Outlook for the Nikkei average this week [4-November 2024]

 [Fundamental viewpoint]

In the US markets last week, tech and semi-conductor stocks sold off, sending stock indices lower for the week.

 

Weekly change NY Dow: -0.15%, NASDAQ: -1.50%, S&P 500: -1.37%.

                                                                                                 

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 4.76 points undervalued for the Japanese market when the OECD's nominal GDP forecast for 2025 is taken into account. The reason for the undervaluation is the difference between the S&P 500's P/E ratio of 23.8 and the Nikkei 225's P/E ratio of 15.4 the difference between the U.S. and Japanese interest rates, and the difference in GDP growth rates.

In order for the U.S. and Japanese markets to be in equilibrium, the following conditions must be met.

The difference in GDP growth between Japan and the U.S. in 2025 relative to the current price of the Nikkei 225 will be 4.76 percentage points larger than the OECD forecast. (Japan is revised downward or the U.S. is revised upward). Or the current year's forecast PER for stocks in the Nikkei Stock Average becomes about 56.8 Or, the Nikkei 225 will be around 140,850 yen.

As a result, the Japanese market is undervalued by about 102,850 yen in the medium to long term.

 

From a fundamental perspective, the Japanese market can be said to be about 102,850 yen less attractive than the U.S. market. Weakness in the Japanese market was somewhat magnified last week.

 

[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 2025 GDP estimate (now +2.9%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The weekly leg of the NYDow was negative last week. The daily chart is above the 200-day line and above the clouds of the Ichimoku Chart. The NASDAQ's weekly leg was negative last week. The daily chart is above the 200-day line and above the equilibrium cloud. This week, the focus will be on whether or not the NY Dow is able to surpass the 25-day line.

②    As a result of the earnings announcements, the expected ROE of the Nikkei 225 index stood at +8.8%, 0.2 percentage points worse than three months ago. The profit growth rate was +1.4%, 0.2 percentage points worse than three months ago.

③    Long-term interest rates in the US rose and the interest rate differential between the US and Japan widened from 3.30 to 3.45, causing the USD/JPY to move in a weaker direction in the range of 151 yen to 153 yen. The Dollar Index rose +0.00% on the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2025 is expected to be +2.9% for Japan and +3.9% for the U.S., so the Japanese market is 1.0 percentage points inferior in this aspect.

⑤    The fourth week of October was oversold, the fifth week of October was likely oversold and this week is expected to be overbought. Of the five points, (i) was bearish last week.

 

[Technical viewpoint]

Looking at the Japanese market from a technical perspective, it is undervalued by 8.1 points in the medium to long term in terms of the difference in the 200-day divergence rate from the NASDAQ (about 3080 yen when converted to the Nikkei 225). On the other hand, the difference in the 200-day divergence from the NYDow is undervalued by 6.5 points in the medium to long term (about 2470 yen when calculated for the Nikkei 225).

 

Japanese markets are weak against the NY Dow and NASDAQ. The VIX, a measure of US market volatility, rose to 21.9 for the week. The Nikkei VI fell to a weekly low of 26.0. The US market is slightly pessimistic, as is the Japanese market.

 

The Nikkei 225 is below the 9-day and 25-day lines. This is a “red light” for the short-term trend.

The Nikkei 225 is above the Ichimoku Kinko Chart cloud. The Nikkei 225's overall divergence was -2.6% and the divergence from the 200-day moving average was -0.9%. As these two factors are negative, a ‘yellow light’ has been given to the medium-term trend.

 

In the U.S. market, the NYDow is below the 9-day, and 25-day lines, and above 200-day line. It is above the Ichimoku Chart cloud.

The NASDAQ is below the 9-day, and 25-day lines, and above 200-day line. The NASDAQ is above the Ichimoku Chart cloud.

This is a “red signal” in the short term and a “green signal” in the medium term.

 

[Outlook for this week]

Looking at the U.S. market in terms of fundamentals, we are aware of concerns of a recession in the near term. Other risk factors include inflation and rising interest rates due to the Russia-Ukraine war, economic recession due to energy shortages and deteriorating political conditions in the EU, U.S.-China trade friction, financial market turmoil caused by the bursting of China's real estate bubble and credit crunch, and expanding geopolitical risks in the Middle East.

 

Looking at the technical aspects, the U.S. market is in a medium-term up trend and a short-term down 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 turned toward appreciation after peaking at 162 yen in June 2024. This week, we expect the yen to be between ¥150 and ¥153.

 

The US presidential election will be the most closely watched event in the US markets this week. In addition, markets will focus on the Fed's monetary policy, the ISM Services PMI, the University of Michigan Consumer Confidence Index, manufacturing orders and corporate earnings. Globally, the focus will be on UK monetary policy decisions, German industrial production and manufacturing orders, Eurozone retail sales, Chinese trade statistics and services PMI, and inflation indicators.

