Research Excerpts

Japanese Stocks: Canary In The Coal Mine?

Posted on: Wednesday, August 7th, 2013

The following (green highlights) is an excerpt from our August 5th Keys To This Week report.

Keys To This Week, one of 8 different reports that we produce for subscribers throughout the month, is a detailed weekly outline of key market factors and corresponding charts pertaining to the US stock market and market sectors, US interest rates, and the US Dollar that are most likely to influence US financial market direction during the upcoming week. Click Here to view a sample copy.

Excerpt From: Keys To This Week
Asset Class: Global Equities
Topic: Intermarket Relationships
Date: August 5th, 2013

Chart 1 below plots the Japanese Nikkei 225 Index since January and highlights a chart pattern, a triangle, that has emerged over the past 2 months. Triangles represent temporary investor indecision and typically resolve them in the direction of the trend that preceded them, which in this case would be accomplished by a close above the pattern’s upper boundary at 14,650. An upside breakout, should it occur, would target an additional 25% rise to 17,800.

Chart 1

Chart 1

Conversely, an atypical breakdown through the lower boundary of the pattern at 13,800 would target an eventual 26% decline to 10,600.

Considering the positive correlation between the Nikkei 225 and the S&P 500 over the past 3 years, how the Japanese index reacts to this pattern over the next week or so will be seen as an indirect indication of upcoming direction in the US broad market.


The Nikkei 225 finished today’s session at 13,825.


Asbury Research subscribers can view our entire July 29th report by visiting our Research Center.