Outlook for the Nikkei average this week [30-August-2020]

[Present state recognition of fundamental]

In the US market last week, the stock market index rose, driven by the development of new coronavirus vaccines and the rise in market prices of mainstay high-tech stocks. On the other hand, in the medium to long term, the spread of new types of pneumonia, an inward political situation centered on the world's own country, a lack of creditworthiness and credit crunch of banks, a slowdown in China and other economies, a fear of a slowdown in the global economy due to trade wars, etc. The geopolitical risks of the Middle East, the Korean Peninsula and Ukraine need continued attention.

The difference in the yield spread between the Japanese and U.S. markets is the published OECD real GDP forecast for 2021 The Japanese market is overvalued by 0.86 points, considering the announced OECD real GDP forecast for 2021. The reason for the overvaluation is the difference between the P/E of the S&P500 at 26.7 and the expected P/E of 21.7 of the Nikkei 225 stocks for the current fiscal year, as well as the difference between Japanese and U.S. interest rates and GDP growth.

This means that if the difference in the GDP growth rate between Japan and the U.S. in 2021 is further decrease by 0.86% compared to the OECD forecast (Japan is revised downward or the U.S. is revised upward), or if the PER of the Nikkei 225 stocks for the current term is around 18.3 or if the Nikkei 225 is around 19300 yen, the Japanese market is overvalued by 3590 yen in the medium to long term , which is roughly balanced.

[Conditions for Nikkei average rise]

In the future, the following assumptions are necessary for the Nikkei average to rise further.

① Rising US market

② UP of expected profit increase rate for the current term more than before

③ Expansion of the interest rate differential between Japan and the US and further depreciation of the yen

④ Upward revision of Japan's 2021 GDP estimate (now -0.5%) by OECD

⑤ Foreign investors over-buying

Looking at recent movements

①    Last week's NYDow weekly trend was positive. The daily footstep is above the 200-day line and above the clouds of the Ichimoku kinko table. NASDAQ weekly trend was positive. The daily footstep is above the 200-day line and above the clouds of the Ichimoku kinko table. House indexes, quarterly financial results announcements, August ISM Manufacturing Economy Index, August Employment Statistics will be the focus this week. It will be interesting to see if NYDow can keep above the 25-day line.

②    As a result of the announcement of the quarterly financial results, the forecasted ROE of the Nikkei 225 stocks was 5.0%. 0.2 points worse than 3 months ago. Profit growth was -17.7%. 1.7 points worse than 3 months ago.

③    The long-term interest rate in the United States rose, the interest rate differential between Japan and the US expanded from 0.61% to 0.67%, but the yen was strengthening from the 106 yen level to the 105 yen level.

④    The OECD's real GDP growth forecasts for Japan and the U.S. for 2021 were released, and Japan's GDP growth rate is expected to be -.0.5%. The U.S. market is expected to be up 1.9%, which means that the Japanese market is 2.4 points worse off in this respect.  

⑤    The 2nd week of August was a over selling. There was a high possibility that the 3rd week of August was over selling, and this week we are forecasting to over selling. Of the five points last week, ① was a bullish factor and ③ was a bearish factor. This week, it seems that ① ② ③ ⑤ will influence.

[Technical viewpoint]

From a technical perspective on the Japanese market, the difference in the 200-day deviation rate from NASDAQ is 21.6 points (about 4940 yen when considering the Nikkei 225 average) over the medium to long term. The price range expanded compared to last week. On the other hand, the difference in the 200-day deviation rate from NYDow is 5.2 points (about 1190 yen when considering the Nikkei 225 average) under the medium to long term.

The Nikkei 225 is above the clouds in the Ichimoku Kinko Hyo. The total deviation rate was +7.0%, which shrank positive width compared to last week. The 200-day moving average deviation rate was +3.9%, which shrank positive width. As the three factors are positive, the "green light" is lit in the medium term trend.

The Nikkei 225 is above the 25th line but under the 9th line. The "yellow light" is lit in short-term trends.

In the US market, NY Dow is above the 200 and 25 day lines and the 9 day line. It is above the clouds in the Ichimoku Kinko table. Nasdaq is above the 200 and 25 day lines, and the 9 day line. It is above the clouds of the Ichimoku Kinko table.

In the short term, the "green light" is lit, and in the medium term, the "green light" is lit.

