Updated 14th November 2017 & amended 15th December 2017
The Nikkei’s medium term picture points towards further gains. Moreover we forecast that the long lasting downward trend, which started in the late 80’s came in early 2009 to an end. We anticipate that the Nikkei has started a bull market since that point, which is likely to last a major part of the coming decade.
However, short term the correction may see some followthrough to the downside before the Nikkei continues its medium trend to the upside.
Published 15th December 2017
Our base case remains marked in black. We think the correction will extend further and finish as a complex double three elliott wave pattern..
The trade setup, which we’ve mentioned during the last update remains valid. A breakout above 23k probably means that the Nikkei follows the red count wants to see higher levels immediately. The 23k mark can be seen as a trading signal for new positions. Long position above and no position (e.g. stop/loss) below 23k.
Eventually the current correction should resolve to the upside. Our Nikkei forecast remains a push into the 24,000-25,000 points area for the current swing.
Nikkei Technical Analysis Short Term
Published 24th November 2017 & amended 15th December 2017
Our short term Nikkei forecast is followthrough to the upside. Our two main reasons for this call are:
- There is no clean wave structure that can fit the current pattern into a terminal structure. We do see 9 waves up from the mid 2016 interim lows. There is no way to fit a non overlapping 1st and 4th wave within this structure though.
- Moreover equity index trends do very rarely end with spikes on increasing momentum. The October 2017 increase showed the highest MACD reading since 2014. The RSI went simply off the charts and reached the highest level in the past decade during the October move.
The Nikkei is still tracing out minor wave 3. It has just put in wave iii° of 3.
Nikkei Technical Analysis Medium Term
Published 7th November & validated 15th December 2017
The Nikkei 225 index passed on the upside through a big cluster of long term resistance in the past weeks. The advance occurred with gaining momentum, which is typical for third waves. The area spans from roughly 20.800-21.600 points. It has been significant since 1987 and provided major turning points in the Nikkei. This is a very strong sign for the bulls. The cluster serves now as support to the upside. We expect to revisit this area again in form of a correction to the upside trend.
Our base case is that the index is in a hurry to the upside. That would be the traditionally strong third wave in elliott wave theory. Our interpretation is that we have just started a third wave of primary degree and further price gains are ahead of us in the coming months. Correction wave 2° of primary degree finished in 2016. It has retraced slightly more than the 38.2% fibonacci level.
The index advance is strong and advances without showing willingness to correct. The result is forecast the current swing to carry the Nikkei into the 24,000-25,000 area. This is projected by wave symmetry, fibonacci retracements, and resistance levels dating back into the late 80’s / early 90’s.
Nikkei Technical Analysis Long Term
Published 7th November& validated 15th December 2017
The Nikkei has probably finished a 20-year downward cycle in 2009. The respective elliott wave pattern was complex overall but also in some subwaves of intermediate degree.
We believe that a secular bull market started in Japan in 2009. The Nikkei has roughly tripled in value until 2015. The increase occurred with an impulsive character. It tells us from a technical analyst point of view that there is more to come on the upside.
The subsequent correction was rather shallow and retraced just between 38% and 50% of the 2009-2015 impulse. The entire correction may extend, as described above, and form into a more complex structure such as an irregular flat into 2018.