 

Last week, the Nikkei 225 moved above its assumed range. The upper range was about 620 yen above the assumed range and the lower range was about 310 yen above the assumed line.

This week, the Nikkei 225 is expected to move between the Bollinger Band +2σ (currently around 39990 yen) on the upside and the Bollinger Band -2σ (currently around 37640 yen) on the downside.

 

The Nikkei 225 is likely to be volatile this week following the outcome of the US presidential election.

Outlook for the Nikkei average this week [27-October 2024]

 [Fundamental viewpoint]

Stock indices were mixed during the week in the US market last week, with generally strong quarterly earnings announcements, but also due to a disappointing rise in long-term interest rates.

 

Weekly volatility NY Dow: -2.68%, NASDAQ: +0.16%, S&P 500: -0.96%.

                                                                                                 

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 4.70 points undervalued for the Japanese market when the OECD's nominal GDP forecast for 2025 is taken into account. The reason for the undervaluation is the difference between the S&P 500's P/E ratio of 24.2 and the Nikkei 225's P/E ratio of 15.3 the difference between the U.S. and Japanese interest rates, and the difference in GDP growth rates.

In order for the U.S. and Japanese markets to be in equilibrium, the following conditions must be met.

The difference in GDP growth between Japan and the U.S. in 2025 relative to the current price of the Nikkei 225 will be 4.70 percentage points larger than the OECD forecast. (Japan is revised downward or the U.S. is revised upward). Or the current year's forecast PER for stocks in the Nikkei Stock Average becomes about 54.3 Or, the Nikkei 225 will be around 134,820 yen.

As a result, the Japanese market is undervalued by about 96,900 yen in the medium to long term.

 

From a fundamental perspective, the Japanese market can be said to be about 96,900 yen less attractive than the U.S. market. Weakness in the Japanese market was somewhat magnified last week.

 

[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 2025 GDP estimate (now +2.9%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The weekly leg of the NYDow was negative last week. The daily chart is above the 200-day line and above the clouds of the Ichimoku Chart. The NASDAQ's weekly leg was positive last week. The daily chart is above the 200-day line and above the equilibrium cloud. This week, the focus will be on whether or not the NY Dow can keep above the 25-day line.

②    As a result of the earnings announcements, the forecasted ROE for the Nikkei 225 index came in at +8.8%, a deterioration of 0.2 percentage points from three months ago. The profit growth rate was +2.1%, an improvement of 0,9 percentage points from three months ago.

③    Long-term interest rates in the US rose and the interest rate differential between the US and Japan widened from 3.12 to 3.30, causing the USD/JPY to move in a weaker direction in the range of 149 yen to 153 yen. The Dollar Index rose +0.83% on the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2025 is expected to be +2.9% for Japan and +3.9% for the U.S., so the Japanese market is 1.0 percentage points inferior in this aspect.

⑤    The third week of October was oversold, the fourth week of October was likely oversold and this week is expected to be oversold. Of the five points, ⑤ was bearish last week.

 

[Technical viewpoint]

Looking at the Japanese market from a technical perspective, it is undervalued by 10.2 points in the medium to long term in terms of the difference in the 200-day divergence rate from the NASDAQ (about 3870 yen when converted to the Nikkei 225). On the other hand, the difference in the 200-day divergence from the NYDow is undervalued by 6.9 points in the medium to long term (about 2620 yen when calculated for the Nikkei 225).

 

Japanese markets are weak against the NY Dow and NASDAQ. The VIX, a measure of US market volatility, rose to 20.3 for the week. The Nikkei VI rose to 32.1 for the week. The US market is slightly pessimistic and the Japanese market is pessimistic.

 

The Nikkei 225 is below the 9-day and 25-day lines. This is a “red light” for the short-term trend.

The Nikkei 225 is above the Ichimoku Kinko Chart cloud. The Nikkei 225's overall divergence was -3.5% and the divergence from the 200-day moving average was -0.9%. As these two factors are negative, a ‘yellow light’ has been given to the medium-term trend.

 

In the U.S. market, the NYDow is below the 9-day, and 25-day lines, and above 200-day line. It is above the Ichimoku Chart cloud.

The NASDAQ is above the 9-day, and 25-day lines, and 200-day line. The NASDAQ is above the Ichimoku Chart cloud.

This is a “yellow signal” in the short term and a “green signal” in the medium term.