[Outlook for this week]

Looking at the US market fundamentally, concerns such as interest rate hikes in the United States, US-China trade friction, US political uncertainty, North Korea issues are receding However, Spread of pneumonia infection by new coronavirus, falling crude oil prices, worsening U.S. corporate earnings, falling high yield bond markets , global long-term interest rate decline trend, financial market turmoil caused by credit slumps, lack of creditworthiness and political situation of EU banks, global economic slowdown concern with trade war, geopolitical risk of the Middle East and Ukraine Etc exist as a risk factor.

In addition, although the LIBOR interest rate has recently been declining, in March, the LIBOR interest rate has risen despite a decline in short-term interest rates, so there is a concern that financial instability may recur.

On the other hand, good news is the US zero interest rate policy, the Fed's direct financial support to companies including the purchase of junk bonds, economic measures of $ 3 trillion, and President Trump's policy expectations, monetary easing measures such as the Bank of Japan's 2% inflation target, the introduction of negative interest rates and the purchase of unlimited Japanese government bonds and 12 trillion yen in ETFs, as well as expectations for economic measures by the Japanese government that exceed the level of the Lehman Shock, Established 92 trillion yen corona reconstruction fund by EU, and the ECB's announcement of deepening negative interest rates and expanding quantitative easing.

Looking at the technical aspect, the US market is upward trend in the medium term　and upward trend in the short term. The Japanese market is upward trend in the medium term and no trend in the short term.

Analyzing the foreign exchange market last week, although the long-term interest rates in the US rose and the long-term interest rate differential between the US and Japan widened, the yen moved toward a stronger yen. This week, we expect prices in the 105 to 104 yen range.

From now on, we need to pay attention to technical indicators, US market trends, exchange rate movements, and foreign investor trends.

This week, the US employment statistics for August are likely to be highlighted. Non-farm payrolls are expected to grow by more than a million and unemployment rates could drop below 10% for the first time since April. Elsewhere, GDP data for Brazil, India, Australia and Turkey will be keenly watched as well as worldwide manufacturing and services PMI surveys and monetary policy action by the RBA. Other releases include trade figures for the US and Canada, factory orders for the US and Germany, industrial output and retail sales for Japan and South Korea.

The Nikkei average for last week was below the expected range. The upper price fell about 40 yen below the assumed line, and the lower price fell about 180 yen below the assumed line. As for the expected range of this week's Nikkei average, it is assumed that the upper price will be between Bollinger band +1σ (currently around 23170 yen) and the lower value will be between Bollinger band -1σ (currently around 22390 yen).

Outlook for the Nikkei average this week [23-August-2020]

[Present state recognition of fundamental]

In the US market last week, the stock market index rose, driven by leading high-tech stocks such as Apple. On the other hand, in the medium to long term, the spread of new types of pneumonia, an inward political situation centered on the world's own country, a lack of creditworthiness and credit crunch of banks, a slowdown in China and other economies, a fear of a slowdown in the global economy due to trade wars, etc. The geopolitical risks of the Middle East, the Korean Peninsula and Ukraine need continued attention.

The difference in the yield spread between the Japanese and U.S. markets is the published OECD real GDP forecast for 2021 The Japanese market is overvalued by 1.02 points, considering the announced OECD real GDP forecast for 2021. The reason for the overvaluation is the difference between the P/E of the S&P500 at 26.2 and the expected P/E of 21.8 of the Nikkei 225 stocks for the current fiscal year, as well as the difference between Japanese and U.S. interest rates and GDP growth.

This means that if the difference in the GDP growth rate between Japan and the U.S. in 2021 is further decrease by 1.02% compared to the OECD forecast (Japan is revised downward or the U.S. is revised upward), or if the PER of the Nikkei 225 stocks for the current term is around 17.8 or if the Nikkei 225 is around 18750 yen, the Japanese market is overvalued by 4170 yen in the medium to long term , which is roughly balanced.

[Conditions for Nikkei average rise]

In the future, the following assumptions are necessary for the Nikkei average to rise further.

