Outlook for the Nikkei average this week [07-October-2018]

[Present state recognition of fundamental]

In the US market last week, the sudden long-term interest rate rise was disliked, and the selling dominated. 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, European political turmoil and the creditworthiness of European banks and credit crunch concerns, the economic slowdown of emerging economies such as China, and concern over the global economic slowdown due to trade war. We need continued attention to the geopolitical risk of the Middle East , Korean Peninsula and Ukraine.

The difference in the yield spread between the US and Japanese markets is 3.26 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 18.0 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 2019 is 3.1% 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 24.7(the results for the current term will be revised downwards or the Nikkei average will be around 42940 yen) . Because it is so, the Japanese market is cheap about 19160 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 +1.21%) by OECD

⑤ Foreign investors over-buying

Looking at recent movements

① Last week's NYDow weekly foot was negative. The daily bar is above the 200 day line, and it is above the cloud of the ichimoku table. Nasdaq weekly foot was positive. NASDAQ bar is above the 200-day line and above the cloud of the ichimoku table. This week we will be paying attention to Housing related indicators, Quarterly financial results announcement , G20 Finance Minister / Central Bank Governor's Conference, Consumer Price Index in September. I would like to pay attention to whether NYDow can keep above the 25th day line.

② The estimated ROE of the Nikkei 225 hired stocks is expected to be 9.2% with the announcement of the fiscal year ending April-June, improving 0.1 points compared to three months ago. In addition, The profit growth rate for the current business forecast is -4.0%, 2.1 points better than three months ago.

③ Long-term interest rates in the United States have rose and the difference in interest rates between Japan and the US have expanded from 29.4 to 3.08%, and the exchange rate has moved from the 113 yen level to the 114 yen level, a move toward the depreciation of the yen.

④ The OECD's real GDP growth rate in 2019 in Japan and the US is expected to be + 1.2% in Japan and + 2.8% in the US, so the Japanese market is worse by 1.6 points on this aspect.

⑤ the 4th week of  September is a over selling. there is a high possibility that the 1st week of  October is a over selling, and this week we are forecasting to over selling.

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

[Technical viewpoint]

From the technical point of view of the Japanese market, the 200-day discrepancy rate with NASDAQ is 1.9 points in the medium to long term (about 450 yen when calculated by the Nikkei average), which is more expensive.  It changed from less expensive to more expensive compared to last week.

The Nikkei average is above the cloud of the ichimoku table. The total deviation rate was +12.5%, and it has shrunk to the positive range compared to last week. The 200-day moving average line was +5.7% and it has shrunk to the positive range. Since 3 elements are positive, the "green light" is on for the medium term trend. The Nikkei average is above the 25 day moving average line but under the 9 day moving average line,  "yellow light " is on for short-term trends.

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

[Outlook for this week]

Looking at the US market fundamentally, concerns such as the US economic slowdown, sluggish crude oil prices, Financial market turmoil accompanying credit crunch, global long-term interest rate trends declined, Situation of North Korea, falling high-yield bond market, etc. Concern is diminished. However, there are fears concerning the global economic slowdown due to the US interest rate hikes, uncertainty of US politics, the creditworthiness of the EU regional banks, Concerns over the economic slowdown of emerging economies such as China and the global economic slowdown due to trade war, geopolitical risks of the Middle East and Ukraine as risk factors It exists.

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

Also, the latest LIBOR interest rate is on the upward trend, it continues to update the high price in the past five years, which implies that 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 frame is gradually reduced from April 2017 and is planned to end at the end of the year.

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

Analyzing the exchange market last week, the US long-term interest rate rose and the long-term interest rate gap between the US and Japan expanded, and the exchange rate was weaker in the week. This week it is assumed from 112 yen range to 114 yen range. 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 fell short of the expected range. The upper price was below the assumed line by about 200 yen, and the lower price was lower than the assumed line by about 250 yen. This week's Nikkei average is expected to move between the Bollinger band + 1σ (currently around 23980 yen) and the lower price is Bollinger band -1σ (around 22660 yen now).