 

[Outlook for this week]

Looking at the U.S. market in terms of fundamentals, we are aware of concerns of a recession in the near term. Other risk factors include inflation and rising interest rates due to the Russia-Ukraine war, economic recession due to energy shortages and deteriorating political conditions in the EU, U.S.-China trade friction, financial market turmoil caused by the bursting of China's real estate bubble and credit crunch, and expanding geopolitical risks in the Middle East.

 

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 no trend, and the short-term is down trend.

 

Analysis of the foreign exchange market shows that the yen has turned toward appreciation after peaking at 162 yen in June 2024. This week, we expect the yen to be between ¥150 and ¥153.

 

This week, the US markets will focus on the October employment report and the JOLTS jobs report. Other releases include the ISM Manufacturing PMI, the CB Consumer Confidence Index, the PCE Inflation Report and personal consumption and income statistics. In addition, Q3 earnings releases will follow. Globally, the Eurozone inflation and GDP growth, China's manufacturing and services business indices and Japan's central bank monetary policy will be released.

 

Last week, the Nikkei 225 fell below its assumed range. The upside was about JPY 1,390 below the assumed range and the downside was about JPY 930 below the assumed line.

This week, the Nikkei 225 is expected to move between the 25-day line (currently around JPY 38640) on the upside and Bollinger Band -2σ (currently around JPY 37220) on the downside.

 

The Nikkei 225 is likely to weaken further this week, depending on the results of the lower house election, due to political turmoil.

Outlook for the Nikkei average this week [20-October 2024]

 [Fundamental viewpoint]

In the US markets last week, semiconductor equipment stock ASML's cautious earnings outlook is a cause for concern, but generally strong quarterly earnings announcements helped lift stock indices over the week.

 

Weekly change NY Dow: +0.96%, NASDAQ: +0.80%, S&P 500: +0.85%.

                                                                                                 

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 4.46 points undervalued for the Japanese market when the OECD's nominal GDP forecast for 2025 is taken into account. The reason for the undervaluation is the difference between the S&P 500's P/E ratio of 24.2 and the Nikkei 225's P/E ratio of 15.7 the difference between the U.S. and Japanese interest rates, and the difference in GDP growth rates.

In order for the U.S. and Japanese markets to be in equilibrium, the following conditions must be met.

The difference in GDP growth between Japan and the U.S. in 2025 relative to the current price of the Nikkei 225 will be 4.46 percentage points larger than the OECD forecast. (Japan is revised downward or the U.S. is revised upward). Or the current year's forecast PER for stocks in the Nikkei Stock Average becomes about 52.1 Or, the Nikkei 225 will be around 129,530 yen.

As a result, the Japanese market is undervalued by about 90,550 yen in the medium to long term.

 

From a fundamental perspective, the Japanese market can be said to be about 908,550 yen less attractive than the U.S. market. Weakness in the Japanese market was somewhat magnified last week.

 

[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 2025 GDP estimate (now +2.9%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The weekly leg of the NYDow was positive last week. The daily chart is above the 200-day line and above the clouds of the Ichimoku Chart. The NASDAQ's weekly leg was positive last week. The daily chart is above the 200-day line and above the equilibrium cloud. This week, the focus will be on whether or not the NY Dow can keep above the 25-day line.

②    As a result of the earnings announcements, the forecasted ROE for the Nikkei 225 index came in at +8.8%, a deterioration of 0.2 percentage points from three months ago. The profit growth rate was +1.6%, an improvement of 0,8 percentage points from three months ago.

③    Although long-term interest rates in the US declined and the interest rate differential between the two countries narrowed from 3.16 to 3.12, the dollar moved towards a weaker yen in the range of ¥148 to ¥150. The Dollar Index rose +0.53% on the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2025 is expected to be +3.0% for Japan and +3.9% for the U.S., so the Japanese market is 0.9 percentage points inferior in this aspect.

⑤    The second week of October was likely overbought, the third week of October was oversold and this week is expected to be oversold. Of the five points, ② and ⑤ were bearish last week.

 

[Technical viewpoint]

Looking at the Japanese market from a technical perspective, it is undervalued by 7.5 points in the medium to long term in terms of the difference in the 200-day divergence rate from the NASDAQ (about 2920 yen when converted to the Nikkei 225). On the other hand, the difference in the 200-day divergence from the NYDow is undervalued by 7.1 points in the medium to long term (about 2770 yen when calculated for the Nikkei 225).

 

Japanese markets remain weak against the NY Dow and NASDAQ. The VIX, a measure of US market volatility, fell to a weekly low of 18.0. The Nikkei VI fell to a weekly low of 26.4. The US market is slightly optimistic and the Japanese market is volatile.

The Nikkei 225 is below the 9-day and above 25-day lines. This is a “yellow light” for the short-term trend.