① Rising US market

② UP of expected profit increase rate for the current term more than before

③ Expansion of the interest rate differential between Japan and the US and further depreciation of the yen

④ Upward revision of Japan's 2021 GDP estimate (now -0.5%) by OECD

⑤ Foreign investors over-buying

Looking at recent movements

①    Last week's NYDow weekly trend was positive. The daily footstep is above the 200-day line and above the clouds of the Ichimoku kinko table. NASDAQ weekly trend was positive. The daily footstep is above the 200-day line and above the clouds of the Ichimoku kinko table. House indexes, quarterly financial results announcements, Republican conventions, and durable goods orders for July will be the focus this week. It will be interesting to see if NYDow can keep above the 25-day line.

②    As a result of the announcement of the quarterly financial results, the forecasted ROE of the Nikkei 225 stocks was 5.0%. 0.5 points worse than 3 months ago. Profit growth was -17.4%, an improvement of 14.0 percentage points compared to three months ago.

③    The long-term interest rate in the United States declined, the interest rate differential between Japan and the US narrowed from 0.67% to 0.61%, and the yen was strengthening from the 106 yen level to the 105 yen level.

④    The OECD's real GDP growth forecasts for Japan and the U.S. for 2021 were released, and Japan's GDP growth rate is expected to be -.0.5%. The U.S. market is expected to be up 1.9%, which means that the Japanese market is 2.4 points worse off in this respect.  

⑤    The 1st week of August was a over buying. There was a high possibility that the 2nd week of August was over buying, and this week we are forecasting to over buying. Of the five points last week, ① was a bullish factor and ③ was a bearish factor. This week, it seems that ① ② ③ ⑤ will influence.

[Technical viewpoint]

From a technical perspective on the Japanese market, the difference in the 200-day deviation rate from NASDAQ is 18.3 points (about 4190 yen when considering the Nikkei 225 average) over the medium to long term. The price range expanded compared to last week. On the other hand, the difference in the 200-day deviation rate from NYDow is 2.3 points (about 530 yen when considering the Nikkei 225 average) under the medium to long term.

The Nikkei 225 is above the clouds in the Ichimoku Kinko Hyo. The total deviation rate was +8.8%, which shrank positive width compared to last week. The 200-day moving average deviation rate was +4.1%, which shrank positive width. As the three factors are positive, the "green light" is lit in the medium term trend.

The Nikkei 225 is above the 25th line but under the 9th line. The "yellow light" is lit in short-term trends.

In the US market, NY Dow is above the 200 and 25 day lines and the 9 day line. It is above the clouds in the Ichimoku Kinko table. Nasdaq is above the 200 and 25 day lines, and the 9 day line. It is above the clouds of the Ichimoku Kinko table.

In the short term, the "green light" is lit, and in the medium term, the "green light" is lit.

[Outlook for this week]

Looking at the US market fundamentally, concerns such as interest rate hikes in the United States, US-China trade friction, US political uncertainty, North Korea issues are receding However, Spread of pneumonia infection by new coronavirus, falling crude oil prices, worsening U.S. corporate earnings, falling high yield bond markets , global long-term interest rate decline trend, financial market turmoil caused by credit slumps, lack of creditworthiness and political situation of EU banks, global economic slowdown concern with trade war, geopolitical risk of the Middle East and Ukraine Etc exist as a risk factor.

In addition, although the LIBOR interest rate has recently been declining, in March, the LIBOR interest rate has risen despite a decline in short-term interest rates, so there is a concern that financial instability may recur.

On the other hand, good news is the US zero interest rate policy, the Fed's direct financial support to companies including the purchase of junk bonds, economic measures of $ 2 trillion, and President Trump's policy expectations, monetary easing measures such as the Bank of Japan's 2% inflation target, the introduction of negative interest rates and the purchase of unlimited Japanese government bonds and 12 trillion yen in ETFs, as well as expectations for economic measures by the Japanese government that exceed the level of the Lehman Shock, large-scale economic measures by the EU countries, and the ECB's announcement of deepening negative interest rates and expanding quantitative easing.

Looking at the technical aspect, the US market is upward trend in the medium term　and upward trend in the short term. The Japanese market is upward trend in the medium term and no trend in the short term.

Analyzing the foreign exchange market last week, long-term interest rates in the US fell, the long-term interest rate differential between Japan and the US narrowed, and the yen moved toward a stronger yen. This week, the range of 105 to 106 yen is expected.

From now on, we need to pay attention to technical indicators, US market trends, exchange rate movements, and foreign investor trends.

