Outlook for the Nikkei average this week [4-February-2018]

[Present state recognition of fundamental]

In the US market last week, the rise in long-term interest rates was disliked and plummeted on weekends. 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 2019 OECD's real GDP forecast announced. The reason for the bargain is due to the difference between S&P500 's PER of 18.1 and the Nikkei average adopted stock price PER 15.1 and Japan-US interest rate difference, GDP growth difference. This is because the difference in GDP growth between Japan and the US in 2019 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 25.3 (the results for the current term will be revised downwards or the Nikkei average will be around 38960 yen) By the way, the Japanese market is cheap about 15680 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 2019 GDP estimate (now + 0.96%) 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 , ISM Non Manufacturing Industry Situation Index in January. I would like to pay attention to whether NYDow is able to maintain above the 25 day moving average line.

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 0.1 points better than three months ago. In addition, the growth rate forecast for this term is + 13.2%, 5.2 points better than 3 months ago.

③ Long-term interest rates in the country rose and the interest rate differential between Japan and the US expanded from 2.59% to 2.77%, and the exchange rate changed from 108 yen to 110 yen, which was a weaker yen movement. This week is estimated to be the 109 yen level to the 111 yen level.

④ The OECD's real GDP growth rate in 2019 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 1.1 points on this aspect.

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

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

[Technical viewpoint]

From the technical point of view of the Japanese market, the 200-day divergence rate difference with NASDAQ is 0.7 points in mid- to long-term (about 160 yen when it is calculated by Nikkei average), which is expensive. The price range has changed cheap compared to last week.

The Nikkei average in the cloud of the ichimoku table. The total divergence rate was +19.0%, and which shrunk positive range. The 200 day moving average line deviation rate was +13.6%, and which shrunk positive range. Since 3 elements are positive, the "green light" is on for the medium term trend. The Nikkei average is under the 25 day moving average line and the 9 day moving average line,  "red light " is on for short-term trends.

In the US market NY Dow exceeds the 200 day line but under the 25 day line and the 9 day line. It is above cloud of the ichimoku table. NASDAQ exceeds the 200 day average line but under the 25 day average line, and the 9 day average line. It is above the cloud of the ichimoku table. In the short term "red 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.

It also implies that the latest LIBOR interest rate has continued to update the highs for the past five years, and that the global nonperforming debt continues to increase, and the possibility of financial unrest is revealed.

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, but downward trend in the short term. The Japanese market is upward trend in the medium-term, but downward trend the short term.

Analyzing the exchange market last week, the long-term interest rate in the US rose and the long-term interest rate gap between the US and Japan expanded, so the exchange rate was a move toward a weaker 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 was almost within the expected range. The upper price under the assumed line by about 140 yen, and the lower price under the assumed line by about 40 yen. This week's Nikkei average is expected to move between the upper price near the 25 day average line (currently around 23550 yen) and the lower price near the Bollinger band -2σ (currently around 22790 yen ).