The Nikkei 225 is above the Ichimoku Kinko Chart's cloud. The Nikkei 225's divergence ratio is +5.9%. The divergence from the 200-day moving average was +2.2% since three factors are positive, a “green light” has been given to the medium-term trend.

 

In the U.S. market, the NYDow is above the 9-day, and 25-day lines, and 200-day line. It is above the Ichimoku Chart cloud.

The NASDAQ is above the 9-day, and 25-day lines, and 200-day line. The NASDAQ is above the Ichimoku Chart cloud.

This is a “green signal” in the short term and a “green signal” in the medium term.

 

[Outlook for this week]

Looking at the U.S. market in terms of fundamentals, we are aware of concerns of a recession in the near term. Other risk factors include inflation and rising interest rates due to the Russia-Ukraine war, economic recession due to energy shortages and deteriorating political conditions in the EU, U.S.-China trade friction, financial market turmoil caused by the bursting of China's real estate bubble and credit crunch, and expanding geopolitical risks in the Middle East.

 

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 up 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 after peaking at 162 yen in June 2024. This week, we expect the yen to be between ¥148 and ¥150.

 

This week in the US markets, major companies such as Tesla, Coca-Cola, 3M, GM and Verizon will release their quarterly results. In addition, PMIs, durable goods orders and existing and new home sales are due to be released. Globally, the Eurozone and UK consumer confidence indices, manufacturing and services PMIs from Japan, France, Germany and the UK, and monetary policy from Canada will be released.

 

Last week, the Nikkei 225 remained within its assumed range. The upper price was about 260 yen below the assumption and the lower price was about 650 yen above the assumed line.

The assumed range for the Nikkei 225 this week is expected to be between the Bollinger Band +2σ (currently around 40620 yen) on the upside and the 25-day line (currently around 38250 yen) on the downside.

 

This week, the Nikkei 225 is likely to continue to adjust, but the market is likely to be both happy and sad about the expected results of the House of Representatives election.

Outlook for the Nikkei average this week [14-October 2024]

 [Fundamental viewpoint]

In the U.S. market last week, stock indices rose over the week on expectations that stocks will continue to rise due to the resilience of the U.S. economy and strong quarterly earnings announcements, despite concerns about tensions in the Middle East.

 

Weekly change NY Dow: +1.21%, NASDAQ: +1.13%, S&P 500: +1.11%.

                                                                                                 

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 4.36 points undervalued for the Japanese market when the OECD's nominal GDP forecast for 2025 is taken into account. The reason for the undervaluation is the difference between the S&P 500's P/E ratio of 23.8and the Nikkei 225's P/E ratio of 15.8 the difference between the U.S. and Japanese interest rates, and the difference in GDP growth rates.

In order for the U.S. and Japanese markets to be in equilibrium, the following conditions must be met.

The difference in GDP growth between Japan and the U.S. in 2025 relative to the current price of the Nikkei 225 will be 4.36 percentage points larger than the OECD forecast. (Japan is revised downward or the U.S. is revised upward). Or the current year's forecast PER for stocks in the Nikkei Stock Average becomes about 51.3 Or, the Nikkei 225 will be around 128,190 yen.

As a result, the Japanese market is undervalued by about 88,580 yen in the medium to long term.

 

From a fundamental perspective, the Japanese market can be said to be about 88,580 yen less attractive than the U.S. market. Weakness in the Japanese market was somewhat magnified last week.

 

[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 2025 GDP estimate (now +2.9%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The weekly leg of the NYDow was positive last week. The daily chart is above the 200-day line and above the clouds of the Ichimoku Chart. The NASDAQ's weekly leg was positive last week. The daily chart is above the 200-day line and above the equilibrium cloud. This week, the focus will be on whether or not the NY Dow can keep above the 25-day line.

②    As a result of the earnings announcements, the forecasted ROE for the Nikkei 225 index came in at +8.8%, a deterioration of 0.2 percentage points from three months ago. The profit growth rate was +2.1%, an improvement of 1.5 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 3.10 to 3.16, causing the dollar/yen to move toward a weaker yen in the range of ¥147 to ¥149. The dollar index fell +0.42% for the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2025 is expected to be +3.0% for Japan and +3.9% for the U.S., so the Japanese market is 0.9 percentage points inferior in this aspect.

⑤    The first week of October was likely overbought, the first week of October was likely overbought, and overbought is expected this week. Of the five points last week, ① and ③ and ⑤ were bullish.

 

[Technical viewpoint]

Looking at the Japanese market from a technical perspective, it is undervalued by 5.2 points in the medium to long term in terms of the difference in the 200-day divergence rate from the NASDAQ (about 2060 yen when converted to the Nikkei 225). On the other hand, the difference in the 200-day divergence from the NYDow is undervalued by 4.4 points in the medium to long term (about 1740 yen when calculated for the Nikkei 225).