Global central bankers will be participating in the Jackson Hole symposium this week, with investors watching for any signs of future policy changes and looking to policymakers' views regarding the world's economic recovery. Key data to watch for include the US second estimate of Q2 GDP, durable goods orders and personal income and outlays,Canada and Germany Q2 GDP updates.

The Nikkei average for last week was below the expected range. The upper price fell about 400 yen below the assumed line, and the lower price fell below the assumed line by about 190 yen. As for the expected range of this week's Nikkei average, the upper price is Bollinger Bands +2σ (currently around 23410 yen) and the lower price is expected to move between the 25th line (currently around 22710 yen).

Outlook for the Nikkei average this week [16-August-2020]

[Present state recognition of fundamental]

In the US market last week, the stock market index rose due to expectations for the commercialization of a new coronavirus vaccine. On the other hand, in the medium to long term, the spread of new types of pneumonia, an inward political situation centered on the world's own country, a lack of creditworthiness and credit crunch of banks, a slowdown in China and other economies, a fear of a slowdown in the global economy due to trade wars, etc. The geopolitical risks of the Middle East, the Korean Peninsula and Ukraine need continued attention.

The difference in the yield spread between the Japanese and U.S. markets is the published OECD real GDP forecast for 2021 The Japanese market is overvalued by 0.60 points, considering the announced OECD real GDP forecast for 2021. The reason for the overvaluation is the difference between the P/E of the S&P500 at 29.0 and the expected P/E of 21.8 of the Nikkei 225 stocks for the current fiscal year, as well as the difference between Japanese and U.S. interest rates and GDP growth.

This means that if the difference in the GDP growth rate between Japan and the U.S. in 2021 is further decrease by 0.60% compared to the OECD forecast (Japan is revised downward or the U.S. is revised upward), or if the PER of the Nikkei 225 stocks for the current term is around 19.3 or if the Nikkei 225 is around 20600 yen, the Japanese market is overvalued by 2690 yen in the medium to long term , which is roughly balanced.

[Conditions for Nikkei average rise]

In the future, the following assumptions are necessary for the Nikkei average to rise further.

① Rising US market

② UP of expected profit increase rate for the current term more than before

③ Expansion of the interest rate differential between Japan and the US and further depreciation of the yen

④ Upward revision of Japan's 2021 GDP estimate (now -0.5%) by OECD

⑤ Foreign investors over-buying

Looking at recent movements

①    Last week's NYDow weekly trend was positive. The daily footstep is above the 200-day line and above the clouds of the Ichimoku kinko table, while the weekly NASDAQ weekly trend was positive. The daily footstep is above the 200-day line and above the clouds of the Ichimoku kinko table. This week, all eyes will be on the housing index, New York Fed Index for August, Philadelphia Fed Index for August. It will be interesting to see if NYDow can keep above the 25-day line.

②    As a result of the announcement of the quarterly financial results, the forecasted ROE of the Nikkei 225 stocks was 5.0%. 1.6 points worse than 3 months ago. Profit growth was -17.6%, an improvement of 37.7 percentage points compared to three months ago.

③    The long-term interest rate in the United States has risen, the interest rate differential between Japan and the United States has expanded from 0.56% to 0.67%, and the yen has depreciated at 105 to 107 units..

④    The OECD's real GDP growth forecasts for Japan and the U.S. for 2021 were released, and Japan's GDP growth rate is expected to be -.0.5%. The U.S. market is expected to be up 1.9%, which means that the Japanese market is 2.4 points worse off in this respect.  

⑤    The 1st week of August was a over buying. There was a high possibility that the 2nd week of August was over buying, and this week we are forecasting to over buying.

Last week, ① and ③ were bullish factor. It seems that ①,②,③,⑤ will be affected this week.

[Technical viewpoint]

From a technical perspective on the Japanese market, the difference in the 200-day deviation rate from NASDAQ is 14.2 points (about 3310 yen when considering the Nikkei 225 average) over the medium to long term. The price range shrank compared to last week. On the other hand, the difference in the 200-day deviation rate from NYDow is 0.5 points (about 120 yen when considering the Nikkei 225 average) under the medium to long term.

