Outlook for the Nikkei average this week [26-March 2023]

 [Fundamental viewpoint]

In the U.S. market last week, the announcement by six central banks in Japan, the U.S., and Europe, including the Fed, that they would work together to strengthen the supply of dollars to the market, calmed financial concerns and boosted stock indices.

Weekly change NY Dow: +1.18% NASAQ: +1.66% S&P 500: +1.39%.

                                       

On the other hand, medium- to long-term risks include concerns about the prolonged conflict in Ukraine, energy costs, financial instability and global economic slowdown due to rising interest rates, and the collapse of the real estate bubble and economic slowdown in China. This also raises concerns about the arrival of stagflation. In addition, geopolitical risks in East Asia and the Middle East continue to require attention.

The difference in the yield spread between the Japanese and U.S. markets is that the Japanese market is 4.29 points cheaper than the U.S. market, considering the announced OECD nominal GDP forecast for 2024. The reason for the undervaluation is the difference between the S&P 500's PER of 17.8 and the Nikkei 225's expected PER of 12.8 and the current fiscal year, as well as the difference in interest rates and GDP growth between the U.S. and Japan.

This means that if the GDP growth rate difference between Japan and the U.S. in 2021 expands by another 4.29 percentage points 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 fiscal year is about 28.4 if the Nikkei 225 is about 60700 yen compared to the current price of the Nikkei 225. The Japanese market is undervalued by about 33310 yen in the medium to long term.

 

From a fundamental perspective, the Japanese market can be said to be less attractive than the U.S. market by ¥33310. Last week, the weakness of the Japanese market diminished.

 

[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　Increase in profit forecast for the current fiscal year above the previous year's level

③ Further depreciation of the yen due to the widening interest rate gap between Japan and the U.S.

④ Upward revision of Japan's 2023 GDP estimate (now +3.5%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The weekly leg of the NYDow was positive last week. The daily is below the 200-day line and the equilibrium cloud. The NASDAQ has a positive weekly trend. The daily is above the 200-day line and the equilibrium cloud. We will be watching to see if the NYDow can return above the 25-day average line.

②    As a result of the announcement of quarterly financial results, the forecasted ROE of the Nikkei225 index was 9.0, the same level as three months ago. In addition, the profit growth rate was +3.1, a deterioration of -2.7 percentage points from three months ago.

③    U.S. long-term interest rates declined and the interest rate differential between the U.S. and Japan narrowed to 3.15 from 3.14, moving the dollar against the yen in the range of ¥133 to ¥129. The dollar index rose -0.72% for the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2024 is expected to be +2.51% for Japan and +3.54% for the U.S., so the Japanese market is 1.03 percentage points worse in this aspect.

⑤    The March 3 week was oversold; the March 4 week was likely oversold, and this week is expected to be oversold. Last week, of the five points, ① was bullish and ③was bearish. ①②③⑤ are expected to have an impact.

 

[Technical viewpoint]

Looking at the Japanese market from a technical perspective, it is undervalued by 3.8 points in the medium to long term in terms of the difference in 200-day divergence from the NASDAQ (about 1040 yen when converted to the Nikkei 225). On the other hand, the difference in the 200-day divergence from the NYDow is 0.6 points (about 160 yen when converted to the Nikkei average) overvalued in the medium to long term.

 

The strength of the Japanese market relative to the U.S. market decreased during the week. The VIX, a measure of U.S. market volatility, rose to 21.7 for the week. The Nikkei VI rose to 19.1 for the week. This suggests that the U.S. market is pessimistic.

 

The Nikkei is above the 9th but below 25th lines. A short-term trend has a "yellow light".

The Nikkei is above the clouds in the Ichimoku Kinko Hyo. The overall deviation rate was -1.0%, and the deviation rate from the 200-day moving average line was +0.1%. The medium-term trend has a "yellow light" because 2 factors are positive.

 

In the US market, the NYDow is above 9-day line but below 25-day line and 200-day line. It is below the clouds of the Ichimoku Kinko Chart. NASDAQ is above 9-day line and the 25-day line and 200-day line. It is above the clouds of the Ichimoku Kinko Chart.

It is a “yellow light” in the short term and a “yellow light” in the medium term.

 

[Outlook for this week]

Looking at the U.S. market from a fundamental perspective, concerns about a global economic slowdown due to the spread of the new coronavirus have receded, but risk factors include inflation and rising interest rates due to the Russia-Ukraine war and economic slowdown due to energy shortages and deteriorating political conditions in the EU, U.S.-China trade friction, financial market turmoil caused by the bursting of the Chinese real estate bubble and credit contraction, and geopolitical risks in the Middle East and East Asia.

 

Recent LIBOR rates have been on the rise, and we continue to be wary of a resurgence of financial instability.

 

Looking at the technical aspects, the U.S. market is in a medium-term no trend and a short-term no trend. The Japanese market is in a medium-term no trend, and the short-term is no trend.

 

Analysis of the foreign exchange market shows that the yen has been weakening since January 2023, but has been appreciating since mid-March. This week, we expect the yen to be in the 130-128 yen range.