 

Japanese markets are weak against the NY Dow and NASDAQ. The VIX, a measure of U.S. market volatility, rose to 20.5 for the week. The Nikkei VI fell to a weekly low of 28.7. The U.S. market is optimistic and the Japanese market is volatile.

 

The Nikkei 225 is above the 9-day and 25-day lines. This is a “green light” for the short-term trend.

The Nikkei 225 is above the Ichimoku Kinko Chart's cloud. The Nikkei 225's divergence ratio is +12.4%. The divergence from the 200-day moving average was +4.2% since three factors are positive, a “green light” has been given to the medium-term trend.

 

In the U.S. market, the NYDow is above the 9-day, and 25-day lines, and 200-day line. It is above the Ichimoku Chart cloud.

The NASDAQ is above the 9-day, and 25-day lines, and 200-day line. The NASDAQ is above the Ichimoku Chart cloud.

This is a “green signal” in the short term and a “green signal” in the medium term.

 

[Outlook for this week]

Looking at the U.S. market in terms of fundamentals, we are aware of concerns of a recession in the near term. Other risk factors include inflation and rising interest rates due to the Russia-Ukraine war, economic recession due to energy shortages and deteriorating political conditions in the EU, U.S.-China trade friction, financial market turmoil caused by the bursting of China's real estate bubble and credit crunch, and expanding geopolitical risks in the Middle East.

 

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 up 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 after peaking at 162 yen in June 2024. This week, we expect the yen to be between ¥149 and ¥146.

 

This week's US markets will focus on retail sales and speeches by Fed officials. The New York Fed Manufacturing Index, Industrial Production and Housing Starts will also be released. Meanwhile, earnings releases are scheduled for UnitedHealth, J&J, Bank of America, Abbott, Netflix and Procter & Gamble. Globally, the ECB's interest rate decision, industrial production in the eurozone and unemployment and inflation in the UK, retail sales, retail sales in China, industrial production, unemployment, fixed asset investment, GDP growth in the third quarter and inflation in Japan will be released.

 

Last week, the Nikkei 225 remained within its assumed range. The upper price was about JPY 340 below the assumption and the lower price was about JPY 1,190 above the assumed line.

The assumed range for the Nikkei 225 this week is expected to be between the Bollinger Band +2σ (currently around JPY 40300) on the upside and the 25-day line (currently around JPY 37780) on the downside.

 

The Nikkei 225 is likely to continue its upward trend this week, with volatility trending down and market overheating not so high.

Outlook for the Nikkei average this week [6-October 2024]

 [Fundamental viewpoint]

In the U.S. market last week, stock indices rose during the week on expectations that the U.S. economy could have a soft landing after a favorable jobs report, although tensions in the Middle East are a cause for concern.

 

Weekly change NY Dow: +0.09%, NASDAQ: +0.10%, S&P 500: +0.22%.

                                                                                                 

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 4.36 points undervalued for the Japanese market when the OECD's nominal GDP forecast for 2025 is taken into account. The reason for the undervaluation is the difference between the S&P 500's P/E ratio of 23.7 and the Nikkei 225's P/E ratio of 15.6, the difference between the U.S. and Japanese interest rates, and the difference in GDP growth rates.

In order for the U.S. and Japanese markets to be in equilibrium, the following conditions must be met.

The difference in GDP growth between Japan and the U.S. in 2025 relative to the current price of the Nikkei 225 will be 4.36 percentage points larger than the OECD forecast. (Japan is revised downward or the U.S. is revised upward). Or the current year's forecast PER for stocks in the Nikkei Stock Average becomes about 48.7. Or, the Nikkei 225 will be around 120,760 yen.

As a result, the Japanese market is undervalued by about 82,130 yen in the medium to long term.

 

From a fundamental perspective, the Japanese market can be said to be about 82,130 yen less attractive than the U.S. market. Weakness in the Japanese market was somewhat magnified last week.

 

[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 2025 GDP estimate (now +2.9%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The weekly leg of the NYDow was positive last week. The daily chart is above the 200-day line and above the clouds of the Ichimoku Chart. The NASDAQ's weekly leg was positive last week. The daily chart is above the 200-day line and above the equilibrium cloud. This week, the focus will be on whether or not the NY Dow can keep above the 25-day line.

②    As a result of the earnings announcements, the forecasted ROE for the Nikkei 225 index came in at +8.8%, a deterioration of 0.1 percentage points from three months ago. The profit growth rate was +2.5%, an improvement of 1.3 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 2.92 to 3.10, causing the dollar/yen to move toward a weaker yen in the range of ¥141 to ¥148. The dollar index fell +2.06% for the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2025 is expected to be +3.0% for Japan and +3.9% for the U.S., so the Japanese market is 0.9 percentage points inferior in this aspect.

