Wednesday

Our Prediction: Nikkei to Outperform

Post a Comment September 16, 2009 – 11:45 pm |   | Permalink |  Print This Post |

Our indicator remains unchanged despite the rally, suggesting that this rally could have further upside but more importantly we are still in a bear market. We know nothing about Elliot Wave Analysis and not much more about conventional charting, but we do see more Bulls on the technical side. Some are beginning to change their long term outlook. We are quite comfortable with staying in the bear camp, both from a technical and fundamental point of view. However, because our indicator is at a much lower level compared to the previous August rally, it does mean that this rally may go higher to push our indicator to its upper limit. How much higher is the question, and when? We are using the most optimistic view as our assumption to trade (ie short), with some technical analysts calling for the Dow to reach 11500. We believe 10000 is almost a certainty - it is an important psychological milestone. Conquering that bear fort will certainly create more bulls. The bears are still getting air time on CNBC and Bloomberg, so this rally is not ripe for the picking yet. We are hoping to see “CONFIRMATION of a new bull market” and that the “recession is over” in the headlines. Then give it an extra few percent as buffer.

On a different note, the NIKKEI is still off its recent highs whilst every other market we follow have surged ahead. We opened $10/point Nikkei at 10340 overnight. expect this divergence to correct itself. Expect some great news from Japan (or some very bad news from the rest of the world - either way!). At the time of writing the NIKKEI is trading at 10350, with a target of at least 10500 (previous high). Japan has underperformed for decades, thanks to their money printing-bail all out strategy in the 1989 crash - the NIKKEI hit a 20 year low in the recent March crash. 20 lost years (!) - who says investing in the index is a sure win? Fundamentally, America is heading down that way.