The Nikkei 225 is above the clouds in the Ichimoku Kinko Hyo. The total deviation rate was +15.3%, which expanded positive width compared to last week. The 200-day moving average deviation rate was +5.9%, which expanded positive width. As the three factors are positive, the "green light" is lit in the medium term trend.

The Nikkei 225 is above the 25th and 9th lines. The "green light" is lit in short-term trends.

In the US market, NY Dow is above the 200 and 25 day lines and the 9 day line. It is above the clouds in the Ichimoku Kinko table. Nasdaq is above the 200 and 25 day lines, and the 9 day line. It is above the clouds of the Ichimoku Kinko table.

In the short term, the "green light" is lit, and in the medium term, the "green light" is lit.

[Outlook for this week]

Looking at the US market fundamentally, concerns such as interest rate hikes in the United States, US-China trade friction, US political uncertainty, North Korea issues are receding However, Spread of pneumonia infection by new coronavirus, falling crude oil prices, worsening U.S. corporate earnings, falling high yield bond markets , global long-term interest rate decline trend, financial market turmoil caused by credit slumps, lack of creditworthiness and political situation of EU banks, global economic slowdown concern with trade war, geopolitical risk of the Middle East and Ukraine Etc exist as a risk factor.

Real estate prices in China are flat in large cities, but the problems of nonperforming loans in China as a whole such as excessive facilities have not been resolved. If you hurry up the process, it will lead to a short-term market drop, and if you delay proceeding, there is concern that the economic recession will be prolonged.

In addition, although the LIBOR interest rate has recently been declining, in March, the LIBOR interest rate has risen despite a decline in short-term interest rates, so there is a concern that financial instability may recur.

On the other hand, good news is the US zero interest rate policy, the Fed's direct financial support to companies including the purchase of junk bonds, economic measures of $ 2 trillion, and President Trump's policy expectations, monetary easing measures such as the Bank of Japan's 2% inflation target, the introduction of negative interest rates and the purchase of unlimited Japanese government bonds and 12 trillion yen in ETFs, as well as expectations for economic measures by the Japanese government that exceed the level of the Lehman Shock, large-scale economic measures by the EU countries, and the ECB's announcement of deepening negative interest rates and expanding quantitative easing.

Looking at the technical aspect, the US market is upward trend in the medium term　and upward trend in the short term. The Japanese market is upward trend in the medium term and upward trend in the short term.

Analyzing the foreign exchange market last week, long-term interest rates in the US rose, the long-term interest rate differential between Japan and the US widened, and the yen moved toward a weaker yen. This week, we expect prices in the 106 to 107 yen range.

From now on, we need to pay attention to technical indicators, US market trends, exchange rate movements, and foreign investor trends.

This week, the minutes of the Fed and ECB will be highlighted. The central bank of China will also decide on monetary policy. In terms of economic data, PMI surveys in the US, UK, Eurozone, Japan, and Australia provide insights on whether these economies continued to recover in the wake of the COVID-19 infection. Other key data include US housing data, UK retail trade and inflation, Japan second quarter GDP, trade balance and inflation.

Last week's Nikkei average was above the expected range. The upper price exceeded the assumed line by about 310 yen, and the lower price exceeded the assumed line by about 470 yen. The expected range for the Nikkei 225 this week is to move between an upper price of Bollinger band +3σ (currently around 23580 yen) and a lower price of Bollinger band +1σ (currently around 22940 yen).

Outlook for the Nikkei average this week [9-August-2020]

[Present state recognition of fundamental]

In the US market last week, the stock market index rose due to higher-than-expected economic indicators and the rise of large high-tech stocks. On the other hand, in the medium to long term, the spread of new types of pneumonia, an inward political situation centered on the world's own country, a lack of creditworthiness and credit crunch of banks, a slowdown in China and other economies, a fear of a slowdown in the global economy due to trade wars, etc. The geopolitical risks of the Middle East, the Korean Peninsula and Ukraine need continued attention.

The difference in the yield spread between the Japanese and U.S. markets is the published OECD real GDP forecast for 2021 The Japanese market is overvalued by 0.72 points, considering the announced OECD real GDP forecast for 2021. The reason for the overvaluation is the difference between the P/E of the S&P500 at 26.1 and the expected P/E of 20.2 of the Nikkei 225 stocks for the current fiscal year, as well as the difference between Japanese and U.S. interest rates and GDP growth.