⑤    The fourth week of September was oversold, the first week of October was likely oversold, and this week is expected to be overbought. Of the five points last week, ① and ③ were bullish.

 

[Technical viewpoint]

Looking at the Japanese market from a technical perspective, it is undervalued by 6.7 points in the medium to long term in terms of the difference in the 200-day divergence rate from the NASDAQ (about 2590 yen when converted to the Nikkei 225). On the other hand, the difference in the 200-day divergence from the NYDow is undervalued by 5.6 points in the medium to long term (about 2160 yen when calculated for the Nikkei 225).

 

Japanese markets are weak against the NY Dow and NASDAQ. The VIX, a measure of U.S. market volatility, rose to 19.2 for the week. The Nikkei VI fell to a weekly low of 25.1. The U.S. market is optimistic and the Japanese market is volatile.

 

The Nikkei 225 is above the 9-day and 25-day lines. This is a “green light” for the short-term trend.

The Nikkei 225 is above the Ichimoku Kinko Chart's cloud. The Nikkei 225's divergence ratio is +5.8%. The divergence from the 200-day moving average was +2.0% since two factors are positive, a “green light” has been given to the medium-term trend.

 

In the U.S. market, the NYDow is above the 9-day, and 25-day lines, and 200-day line. It is above the Ichimoku Chart cloud.

The NASDAQ is above the 9-day, and 25-day lines, and 200-day line. The NASDAQ is above the Ichimoku Chart cloud.

This is a “green signal” in the short term and a “green signal” in the medium term.

 

[Outlook for this week]

Looking at the U.S. market in terms of fundamentals, we are aware of concerns of a recession in the near term. Other risk factors include inflation and rising interest rates due to the Russia-Ukraine war, economic recession due to energy shortages and deteriorating political conditions in the EU, U.S.-China trade friction, financial market turmoil caused by the bursting of China's real estate bubble and credit crunch, and expanding geopolitical risks in the Middle East.

 

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 up 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 after peaking at 162 yen in June 2024. This week, we expect the yen to be between ¥149 and ¥146.

 

This week in the U.S. markets will be an important week with the release of the September CPI, the release of the FOMC meeting minutes, and the start of earnings season; speeches by Fed officials, the producer price index, the Michigan consumer confidence index, and trade statistics will also be of interest. Globally, German manufacturing orders and industrial production, retail sales, and U.K. GDP growth and factory utilization will be in focus.

 

Last week, the Nikkei 225 moved above its assumed range. The upside was about 490 yen above our assumption and the downside was about 1170 yen above the assumed line.

This week, the Nikkei 225 is expected to move between the Bollinger Band +2σ (currently around 39770 yen) on the upside and the 25-day line (currently around 37580 yen) on the downside.

 

This week, the Nikkei 225 is likely to move toward the +2σ Bollinger band at the beginning of the week following the strong dollar and weak yen at the end of last week, but it is likely to continue to fluctuate wildly.

Outlook for the Nikkei average this week [29-September 2024]

 [Fundamental viewpoint]

In the U.S. markets last week, the stock indices rose over the week as Micron Technology's strong earnings led to a rally in semiconductor stocks and hopes that the U.S. economy can make a soft landing.

 

Weekly change NY Dow: +0.59%, NASDAQ: +0.95%, S&P 500: +0.62%.

                                                                                                 

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 4.00 points undervalued for the Japanese market when the OECD's nominal GDP forecast for 2025 is taken into account. The reason for the undervaluation is the difference between the S&P 500's P/E ratio of 23.7 and the Nikkei 225's P/E ratio of 16.1, the difference between the U.S. and Japanese interest rates, and the difference in GDP growth rates.

In order for the U.S. and Japanese markets to be in equilibrium, the following conditions must be met.

The difference in GDP growth between Japan and the U.S. in 2025 relative to the current price of the Nikkei 225 will be 4.00 percentage points larger than the OECD forecast. (Japan is revised downward or the U.S. is revised upward). Or the current year's forecast PER for stocks in the Nikkei Stock Average becomes about 45.3. Or, the Nikkei 225 will be around 111,990 yen.

As a result, the Japanese market is undervalued by about 72,160 yen in the medium to long term.

 

From a fundamental perspective, the Japanese market can be said to be about 72,160 yen less attractive than the U.S. market. Weakness in the Japanese market was somewhat magnified last week.