 

The turmoil that has gripped the banking industry this week will continue to draw investor attention. In the U.S., the Fed's Vice Chairman for Supervision will testify before the Senate and the House of Representatives. In addition, consumer income and spending, the PCE price index, and the firm report of fourth-quarter GDP growth will be released. Other inflation releases are scheduled in the Eurozone, Germany, France, and Spain.

 

Last week, the Nikkei 225 remained within the assumed range. The upper price was about 100 yen below the assumed line and the lower price was about 190 yen above the assumed line.

This week, the Nikkei 225 is expected to move between the Bollinger Band +1σ (currently around 28040 yen) on the upside and the Bollinger Band -1σ (currently around 27170 yen) on the downside.

 

In the U.S. markets, the VIX remains high as bank runs continue to fester. However, the FOMC meeting has passed, and the Japanese market is expected to calm down somewhat.

Outlook for the Nikkei average this week [19-March 2023]

 [Fundamental viewpoint]

In the U.S. markets last week, stock indices were mixed on the view that the support package for First Republic Bank by the 11 largest banks, once the market calmed down, will inevitably lead to tighter lending attitudes by banks and cool the economy in the future.

Weekly volatility NY Dow: -0.15% NASAQ: +4.41% S&P 500: +1.43%.

                                       

On the other hand, medium- to long-term risks include concerns about the prolonged conflict in Ukraine, energy costs, financial instability and global economic slowdown due to rising interest rates, and the collapse of the real estate bubble and economic slowdown in China. This also raises concerns about the arrival of stagflation. In addition, geopolitical risks in East Asia and the Middle East continue to require attention.

The difference in the yield spread between the Japanese and U.S. markets is that the Japanese market is 4.34 points cheaper than the U.S. market, considering the announced OECD nominal GDP forecast for 2024. The reason for the undervaluation is the difference between the S&P 500's PER of 17.9 and the Nikkei 225's expected PER of 12.8 and the current fiscal year, as well as the difference in interest rates and GDP growth between the U.S. and Japan.

This means that if the GDP growth rate difference between Japan and the U.S. in 2021 expands by another 4.34 percentage points 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 fiscal year is about 28.9 if the Nikkei 225 is about 61660 yen compared to the current price of the Nikkei 225. The Japanese market is undervalued by about 34330 yen in the medium to long term.

 

From a fundamental perspective, the Japanese market can be said to be less attractive than the U.S. market by ¥34330. Last week, the weakness of the Japanese market diminished.

 

[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　Increase in profit forecast for the current fiscal year above the previous year's level

③ Further depreciation of the yen due to the widening interest rate gap between Japan and the U.S.

④ Upward revision of Japan's 2023 GDP estimate (now +3.5%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The weekly leg of the NYDow was negative last week. The daily is below the 200-day line and the equilibrium cloud. The NASDAQ has a positive weekly trend. The daily is above the 200-day line and the equilibrium cloud. We will be watching to see if the NYDow can return above the 25-day average line.

②    As a result of the announcement of quarterly financial results, the forecasted ROE of the Nikkei225 index was 9.0, the same level as three months ago. In addition, the profit growth rate was +3.0, a deterioration of -3.3 percentage points from three months ago.

③    U.S. long-term interest rates declined and the interest rate differential between the U.S. and Japan narrowed to 3.31 from 3.15, moving the dollar against the yen in the range of ¥135 to ¥131. The dollar index rose -0.74% for the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2024 is expected to be +2.51% for Japan and +3.54% for the U.S., so the Japanese market is 1.03 percentage points worse in this aspect.

⑤    The March 2 week was oversold; the March 3 week was likely oversold and is expected to be oversold this week. Of the five points last week, ① and ③ were bearish. ①②③⑤ are expected to have an impact.

 

[Technical viewpoint]

Looking at the Japanese market from a technical perspective, it is undervalued by 2.4 points in the medium to long term in terms of the difference in 200-day divergence from the NASDAQ (about 660 yen when converted to the Nikkei 225). On the other hand, the difference in the 200-day divergence from the NYDow is 1.5 points (about 410 yen when converted to the Nikkei average) overvalued in the medium to long term.

 

The strength of the Japanese market relative to the U.S. market decreased during the week. The VIX, a measure of U.S. market volatility, rose to 25.5 for the week. The Nikkei VI rose to 19.5 for the week. This suggests that the U.S. market is pessimistic.

 

The Nikkei is below the 9th and 25th lines. A short-term trend has a "red light".

The Nikkei is above the clouds in the Ichimoku Kinko Hyo. The overall deviation rate was -1.0%, and the deviation rate from the 200-day moving average line was -0.1%. The medium-term trend has a "yellow light" because 3 factors are positive.

 

In the US market, the NYDow is below 9-day line and 25-day line and 200-day line. It is below the clouds of the Ichimoku Kinko Chart. NASDAQ is above 9-day line and the 25-day line and 200-day line. It is above the clouds of the Ichimoku Kinko Chart.

It is a “yellow light” in the short term and a “yellow light” in the medium term.

 

[Outlook for this week]

Looking at the U.S. market from a fundamental perspective, concerns about a global economic slowdown due to the spread of the new coronavirus have receded, but risk factors include inflation and rising interest rates due to the Russia-Ukraine war and economic slowdown due to energy shortages and deteriorating political conditions in the EU, U.S.-China trade friction, financial market turmoil caused by the bursting of the Chinese real estate bubble and credit contraction, and geopolitical risks in the Middle East and East Asia.