This means that if the difference in the GDP growth rate between Japan and the U.S. in 2021 is further decrease by 0.72% compared to the OECD forecast (Japan is revised downward or the U.S. is revised upward), or if the PER of the Nikkei 225 stocks for the current term is around 17.6 or if the Nikkei 225 is around 19500 yen, the Japanese market is overvalued by 2830 yen in the medium to long term , which is roughly balanced.

[Conditions for Nikkei average rise]

In the future, the following assumptions are necessary for the Nikkei average to rise further.

① Rising US market

② UP of expected profit increase rate for the current term more than before

③ Expansion of the interest rate differential between Japan and the US and further depreciation of the yen

④ Upward revision of Japan's 2021 GDP estimate (now -0.5%) by OECD

⑤ Foreign investors over-buying

Looking at recent movements

①    Last week's NYDow weekly trend was positive. The daily footstep is under the 200-day line and above the clouds of the Ichimoku kinko table, while the weekly NASDAQ weekly trend was positive. The daily footstep is above the 200-day line and above the clouds of the Ichimoku kinko table. This week, all eyes will be on the housing index, July Consumer Price Index, July retail sales. It will be interesting to see if NYDow can keep above the 25-day line.

②    As a result of the announcement of the quarterly financial results, the forecasted ROE of the Nikkei 225 stocks was 5.3%. 0.2 points worse than 3 months ago. Profit growth was -13.8%, an improvement of 22.1 percentage points compared to three months ago.

③    The long-term interest rate in the United States has risen, the interest rate differential between Japan and the United States has expanded from 0.52% to 0.56%, and the yen has depreciated at 105 to 106 units..

④    The OECD's real GDP growth forecasts for Japan and the U.S. for 2021 were released, and Japan's GDP growth rate is expected to be -.0.5%. The U.S. market is expected to be up 1.9%, which means that the Japanese market is 2.4 points worse off in this respect.  

⑤    The 5th week of July was a over selling. There was a high possibility that the 1st week of August was over selling, and this week we are forecasting to over selling.

last week, ① was a bullish factor but ②,⑤ ware bearish factor. It seems that ①,②,③,⑤ will be affected this week.

[Technical viewpoint]

From a technical perspective on the Japanese market, the difference in the 200-day deviation rate from NASDAQ is 19.3 points (about 4310 yen when considering the Nikkei 225 average) over the medium to long term. The price range has expanded compared to last week. On the other hand, the difference in the 200-day deviation rate from NYDow is 2.9 points (about 660 yen when considering the Nikkei 225 average) over the medium to long term.

The Nikkei 225 is above the clouds in the Ichimoku Kinko Hyo. The total deviation rate was +3.7%, which turned positive compared to last week. The 200-day moving average deviation rate was +1.6%, which turned positive. As the three factors are positive, the "green light" is lit in the medium term trend.

The Nikkei 225 is below the 25th and 9th lines. The "red light" is illuminated for short-term trends.

In the US market, NY Dow is above the 200 and 25 day lines and the 9 day line. It is above the clouds in the Ichimoku Kinko table. Nasdaq is above the 200 and 25 day lines, and the 9 day line. It is above the clouds of the Ichimoku Kinko table.

In the short term, the "green light" is lit, and in the medium term, the "green light" is lit.

[Outlook for this week]

Looking at the US market fundamentally, concerns such as interest rate hikes in the United States, US-China trade friction, US political uncertainty, North Korea issues are receding However, Spread of pneumonia infection by new coronavirus, falling crude oil prices, worsening U.S. corporate earnings, falling high yield bond markets , global long-term interest rate decline trend, financial market turmoil caused by credit slumps, lack of creditworthiness and political situation of EU banks, global economic slowdown concern with trade war, geopolitical risk of the Middle East and Ukraine Etc exist as a risk factor.

Real estate prices in China are flat in large cities, but the problems of nonperforming loans in China as a whole such as excessive facilities have not been resolved. If you hurry up the process, it will lead to a short-term market drop, and if you delay proceeding, there is concern that the economic recession will be prolonged.

In addition, although the LIBOR interest rate has recently been declining, in March, the LIBOR interest rate has risen despite a decline in short-term interest rates, so there is a concern that financial instability may recur.