 

[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 2025 GDP estimate (now +2.9%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The weekly leg of the NYDow was positive last week. The daily chart is above the 200-day line and above the clouds of the Ichimoku Chart. The NASDAQ's weekly leg was positive last week. The daily chart is above the 200-day line and above the equilibrium cloud. This week, the focus will be on whether or not the NY Dow can keep above the 25-day line.

②    As a result of the earnings announcements, the forecasted ROE for the Nikkei 225 index came in at +8.7%, a deterioration of 0.2 percentage points from three months ago. The profit growth rate was +2.5%, an improvement of 1.2 percentage points from three months ago.

③    Although U.S. long-term interest rates rose and the interest rate differential between the U.S. and Japan widened from 2.91 to 2.92, the U.S. dollar moved toward a stronger yen in the range of ¥146 to ¥142. The dollar index fell -0.32% for the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2025 is expected to be +3.0% for Japan and +3.9% for the U.S., so the Japanese market is 0.9 percentage points inferior in this aspect.

⑤    The third week of September was likely oversold, the fourth week of September was likely overbought, and this week is expected to be oversold. Of the five points last week, ① and ③ were bullish.

 

[Technical viewpoint]

Looking at the Japanese market from a technical perspective, it is undervalued by 3.5 points in the medium to long term in terms of the difference in the 200-day divergence rate from the NASDAQ (about 1,390 yen when converted to the Nikkei 225). On the other hand, the difference in the 200-day divergence from the NYDow is undervalued by 2.3 points in the medium to long term (about 920 yen when calculated for the Nikkei 225).

 

Japanese markets remain weak against the NY Dow and NASDAQ. The VIX, a measure of U.S. market volatility, rose to 17.0 for the week. The Nikkei VI rose to 26.5 for the week. The U.S. market is optimistic and the Japanese market is volatile.

 

The Nikkei 225 is above the 9-day and 25-day lines. This is a “green light” for the short-term trend.

The Nikkei 225 is above the Ichimoku Kinko Chart's cloud. The Nikkei 225's divergence ratio is +15.6%. The divergence from the 200-day moving average was +5.6% since two factors are positive, a “green light” has been given to the medium-term trend.

 

In the U.S. market, the NYDow is above the 9-day, and 25-day lines, and 200-day line. It is above the Ichimoku Chart cloud.

The NASDAQ is above the 9-day, and 25-day lines, and 200-day line. The NASDAQ is above the Ichimoku Chart cloud.

This is a “green signal” in the short term and a “green signal” in the medium term.

 

[Outlook for this week]

Looking at the U.S. market in terms of fundamentals, we are aware of concerns of a recession in the near term. Other risk factors include inflation and rising interest rates due to the Russia-Ukraine war, economic recession due to energy shortages and deteriorating political conditions in the EU, U.S.-China trade friction, financial market turmoil caused by the bursting of China's real estate bubble and credit crunch, and expanding geopolitical risks in the Middle East.

 

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 up 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 after peaking at 162 yen in June 2024. This week, we expect the yen to be between ¥143 and ¥140.

 

In the U.S. markets this week, the September jobs report and speeches by Fed Chairman Jerome Powell and several Fed officials will be the main focus of market attention. Other data of interest include the JOLTS job openings report, ISM manufacturing and services PMIs, and new orders for manufacturing. Globally, Eurozone inflation and China's manufacturing and services PMIs will be of interest. In Japan, industrial production, retail sales, unemployment rate, consumer confidence index, and the Bank of Japan's Tankan will be released.

 

Last week, the Nikkei 225 moved slightly above its assumed range. The upside was about 100 yen above our assumption and the downside was about 410 yen above the assumed line.

This week, the Nikkei 225 is expected to move between the Bollinger Band +1σ (currently around 38650 yen) on the upside and the Bollinger Band -1σ (currently around 36490 yen) on the downside.

 

This week, the Nikkei 225 is likely to search for a new equilibrium point after falling sharply at the beginning of the week due to the market's missed expectations of the birth of Governor Takaichi.

Outlook for the Nikkei average this week [23-September 2024]

 [Fundamental viewpoint]

In the U.S. markets last week, stock indices rose sharply during the week on the belief that the U.S. economy could have a soft landing following the Fed's significant 0.5% interest rate cut.

 

Weekly change NY Dow: +1.62%, NASDAQ: +1.49%, S&P 500: +1.38%.

                                                                                                 

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 4.23 points undervalued for the Japanese market when the OECD's nominal GDP forecast for 2025 is taken into account. The reason for the undervaluation is the difference between the S&P 500's P/E ratio of 23.1 and the Nikkei 225's P/E ratio of 15.0, the difference between the U.S. and Japanese interest rates, and the difference in GDP growth rates.

In order for the U.S. and Japanese markets to be in equilibrium, the following conditions must be met.

