below. The index fell from over 18300 to 6994 before it was over, losing 61.8% of its value. The recovery though was much weaker than in the US or elsewhere. The Index was only able to retrace about 38.2% of that move lower compared to close to 100% in the US. Now it is pulling back and has retraced nearly 76.4% of the bounce higher. This is where it gets ugly. A move through 8030 going lower becomes a lot more likely to retrace fully back to the 6994 level. And looking at the other indicators, they all support more downside price action. The Relative Strength Index (RSI) is bearish and heading lower, the Moving Average Convergence Divergence (MACD) indicator is negative and growing, and the Bollinger bands are opening up to the downside. Nothing good looking here.

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