On the other hand, good news is the US zero interest rate policy, the Fed's direct financial support to companies including the purchase of junk bonds, economic measures of $ 2 trillion, and President Trump's policy expectations, monetary easing measures such as the Bank of Japan's 2% inflation target, the introduction of negative interest rates and the purchase of unlimited Japanese government bonds and 12 trillion yen in ETFs, as well as expectations for economic measures by the Japanese government that exceed the level of the Lehman Shock, large-scale economic measures by the EU countries, and the ECB's announcement of deepening negative interest rates and expanding quantitative easing.

Looking at the technical aspect, the US market is upward trend in the medium term　and upward trend in the short term. The Japanese market is upward trend in the medium term and downward trend in the short term.

Analyzing the foreign exchange market last week, long-term interest rates in the US rose, the long-term interest rate differential between Japan and the US widened, and the yen moved toward a weaker yen. This week, we expect prices in the 105 to 107 yen range.

From now on, we need to pay attention to technical indicators, US market trends, exchange rate movements, and foreign investor trends.

The coming week will see second-quarter GDP data for the UK, Russia, Malaysia, Hong Kong, Taiwan and Singapore, alongside industrial production for the US, China, Eurozone, UK and India and retail sales for the US and China.

Last week's Nikkei average was above the expected range. The upper price exceeded the assumed line by about 410 yen, and the lower price exceeded the assumed line by about 320 yen. The expected range of the Nikkei average this week is that the upper price is the 25th line (currently around 22520 yen) and the lower price is between Bollinger Bands-2σ (currently around 21990 yen).

Outlook for the Nikkei average this week [2-August-2020]

[Present state recognition of fundamental]

The US market last week was mixed. High-tech stocks were bought while selling became dominant due to concerns over deterioration of economic indicators. On the other hand, in the medium to long term, the spread of new types of pneumonia, an inward political situation centered on the world's own country, a lack of creditworthiness and credit crunch of banks, a slowdown in China and other economies, a fear of a slowdown in the global economy due to trade wars, etc. The geopolitical risks of the Middle East, the Korean Peninsula and Ukraine need continued attention.

The difference in the yield spread between the Japanese and U.S. markets is the published OECD real GDP forecast for 2021 The Japanese market is overvalued by 0.22 points, considering the announced OECD real GDP forecast for 2021. The reason for the overvaluation is the difference between the P/E of the S&P500 at 25.5 and the expected P/E of 17.9 of the Nikkei 225 stocks for the current fiscal year, as well as the difference between Japanese and U.S. interest rates and GDP growth.

This means that if the difference in the GDP growth rate between Japan and the U.S. in 2021 is further decrease by 0.22% compared to the OECD forecast (Japan is revised downward or the U.S. is revised upward), or if the PER of the Nikkei 225 stocks for the current term is around 17.2 or if the Nikkei 225 is around 20880 yen, the Japanese market is overvalued by 830 yen in the medium to long term , which is roughly balanced.

[Conditions for Nikkei average rise]

In the future, the following assumptions are necessary for the Nikkei average to rise further.

① Rising US market

② UP of expected profit increase rate for the current term more than before

③ Expansion of the interest rate differential between Japan and the US and further depreciation of the yen

④ Upward revision of Japan's 2021 GDP estimate (now -0.5%) by OECD

⑤ Foreign investors over-buying

Looking at recent movements

①    Last week's NYDow weekly trend was negative. The daily footstep is under the 200-day line and above the clouds of the Ichimoku kinko table, while the weekly NASDAQ weekly trend was positive. The daily footstep is above the 200-day line and above the clouds of the Ichimoku kinko table. This week, all eyes will be on the housing index, July ISM Manufacturing Economy Index, July Employment Statistics. It will be interesting to see if NYDow can keep above the 25-day line.

②    As a result of the announcement of the quarterly financial results, the forecasted ROE of the Nikkei 225 stocks was 5.8%. 0.6 points worse than 3 months ago. Profit growth was -6.7%, an improvement of 18.1 percentage points compared to three months ago.

③    Although U.S. long-term interest rates fell and the interest rate gap between Japan and the U.S. narrowed from 0.59% to 0.52%, the exchange rate, yen was stronger in the 106s to 104s.