 

Recent LIBOR rates have been on the rise, and we continue to be wary of a resurgence of financial instability.

 

Looking at the technical aspects, the U.S. market is in a medium-term no trend and a short-term no trend. The Japanese market is in a medium-term no trend, and the short-term is down trend.

 

Analysis of the foreign exchange market shows that the yen has been weakening since January 2023, but has been appreciating since mid-March. This week, we expect the yen to be in the 132-128 yen range.

 

Inflation reports and retail sales will be the focus of attention in the U.S. this week. This week, investors will continue to monitor conditions in the banking sector and await monetary policy decisions from the Fed, BoE, and other major central banks. Also of interest will be inflation data from Japan, the UK, and Canada, as well as Germany's ZEW economic index. Also important will be PMI data from the U.S., Japan, the U.K., the Eurozone, Germany, and France.

 

Last week, the Nikkei 225 fell below its assumed range. The upside was about 170 yen below the assumed line and the downside was about 620 yen below the assumed line.

This week, the Nikkei 225 is expected to move between the 25-day line (currently near 29650 yen) on the upside and Bollinger Band -2σ (currently near 26830 yen) on the downside.

 

In the U.S. markets, the VIX is still rising as regional bank runs are still smoldering. It is also likely to be heavily influenced by the FOMC results. The Japanese market is also likely to be volatile this week.

Outlook for the Nikkei average this week [12-March 2023]

 [Fundamental viewpoint]

In the U.S. markets last week, stock indices fell sharply as investors were concerned that the failure of Silicon Valley Bank, a subsidiary of SVB Financial Group, could spread to the entire financial system.

Weekly volatility NY Dow: -4.44% NASAQ: -4.71% S&P 500: -4.55%.

                                       

On the other hand, medium- to long-term risks include concerns about a prolonged conflict in Ukraine, energy costs, concerns about a slowdown in the global economy due to rising interest rates, and concerns about the bursting of the real estate bubble and a slowdown in China. This also raises concerns about the arrival of stagflation. In addition, geopolitical risks in East Asia and the Middle East continue to require attention.

The difference in the yield spread between the Japanese and U.S. markets is that the Japanese market is 4.24 points cheaper than the U.S. market, considering the announced OECD nominal GDP forecast for 2024. The reason for the undervaluation is the difference between the S&P 500's PER of 18.1 and the Nikkei 225's expected PER of 13.4 and the current fiscal year, as well as the difference in interest rates and GDP growth between the U.S. and Japan.

This means that if the GDP growth rate difference between Japan and the U.S. in 2021 expands by another 4.24 percentage points 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 fiscal year is about 30.9 if the Nikkei 225 is about 64980 yen compared to the current price of the Nikkei 225. The Japanese market is undervalued by about 36840 yen in the medium to long term.

 

From a fundamental perspective, the Japanese market can be said to be less attractive than the U.S. market by ¥36840. Last week, the weakness of the Japanese market diminished.

 

[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　Increase in profit forecast for the current fiscal year above the previous year's level

③ Further depreciation of the yen due to the widening interest rate gap between Japan and the U.S.

④ Upward revision of Japan's 2023 GDP estimate (now +3.5%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The weekly leg of the NYDow was negative last week. The daily is below the 200-day line and the equilibrium cloud. The NASDAQ has a negative weekly trend. The daily is below the 200-day line and the equilibrium cloud. We will be watching to see if the NYDow can return above the 25-day average line.

②    As a result of the announcement of quarterly financial results, the forecasted ROE of the Nikkei225 index was 9.0, the same level as three months ago. In addition, the profit growth rate was +3.5, a deterioration of -2.5 percentage points from three months ago.

③    U.S. long-term interest rates declined and the interest rate differential between the U.S. and Japan narrowed to 3.31 from 3.45, moving the dollar against the yen in the range of ¥137 to ¥134. The dollar index rose +0.11% for the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2024 is expected to be +2.51% for Japan and +3.54% for the U.S., so the Japanese market is 1.03 percentage points worse in this aspect.

⑤    The March 1 week was oversold; the March 2 week was likely overbought; this week is expected to be oversold. Of the five points last week, ① was bearish. ①②③⑤ are expected to have an impact.

 

[Technical viewpoint]

Looking at the Japanese market from a technical perspective, it is overvalued by 6.8 points (about 1910 yen when calculated to the Nikkei 225) in the medium to long term in terms of the difference in the 200-day divergence rate from the NASDAQ.
On the other hand, the difference in the 200-day divergence from the NYDow is undervalued by 6.2 points in the medium to long term (about 1740 yen when calculated for the Nikkei 225).

The strength of the Japanese market relative to the U.S. market increased during the week. The VIX, a measure of U.S. market volatility, rose to 24.8 for the week. The Nikkei VI rose to 17.9 for the week. This suggests that the U.S. market is pessimistic.

 

The Nikkei is above the 9th and 25th lines. A short-term trend has a "green light".

