Outlook for the Nikkei average this week [10-Sep-2017]

[Present state recognition of fundamental]

In the US market last week, selling was dominant due to rising geopolitical risks over North Korea and the caution against the economic impact of the large hurricane "Ilma". In the medium to long term, there are fears of a slowdown in the global economy due to confusion of US politics, raise rate by FRB, the lack of creditworthiness of European banks and concerns about credit contraction, the economic slowdown of emerging economies such as China, and the stagnation of crude oil prices. We need continued attention to the geopolitical risk of the Middle East and Ukraine.

The difference in the yield spread between the US and Japanese markets is 2.67 points less than in the Japanese market, taking into account the 2018 OECD's real GDP forecast announced. The reason for the bargain is due to the difference between S&P500 's PER of 18.8 and the Nikkei average adopted stock price PER 13.7 and Japan-US interest rate difference, GDP growth difference. This is because the difference in GDP growth between Japan and the US in 2018 is 2.7% more than the OECD forecast (Japan will downgrade or US will be revised upward) against the current Nikkei average price, Or it can be interpreted that the Japanese-U.S. Market will be in equilibrium, because the expected PER of the Nikkei average hires will be around 21.5 (the results for the current term will be revised downwards or the Nikkei average will be around 30340 yen) By the way, the Japanese market is cheap about 11060 yen.

[Conditions for Nikkei average rise]

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

① Rising US market

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

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

④ Upward revision of Japan's 2018 GDP estimate (now + 0.98%) by OECD

⑤ Foreign investors over-buying

Looking at recent movements

① Last week's NYDow weekly foot was negative. The daily bar is on the 200 day line, and it is on the cloud of the ichimoku table. Nasdaq weekly foot was negative. NASDAQ bar is on the 200-day line and on the cloud of the ichimoku table. This week we will be paying attention to Housing related indicators, Quarterly financial results announcement , Industrial production in August, University of Michigan consumer confidence index in September. I would like to pay attention to whether NYDow is able to maintain the clouds above the ichimoku table.

② The expected profit increase for the Nikkei 225 hires will be 8.9% with the announcement of the 2nd quarter financial results, which is the same level as the three months ago. In addition, the growth rate forecast for the current term is + 5.5%, which is 2.8 points worse than three months ago.

③ Although the US long-term interest rate was at the same level, the interest rate differential between Japan and the US expanded from 2.19 to 2.06%, and the exchange rate moved from the 109 yen level to 107 yen level. This week is estimated to be 108 yen range from the 106 yen range.

④ The OECD's real GDP growth rate in 2018 in Japan and the US is expected to be + 1.0% in Japan and + 2.4% in the US, so the Japanese market is worse by 1.4 points on this aspect.

⑤ 3rd week of July is a over selling. there is a high possibility that the 4th week of August is a over selling, and this week we are forecasting to over selling.

①,③ was a bearish factor. It seems that ①,③,⑤ will be affected this week.

[Technical viewpoint]

From the technical viewpoint of the Japanese market, the 200-day divergence rate difference with NASDAQ is 7.4 points less expensive in the mid to long term (about 1430 yen when calculating the Nikkei average) and it is cheap. The ratio was expanded 0.7 points last week.

The Nikkei average on the cloud of the ichimoku table. The total divergence rate was -5.1%, and which was changed negative range. The 200 day moving average line deviation rate was -0.7%, and which was changed negative range. Since 3 elements are negative, the "red light" is on for the medium term trend. The Nikkei average is under the 25 day and the 9 day moving average line,  "red light " is on for short-term trends.

In the US market NY Dow is on the 200 day line but under the 25 day line , 9 day line. It is on the cloud of the ichimoku table. NASDAQ is on the 200 day average line and the 25 day average line, but under the 9 day average line. It is on the cloud of the ichimoku table. In the short term " yellow light" is on and in the medium term " green light" is on.

[Outlook for this week]

Looking at the US market fundamentally, concerns such as the US economic slowdown, sluggish crude oil prices, falling high-yield bond market, financial market turmoil due to UK's withdrawal from the EU, global long-term interest rate trends declined, etc. Concern is diminished. However, there are fears concerning the global economic slowdown due to the US interest rate hikes, uncertainty of US politics, Situation of North Korea, the creditworthiness of the EU regional banks, the economic slowdown of emerging economies such as China, the sluggish growth of US corporate earnings, geopolitical risks of the Middle East and Ukraine as risk factors It exists.

China's real estate prices are flat in big cities, but the problem of bad loans in China such as excessive facilities has not been resolved. If you rush up the process, it will lead to a short-term market decline, and there is a concern that prolonged recession will prolong the recession.

Also, the most recent LIBOR interest rate has been updated for the past five years high and conscious of the possibility of financial unrest.

On the other hand, as favorable material, the possibility of moderate rate hike in the US, policy expectation of New President Trump, setting of 2% inflation target by the BOJ, introduction of negative interest rate and purchase of 80 trillion government bond · 6 trillion yen ETF, In addition to monetary easing measures, clarification of the duration of long-term interest rate manipulation and monetary relaxation. Negative interest rates and purchase of government bonds are maintained for policy interest rates by the ECB. However, the government bond purchase facility has been gradually reduced from April 2017.  EU is also headed towards financial normality.

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

When analyzing the exchange market last week, long-term interest rates in the US declined, the long-term interest rate differential between the US and Japan shrank, and the exchange rate was a move toward a strong yen in the week. From now on, we need to pay attention to technical indicators, US market trends, foreign exchange movements and foreign investor's trends.

Last week's Nikkei average went down the expected range. The upper price was lower than the assumed line by about 290 yen, and the lower price was also lower than the supposed line by 140 yen. This week's Nikkei average is expected to move between the upper price on the 25 day average line (currently around 19570 yen) and the lower price between Bollinger band -2σ (around 19150 yen now).