④    The OECD's real GDP growth forecasts for Japan and the U.S. for 2021 were released, and Japan's GDP growth rate is expected to be -.0.5%. The U.S. market is expected to be up 1.9%, which means that the Japanese market is 2.4 points worse off in this respect.  

⑤    The 4th week of July was a over buying. There was a high possibility that the 5th week of July was over selling, and this week we are forecasting to over selling.

last week, ③ was a bearish factor. It seems that ①,②,③,⑤④ will be affected this week.

[Technical viewpoint]

From a technical perspective on the Japanese market, the difference in the 200-day deviation rate from NASDAQ is 11.7 points (about 2660 yen when considering the Nikkei225 average) over the medium and long term. It is less undervalued than last week. On the other hand, the difference in the rate of deviation from the 200-day line with NYDow is 2.9 points higher (about 660 yen when considering the Nikkei 225) over the medium to long term.

The Nikkei 225 is in the cloud of the Ichimoku Kinko table. The overall deviation rate was -3.7%, which turned negative compared to last week. The 200-day moving average deviation rate turned negative at -1.1. Since the two factors are negative, the "yellow signal" is lit in the medium term trend.

The Nikkei 225 is below the 25th and 9th lines. The "red light" is illuminated for short-term trends.

In the US market, NY Dow is above the 200 and 25 day lines, but below the 9 day line. It is above the clouds in the Ichimoku Kinko table. Nasdaq is above the 200 and 25 day lines, and the 9 day line. It is above the clouds in the Ichimoku Kinko table.

In the short term, the "yellow light" is lit, and in the medium term, the "green light" is lit.

[Outlook for this week]

Looking at the US market fundamentally, concerns such as interest rate hikes in the United States, US-China trade friction, US political uncertainty, North Korea issues are receding However, Spread of pneumonia infection by new coronavirus, falling crude oil prices, worsening U.S. corporate earnings, falling high yield bond markets , global long-term interest rate decline trend, financial market turmoil caused by credit slumps, lack of creditworthiness and political situation of EU banks, global economic slowdown concern with trade war, geopolitical risk of the Middle East and Ukraine Etc exist as a risk factor.

Real estate prices in China are flat in large cities, but the problems of nonperforming loans in China as a whole such as excessive facilities have not been resolved. If you hurry up the process, it will lead to a short-term market drop, and if you delay proceeding, there is concern that the economic recession will be prolonged.

In addition, although the LIBOR interest rate has recently been declining, in March, the LIBOR interest rate has risen despite a decline in short-term interest rates, so there is a concern that financial instability may recur.

On the other hand, good news is the US zero interest rate policy, the Fed's direct financial support to companies including the purchase of junk bonds, economic measures of $ 2 trillion, and President Trump's policy expectations, monetary easing measures such as the Bank of Japan's 2% inflation target, the introduction of negative interest rates and the purchase of unlimited Japanese government bonds and 12 trillion yen in ETFs, as well as expectations for economic measures by the Japanese government that exceed the level of the Lehman Shock, large-scale economic measures by the EU countries, and the ECB's announcement of deepening negative interest rates and expanding quantitative easing.

Looking at the technical aspect, the US market is upward trend in the medium term, and no trend in the short term. The Japanese market is no trend in the medium term, and downward trend in the short term.

Analyzing the foreign exchange market last week, the US long-term interest rates fell, the gap between the Japanese and US long-term interest rates narrowed, and the exchange rate moved in the direction of a stronger yen. This week we can expect the yen to be in the range of 106 to 104 yen.

From now on, we need to pay attention to technical indicators, US market trends, exchange rate movements, and foreign investor trends.

The US quarterly closing season continues this week, with about a quarter of S&P 500 companies reporting their second quarter results. In terms of economic data, we look at US employment statistics. With an increase of over 2 million in July, the unemployment rate could drop to 10.3%. Elsewhere, attention will be given to central bank policy conferences in the United Kingdom, India, Brazil, Australia and Thailand, as well as manufacturing and service PMIs around the world. Elsewhere, we also look at US and Chinese trade.

Last week's Nikkei average was below the expected range. The upper price was about 70 yen above the assumed line, and the lower price was about 480 yen below the assumed line. As for the expected range of this week's Nikkei average, it is assumed that the upper price is between Bollinger Bands-1σ (currently around 22190 yen) and the lower value is between Bollinger Bands-3σ (currently around 21610 yen).