The Nikkei is above the clouds in the Ichimoku Kinko Hyo. The overall deviation rate was +7.5%, and the deviation rate from the 200-day moving average line was +2.9%. The medium-term trend has a "green light" because 3 factors are positive.

 

In the US market, the NYDow is below 9-day line and 25-day line and 200-day line. It is below the clouds of the Ichimoku Kinko Chart. NASDAQ is below 9-day line and the 25-day line and 200-day line. It is below the clouds of the Ichimoku Kinko Chart.

It is a “red light” in the short term and a “red light” in the medium term.

 

[Outlook for this week]

Looking at the U.S. market from a fundamental perspective, concerns about a global economic slowdown due to the spread of the new coronavirus have receded, but risk factors include inflation and rising interest rates due to the Russia-Ukraine war and economic slowdown due to energy shortages and deteriorating political conditions in the EU, U.S.-China trade friction, financial market turmoil caused by the bursting of the Chinese real estate bubble and credit contraction, and geopolitical risks in the Middle East and East Asia.

 

Recent LIBOR rates have been on the rise, and we continue to be wary of a resurgence of financial instability.

 

Looking at the technical aspects, the U.S. market is in a medium-term no trend and a short-term no trend. The Japanese market is in a medium-term up trend, and the short-term is up trend.

 

Analysis of the foreign exchange market shows that the yen has turned toward appreciation since November 2021, but has been weakening since mid-January.

This week, we expect the yen to be in the 135-132 yen range.

 

Inflation reports and retail sales will be the focus of attention in the U.S. this week. Investors will be looking for signs of spillover from the collapse of Silicon Valley Bank into the financial sector. Elsewhere, the ECB will set its monetary policy course, and China will release industrial production and retail sales data. Finally, the unemployment rate will be released in the U.K. and Australia, and CPI and trade statistics will be released in India..

 

Last week, the Nikkei 225 moved above its assumed range. The upper price was about 120 yen above the assumed line and the lower price was about 50 yen above the assumed line.

This week, the Nikkei 225 is expected to move between the Bollinger Band +1σ (currently around 28070 yen) on the upside and the Bollinger Band -1σ (currently around 27350 yen) on the downside.

In the U.S. market, the VIX is rising sharply as a shift of funds from stocks to bonds is taking place. This week, the Japanese market will have to be affected by this as well.

Outlook for the Nikkei average this week [5-March 2023]

[Fundamental viewpoint]

In the US market last week, long-term interest rates fell as fears of a Fed rate hike widening to 0.5% abated, and equity indices were dominated by buying.

Weekly fluctuation rate NY Dow: +1.75% NASAQ: +2.58% S&P500: +1.90%.

                                       

On the other hand, medium- to long-term risks include concerns about a prolonged conflict in Ukraine, energy costs, concerns about a slowdown in the global economy due to rising interest rates, and concerns about the bursting of the real estate bubble and a slowdown in China. This also raises concerns about the arrival of stagflation. In addition, geopolitical risks in East Asia and the Middle East continue to require attention.

The difference in the yield spread between the Japanese and U.S. markets is that the Japanese market is 4.42 points cheaper than the U.S. market, considering the announced OECD nominal GDP forecast for 2024. The reason for the undervaluation is the difference between the S&P 500's PER of 18.0 and the Nikkei 225's expected PER of 13.2 and the current fiscal year, as well as the difference in interest rates and GDP growth between the U.S. and Japan.

This means that if the GDP growth rate difference between Japan and the U.S. in 2021 expands by another 4.42 percentage points 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 fiscal year is about 31.9 if the Nikkei 225 is about 66020 yen compared to the current price of the Nikkei 225. The Japanese market is undervalued by about 39390 yen in the medium to long term.

 

From a fundamental perspective, the Japanese market can be said to be less attractive than the U.S. market by ¥39390. Last week, the weakness of the Japanese market diminished.

 

[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　Increase in profit forecast for the current fiscal year above the previous year's level

③ Further depreciation of the yen due to the widening interest rate gap between Japan and the U.S.

④ Upward revision of Japan's 2023 GDP estimate (now +3.5%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The weekly leg of the NYDow was positive last week. The daily is above the 200-day line and below the equilibrium cloud. The NASDAQ has a positive weekly trend. The daily is above the 200-day line and above the equilibrium cloud. We will be watching to see if the NYDow can return above the 25-day average line.

②    As a result of the announcement of quarterly financial results, the forecasted ROE of the Nikkei225 index was 9.0, the same level as three months ago. In addition, the profit growth rate was +3.7, a deterioration of -2.4 percentage points from three months ago.

③    U.S. long-term interest rates rose and the interest rate differential between the U.S. and Japan widened from 3.44 to 3.45, but the dollar moved toward a stronger yen in the range of ¥137 to ¥135. The dollar index fell -0.70% for the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2024 is expected to be +2.51% for Japan and +3.54% for the U.S., so the Japanese market is 1.03 percentage points worse in this aspect.

⑤    The 4th week of February was net selling. The first week of March was likely a net sell, and a net buy is expected this week. Last week, out of the five points, ① was bullish. ①②③⑤ are expected to have an impact.