The difference in GDP growth between Japan and the U.S. in 2025 relative to the current price of the Nikkei 225 will be 4.23 percentage points larger than the OECD forecast. (Japan is revised downward or the U.S. is revised upward). Or the current year's forecast PER for stocks in the Nikkei Stock Average becomes about 41.2. Or, the Nikkei 225 will be around 103,450 yen.

As a result, the Japanese market is undervalued by about 65,730 yen in the medium to long term.

 

From a fundamental perspective, the Japanese market can be said to be about 65,730 yen less attractive than the U.S. market. Weakness in the Japanese market was somewhat magnified last week.

 

[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 2025 GDP estimate (now +2.9%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The weekly leg of the NYDow was positive last week. The daily chart is above the 200-day line and above the clouds of the Ichimoku Chart. The NASDAQ's weekly leg was positive last week. The daily chart is above the 200-day line and above the equilibrium cloud. This week, the focus will be on whether or not the NY Dow can keep above the 25-day line.

②    As a result of the earnings announcements, the forecasted ROE for the Nikkei 225 index came in at +8.8%, a deterioration of 0.2 percentage points from three months ago. The profit growth rate was +2.6%, an improvement of 1.5 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 2.82 to 2.91, causing the dollar/yen to move toward a weaker yen in the range of ¥139 to ¥144. The dollar index fell -0.37% for the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2025 is expected to be +2.9% for Japan and +3.9% for the U.S., so the Japanese market is 1.0 percentage points inferior in this aspect.

⑤    The second week of September was likely oversold, the third week of September was likely overbought, and this week is expected to be overbought. Of the five points last week, ① and ③ were bullish.

 

[Technical viewpoint]

Looking at the Japanese market from a technical perspective, it is undervalued by 8.3 points in the medium to long term in terms of the difference in the 200-day divergence rate from the NASDAQ (about 3,130 yen when converted to the Nikkei 225). On the other hand, the difference in the 200-day divergence from the NYDow is undervalued by 7.2 points in the medium to long term (about 2,720 yen when calculated for the Nikkei 225).

 

Japanese markets remain weak against the NY Dow and NASDAQ. The VIX, a measure of U.S. market volatility, declined to a weekly low of 16.2. The Nikkei VI fell to a weekly low of 24.3. The U.S. market is optimistic and the Japanese market is volatile.

 

The Nikkei 225 is above the 9-day and 25-day lines. This is a “green light” for the short-term trend.

The Nikkei 225 is above the Ichimoku Kinko Chart's cloud. The Nikkei 225's divergence ratio is -0.5%. The divergence from the 200-day moving average was +0.3% since two factors are positive, a “yellow light” has been given to the medium-term trend.

 

In the U.S. market, the NYDow is above the 9-day, and 25-day lines, and 200-day line. It is above the Ichimoku Chart cloud.

The NASDAQ is above the 9-day, and 25-day lines, and 200-day line. The NASDAQ is above the Ichimoku Chart cloud.

This is a “green signal” in the short term and a “green signal” in the medium term.

 

[Outlook for this week]

Looking at the U.S. market in terms of fundamentals, we are aware of concerns of a recession in the near term. Other risk factors include inflation and rising interest rates due to the Russia-Ukraine war, economic recession due to energy shortages and deteriorating political conditions in the EU, U.S.-China trade friction, financial market turmoil caused by the bursting of China's real estate bubble and credit crunch, and expanding geopolitical risks in the Middle East.

 

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 up trend. The Japanese market is in a medium-term no trend, and the short-term is up trend.

 

Analysis of the foreign exchange market shows that the yen has turned toward appreciation after peaking at the 162 yen level, which was reached in June 2024. This week, a range of 140 yen to 145 yen is expected.

 

This week, U.S. markets will focus on PCE prices, personal income, and consumer spending, as well as speeches by several Fed officials, including Fed Chairman Jerome Powell. Also in focus will be the finalized Q2 GDP growth, PMI data, the CB Consumer Confidence Index, durable goods orders, and the number of new and preliminary existing home sales. Globally, attention will be focused on September PMIs for Japan, the Eurozone, and the U.K., Australia's interest rate decision, inflation in France and Spain, and the German consumer confidence index.

 

Last week, the Nikkei 225 moved above its assumed range. The upside was about 530 yen above our assumption and the downside was about 410 yen above the assumed line.

This week, the Nikkei 225 is expected to move within the assumed range with the upper price at the Bollinger Band +2σ (currently around 39330 yen) and the lower price between the 25-day line (currently around 37450 yen).

 

This week, the US long-term interest rates and the US dollar/yen will be of interest. If the U.S. long-term interest rates continue to rise, the Nikkei 225 will be able to approach the +2σ Bollinger band.