JAPAN STOCK MARKET: SHORT TERM SUPPORT IN A LONG TERM BEAR MARKET

Japan's economy has been getting weaker since year 2007 and this has led to a very bearish market sentiment that led to a strong bear trend that started in July 2007 when the Nikkei was trading around 18,000 points. In my last analysis on Japan's stock market in 8th October 2008 when the Nikkei225 was at 10,155 points, I have expected the market to fall further and the Nikkei may find some safety net at 8,800 points. However, the benchmark index went under this net and only found support at 7,000 points in late October 2008. It rebounded since and traded sideways in a range between 7,500 and 9,500 points.

Today, the Nikkei 225 is at 8,256.85 points. The index is still below the declining long term 90-days moving average and this means that the market is still in a down trend. In December 2008, the Nikkei went above the short to mid term 60 to 90 day moving averages but went below it again few days back. The market is in a long term down trend consolidation.


Weekly Nikkei225 chart as at 19 January 2009 using NextVIEW Advisor. Click on chart for larger view.

The consolidation is currently dominated by the bears in the long term although it is being supported in the short term. The weekly RSI indicator are forming lower swings. A break below the crucial support level may send the Nikkei to a technical target of 5,500 points. I'd expect the Nikkei to trade sideways in the said trading range at least until the next quarter.

****

Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Upcoming Workshop from Benny Lee:
Market Outlook and how to Pick Right Value Stocks by Benny Lee | 21 Jan 2009 (K. Lumpur). Click on the title for more details.