 

[Technical viewpoint]

Looking at the Japanese market from a technical perspective, it is overvalued by 0.3 points (about 80 yen when calculated to the Nikkei 225) in the medium to long term in terms of the difference in the 200-day divergence rate from the NASDAQ.
On the other hand, the difference in the 200-day divergence from the NYDow is undervalued by 0.8 points in the medium to long term (about 220 yen when calculated for the Nikkei 225).

The weakness of the Japanese market relative to the U.S. market improved during the week. The VIX, a measure of U.S. market volatility, fell to a weekly low of 18.5. The Nikkei VI fell to a weekly low of 16.2. This suggests optimism in both the U.S. and Japanese markets.

 

The Nikkei is above the 9th and 25th lines. A short-term trend has a "green light".

The Nikkei is above the clouds in the Ichimoku Kinko Hyo. The overall deviation rate was +6.1%, and the deviation rate from the 200-day moving average line was +2.3%. The medium-term trend has a "green light" because 3 factors are positive.

 

In the US market, the NYDow is above 9-day line and 200-day lines but below the 25-day line. It is below the clouds of the Ichimoku Kinko Chart. NASDAQ is above 9-day line and 200-day lines but below the 25-day line. It is above the clouds of the Ichimoku Kinko Chart.

It is a “yellow light” in the short term and a “yellow light” in the medium term.

 

[Outlook for this week]

Looking at the U.S. market from a fundamental perspective, concerns about a global economic slowdown due to the spread of the new coronavirus have receded, but risk factors include inflation and rising interest rates due to the Russia-Ukraine war and economic slowdown due to energy shortages and deteriorating political conditions in the EU, U.S.-China trade friction, financial market turmoil caused by the bursting of the Chinese real estate bubble and credit contraction, and geopolitical risks in the Middle East and East Asia.

 

Recent LIBOR rates have been on the rise, and we continue to be wary of a resurgence of financial instability.

 

Looking at the technical aspects, the U.S. market is in a medium-term no trend and a short-term no trend. The Japanese market is in a medium-term up trend, and the short-term is up trend.

 

Analysis of the foreign exchange market shows that the yen has turned toward appreciation since November 2021, but has been weakening since mid-January.

This week, we expect the yen to be in the 135-133 yen range.

 

In the U.S. this week, the focus will likely be on the February jobs report, JOLTs jobs report, trade statistics, and speeches by several Fed officials. Elsewhere in the region, China's inflation and trade data will be released, as will GDP from the UK, Eurozone, and Japan. In addition, the central banks of Australia and Japan will make monetary policy decisions.

 

Last week, the Nikkei 225 moved above its assumed range. The upper price was about 140 yen above the assumed line and the lower price was about 90 yen above the assumed line.

This week, the Nikkei 225 is expected to move between the Bollinger Band +3σ (currently around 27980 yen) on the upside and Bollinger Band +1σ (currently around 27670 yen) on the downside.

This week, the U.S. jobs report for February will be in focus, but U.S. long-term interest rates and the VIX are trending lower, which should be supportive for growth stocks.

Outlook for the Nikkei average this week [26-February 2023]

 [Fundamental viewpoint]

In the U.S. market last week, stock indices sold off as long-term interest rates rose and PCE showed stronger inflationary pressures.

Weekly volatility NY Dow: -2.99% NASAQ: -3.33% S&P 500: -2.67%.

                                       

On the other hand, medium- to long-term risks include concerns about a prolonged conflict in Ukraine, energy costs, concerns about a slowdown in the global economy due to rising interest rates, and concerns about the bursting of the real estate bubble and a slowdown in China. This also raises concerns about the arrival of stagflation. In addition, geopolitical risks in East Asia and the Middle East continue to require attention.

The difference in the yield spread between the Japanese and U.S. markets is that the Japanese market is 4.45 points cheaper than the U.S. market, considering the announced OECD nominal GDP forecast for 2024. The reason for the undervaluation is the difference between the S&P 500's PER of 17.9and the Nikkei 225's expected PER of 13.1 and the current fiscal year, as well as the difference in interest rates and GDP growth between the U.S. and Japan.

This means that if the GDP growth rate difference between Japan and the U.S. in 2021 expands by another 4.45 percentage points 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 fiscal year is about 31.5 if the Nikkei 225 is about 66020 yen compared to the current price of the Nikkei 225. The Japanese market is undervalued by about 38560 yen in the medium to long term.

 

From a fundamental perspective, the Japanese market can be said to be less attractive than the U.S. market by ¥38560. Last week, the weakness of the Japanese market diminished.

 

[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　Increase in profit forecast for the current fiscal year above the previous year's level

③ Further depreciation of the yen due to the widening interest rate gap between Japan and the U.S.

④ Upward revision of Japan's 2023 GDP estimate (now +3.5%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The weekly leg of the NYDow was negative last week. The daily is above the 200-day line and below the Ichimoku cloud. The daily is above the 200-day line and above the Ichimoku cloud. We will be watching to see if the NYDow can return above the 25-day average line.

②    As a result of the announcement of quarterly financial results, the forecasted ROE of the Nikkei225 index was 9.1, the same level as three months ago. In addition, the profit growth rate was +3.6, a deterioration of -2.5 percentage points from three months ago.

③    U.S. long-term interest rates rose and the interest rate differential between the U.S. and Japan widened from 3.31 to 3.44, causing the dollar/yen to move toward a weaker yen in the range of ¥133 to ¥136. The dollar index rose +1.33% for the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2024 is expected to be +2.51% for Japan and +3.54% for the U.S., so the Japanese market is 1.03 percentage points worse in this aspect.

⑤    The February 3 week was overbought; the February 4 week was likely oversold, and this week is expected to be oversold. Last week, of the five points, ③ was bullish and ① was bearish. ①②③⑤ are expected to have an impact.

 

[Technical viewpoint]

Looking at the Japanese market from a technical perspective, it is overvalued by 0.7 points (about 190 yen when calculated to the Nikkei 225) in the medium to long term in terms of the difference in the 200-day divergence rate from the NASDAQ.
On the other hand, the difference in the 200-day divergence from the NYDow is undervalued by 0.7 points in the medium to long term (about 190 yen when calculated for the Nikkei 225).

Weakness in the Japanese market relative to the U.S. market improved during the week. The VIX, a measure of U.S. market volatility, rose to 21.7 for the week. The Nikkei VI rose to 16.6 for the week. While the U.S. market is somewhat pessimistic, this suggests that the Japanese market is still optimistic.

 

The Nikkei is below the 9th but above 25th lines. A short-term trend has a "yellow light".

The Nikkei is above the clouds in the Ichimoku Kinko Hyo. The overall deviation rate was +1.4%, and the deviation rate from the 200-day moving average line was +0.7%. The medium-term trend has a "green light" because 3 factors are positive.

 

In the US market, the NYDow is below the 9-day line and 25-day line but above 200-day lines. It is below the clouds of the Ichimoku Kinko Chart. NASDAQ is below the 9-day line and 25-day line but above 200-day lines. It is above the clouds of the Ichimoku Kinko Chart.

It is a “red light” in the short term and a “yellow light” in the medium term.

 

[Outlook for this week]

Looking at the U.S. market from a fundamental perspective, concerns about a global economic slowdown due to the spread of the new coronavirus have receded, but risk factors include inflation and rising interest rates due to the Russia-Ukraine war and economic slowdown due to energy shortages and deteriorating political conditions in the EU, U.S.-China trade friction, financial market turmoil caused by the bursting of the Chinese real estate bubble and credit contraction, and geopolitical risks in the Middle East and East Asia.

 

Recent LIBOR rates have been on the rise, and we continue to be wary of a resurgence of financial instability.

 

Looking at the technical aspects, the U.S. market is in a medium-term no trend and a short-term down trend. The Japanese market is in a medium-term up trend, and the short-term is no trend.

 

Analysis of the foreign exchange market shows that the yen has turned toward appreciation since November 2021, but has been weakening since mid-January.

This week, we expect the yen to be in the 135-137 yen range.

 

This week in the U.S., the release of the ISM Manufacturing Index Chicago Purchasing Managers Association Index, as well as statements from several Fed officials, will be closely watched. Other highlights include GDP growth in India, Australia, and Brazil, PMIs in China, and inflation in the Eurozone.

 

Last week, the Nikkei 225 fell below its assumed range. The upper price was about 160 yen below the assumed line and the lower price was about 40 yen below the assumed line.

This week, the Nikkei 225 is expected to move between the Bollinger Band +2σ on the upside (currently around 27920 yen) and the Bollinger Band -2σ on the downside (currently around 26920 yen).

This week, the focus will be on U.S. economic indicators, but U.S. long-term interest rates and the VIX are trending higher, and growth stocks are likely to remain vulnerable to selling pressure. However, the weak yen is likely to be a factor supporting lower prices.

Outlook for the Nikkei average this week [19-February 2023]

 [Fundamental viewpoint]

In the U.S. markets last week, stock indices were mixed for the week, as CPI and PPI showed strong inflationary pressures, which offset the highs in tech stocks earlier in the week.

Weekly volatility NY Dow: -0.13% NASAQ: +0.59% S&P 500: -0.28%.

                                       

On the other hand, medium- to long-term risks include concerns about a prolonged conflict in Ukraine, energy costs, concerns about a slowdown in the global economy due to rising interest rates, and concerns about the bursting of the real estate bubble and a slowdown in China. This also raises concerns about the arrival of stagflation. In addition, geopolitical risks in East Asia and the Middle East continue to require attention.

The difference in the yield spread between the Japanese and U.S. markets is that the Japanese market is 4.53 points cheaper than the U.S. market, considering the announced OECD nominal GDP forecast for 2024. The reason for the undervaluation is the difference between the S&P 500's PER of 18.6and the Nikkei 225's expected PER of 13.1 and the current fiscal year, as well as the difference in interest rates and GDP growth between the U.S. and Japan.

This means that if the GDP growth rate difference between Japan and the U.S. in 2021 expands by another 4.53 percentage points 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 fiscal year is about 32.2 if the Nikkei 225 is about 67680 yen compared to the current price of the Nikkei 225. The Japanese market is undervalued by about 40160 yen in the medium to long term.

 

Fundamentally, the Japanese market is 40160 yen less attractive than the US market. Last week, the weakness in the Japanese market increased.

 

[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　Increase in profit forecast for the current fiscal year above the previous year's level

③ Further depreciation of the yen due to the widening interest rate gap between Japan and the U.S.

④ Upward revision of Japan's 2023 GDP estimate (now +3.5%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The NYDow was in crosshairs for the week last week. The daily is above the 200-day line and above the Ichimoku Kinko's Kumo's. The NASDAQ made a crosshair for the week. The daily price is above the 200-day line and above the Ichimoku cloud. We will be watching to see if the NYDow can return above the 25-day average line.

②    As a result of the announcement of quarterly financial results, the forecasted ROE for the Nikkei225 index stood at 9.0, 0.1 percentage point worse than three months ago. The profit growth rate was +4.1, a deterioration of -3.8 percentage points from three months ago.

③    U.S. long-term interest rates rose and the interest rate differential between the U.S. and Japan widened from 3.24 to 3.31, causing the dollar/yen to move toward a weaker yen in the range of ¥131 to ¥135. The dollar index rose +0.29% for the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2024 is expected to be +2.51% for Japan and +3.54% for the U.S., so the Japanese market is 1.03 percentage points worse in this aspect.

⑤    The February 2 week was overbought; the February 3 week was likely oversold; and this week is expected to be oversold. Last week, of the five points, ③ was bullish and ① was bearish. ①②③⑤ are expected to have an impact.

 

[Technical viewpoint]

Looking at the Japanese market from a technical perspective, it is undervalued by 2.5 points (about 690 yen when calculated to the Nikkei 225) in the medium to long term in terms of the difference in the 200-day divergence rate from the NASDAQ.
On the other hand, the difference in the 200-day divergence from the NYDow is undervalued by 3.7 points in the medium to long term (about 1,020 yen when calculated for the Nikkei 225).

Weakness in the Japanese market relative to the U.S. market strengthened during the week.

The VIX, a measure of U.S. market volatility, fell to a weekly low of 20.0. The Nikkei VI fell to a weekly low of 15.4.This suggests that the U.S. market is somewhat pessimistic, but the Japanese market is optimistic.

 

The Nikkei is below the 9th but above 25th lines. A short-term trend has a "yellow light".

The Nikkei is above the clouds in the Ichimoku Kinko Hyo. The overall deviation rate was +2.7%, and the deviation rate from the 200-day moving average line was +0.9%. The medium-term trend has a "green light" because 3 factors are positive.

 

In the US market, the NYDow is below the 9-day line and 25-day line but above 200-day lines. It is above the clouds of the Ichimoku Kinko Chart. NASDAQ is below the 9-day line but above 25-day line and 200-day lines. It is above the clouds of the Ichimoku Kinko Chart.

It is a “yellow light” in the short term and a “green light” in the medium term.

 

[Outlook for this week]

Looking at the U.S. market from a fundamental perspective, concerns about a global economic slowdown due to the spread of the new coronavirus have receded, but risk factors include inflation and rising interest rates due to the Russia-Ukraine war and economic slowdown due to energy shortages and deteriorating political conditions in the EU, U.S.-China trade friction, financial market turmoil caused by the bursting of the Chinese real estate bubble and credit contraction, and geopolitical risks in the Middle East and East Asia.

 

Recent LIBOR rates have been on the rise, and we continue to be wary of a resurgence of financial instability.

 

Looking at the technical aspects, the U.S. market is in a medium-term up trend and a short-term no trend. The Japanese market is in a medium-term up trend, and the short-term is up trend.

 

Analysis of the foreign exchange market shows that the yen has turned toward appreciation since November 2021, but has been weakening since mid-January.

This week, we expect the yen to be in the 134-137 yen range.

 

In the U.S. this week, the focus will be on the FOMC minutes and speeches by Fed officials. Also in focus will be revisions to personal income, personal consumption, the PCE price index, and the fourth quarter GDP growth rate. Attention will also be focused on the latest manufacturing and services PMI readings from major economies including the U.S., U.K., France, Germany, and Japan.

 

Last week, the Nikkei 225 remained within the assumed range. The upper price was about 500 yen below the assumed line and the lower price was about 220 yen above the assumed line.

This week, the Nikkei 225 is expected to move between the Bollinger Band +1σ (currently around 27740 yen) on the upside and the Bollinger Band -1σ (currently around 26740 yen) on the downside.

This week, the FOMC minutes and PCE price indexes will be in focus, but US long-term interest rates and the VIX are trending higher and growth stocks are likely to remain under selling pressure

Outlook for the Nikkei average this week [12-February 2023]

 [Fundamental viewpoint]

In the U.S. market last week, stock indices fell for the week as long-term interest rates rose and selling prevailed, especially in high-performing growth stocks, which are easily perceived as relatively overvalued.

Weekly change NY Dow:-0.17% NASAQ:-2.41% S&P 500:-1.11%.

                                       

On the other hand, medium- to long-term risks include concerns about a prolonged conflict in Ukraine, energy costs, concerns about a slowdown in the global economy due to rising interest rates, and concerns about the bursting of the real estate bubble and a slowdown in China. This also raises concerns about the arrival of stagflation. In addition, geopolitical risks in East Asia and the Middle East continue to require attention.

The difference in the yield spread between the Japanese and U.S. markets is that the Japanese market is 4.51 points cheaper than the U.S. market, considering the announced OECD nominal GDP forecast for 2024. The reason for the undervaluation is the difference between the S&P 500's PER of 18.6and the Nikkei 225's expected PER of 13.0 and the current fiscal year, as well as the difference in interest rates and GDP growth between the U.S. and Japan.

This means that if the GDP growth rate difference between Japan and the U.S. in 2021 expands by another 4.5 percentage points 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 fiscal year is about 31.5 if the Nikkei 225 is about 66990 yen compared to the current price of the Nikkei 225. The Japanese market is undervalued by about 39310 yen in the medium to long term.

 

Fundamentally, the Japanese market is 39310 yen less attractive than the US market. Last week, the weakness in the Japanese market increased.

 

[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　Increase in profit forecast for the current fiscal year above the previous year's level

③ Further depreciation of the yen due to the widening interest rate gap between Japan and the U.S.

④ Upward revision of Japan's 2023 GDP estimate (now +3.5%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    Last week, the NYDow weekly trend was negative. The daily footstep is above the 200-day line and the clouds of the equilibrium chart. NASDAQ weekly trend was negative. The daily footstep is above the 200-day line and above the clouds of the equilibrium chart. This week, we will be watching to see if the NYDow can return above the 25-day average line.

②    As a result of the announcement of quarterly financial results, the forecasted ROE for the Nikkei225 index stood at 9.0, 0.1 percentage point worse than three months ago. The profit growth rate was +3.7, a deterioration of -2.5 percentage points from three months ago.

③    U.S. long-term interest rates rose and the interest rate differential between the U.S. and Japan widened from 3.04 to 3.24, causing the dollar/yen to move toward a weaker yen in the range of ¥131 to ¥129. The dollar index rose +0.57% for the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2024 is expected to be +2.51% for Japan and +3.54% for the U.S., so the Japanese market is 1.03 percentage points worse in this aspect.

⑤    The February 1 week was oversold; the February 2 week was likely overbought, and this week is expected to be oversold. Last week, of the five points, ③ was bullish and ① was bearish. ①②③⑤ are expected to have an impact.

 

[Technical viewpoint]

Looking at the Japanese market from a technical perspective, it is undervalued by 4.3 points (about 1180 yen when calculated to the Nikkei 225) in the medium to long term in terms of the difference in the 200-day divergence rate from the NASDAQ. On the other hand, the difference in the 200-day divergence from the NYDow is undervalued by 4.1 points in the medium to long term (about 1130 yen when converted to the Nikkei 225).

Weakness in the Japanese market relative to the U.S. market declined during the week. The VIX, a measure of U.S. market volatility, rose to 20.5 for the week. The Nikkei VI fell to 16.2 for the week. This suggests that the U.S. market is somewhat pessimistic, but the Japanese market is optimistic.

 

The Nikkei is above the 9th and 25th lines. A short-term trend has a "green light".

The Nikkei is above the clouds in the Ichimoku Kinko Hyo. The overall deviation rate was +5.5%, and the deviation rate from the 200-day moving average line was +1.6%. The medium-term trend has a "green light" because 3 factors are positive.

 

In the US market, the NYDow is below the 9-day line but above 25-day line and 200-day lines. It is above the clouds of the Ichimoku Kinko Chart. NASDAQ is below the 9-day line but above 25-day line and 200-day lines. It is above the clouds of the Ichimoku Kinko Chart.

It is a “yellow light” in the short term and a “green light” in the medium term.

 

[Outlook for this week]

Looking at the U.S. market from a fundamental perspective, concerns about a global economic slowdown due to the spread of the new coronavirus have receded, but risk factors include inflation and rising interest rates due to the Russia-Ukraine war and economic slowdown due to energy shortages and deteriorating political conditions in the EU, U.S.-China trade friction, financial market turmoil caused by the bursting of the Chinese real estate bubble and credit contraction, and geopolitical risks in the Middle East and East Asia.

 

Recent LIBOR rates have been on the rise, and we continue to be wary of a resurgence of financial instability.

 

Looking at the technical aspects, the U.S. market is in a medium-term up trend and a short-term no trend. The Japanese market is in a medium-term up trend, and the short-term is up trend.

 

Analyzing the foreign exchange market, the yen has been trending lower since early 2021, but has turned stronger since November. This week, the yen is expected to be in the 129-132 yen range.

 

This week in the U.S., inflation, producer prices, retail sales, and several speeches by Fed officials will be the main focus of attention. Also in the U.K., the Consumer Price Index, Retail Sales, and Labor Statistics will be released. In addition, Japan's fourth quarter GDP growth and India's inflation rate will also be released.

 

Last week, the Nikkei 225 remained within the assumed range. The upper price was about 160 yen below the assumed line and the lower price was about 520 yen above the assumed line.

This week, the Nikkei 225 is expected to move between the Bollinger Band +2σ (currently around 28200 yen) on the upside and the 25-day line (currently around 26980 yen) on the downside.

This week, the U.S. Consumer Price Index for January will be the most closely watched, but with U.S. long-term interest rates and the VIX trending higher, it will be a week of selling pressure on the Nikkei 225.