Outlook for the Nikkei average this week [11-November-2018]

[Present state recognition of fundamental]

In the US market last week, buying became dominant, assuming that the middle election was almost as expected and the immediate uncertainty was relaxed. 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 3.41 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 16.8 and the Nikkei average adopted stock price PER 12.7 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 3.4% 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 22.4(the results for the current term will be revised downwards or the Nikkei average will be around 39340 yen) . Because it is so, the Japanese market is cheap about 16990 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 positive. The daily bar is above the 200 day line, and it is in the cloud of the ichimoku table. Nasdaq weekly foot was positive. NASDAQ bar is under the 200-day line and under the cloud of the ichimoku table. This week we will be paying attention to Housing related indicators, Quarterly financial results announcement , Consumer prices in October, retail sales in October. I would like to pay attention to whether NYDow can keep above the 200th-day average 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 0.0 points compared to three months ago. In addition, The profit growth rate for the current business forecast is -2.4%, 2.2 points better than three months ago.

③ Long-term interest rates in the US declined and the interest rate differential between Japan and the US shrank from 3.10 to 3.07%, but  the exchange rate was a move toward a weak yen at 114 units from 112 units..

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 5th week of  October is a over buyling. there is a high possibility that the 1st week of  November is a over buying, and this week we are forecasting to over buying.

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

[Technical viewpoint]

From the technical viewpoint of the Japanese market, the 200-day divergence rate difference with NASDAQ is 0.9 points higher than NASDAQ in the medium to long term. (It is about 200 yen when it is based on the Nikkei average)  Higher proportions have shrunk compared to last week.

The Nikkei average is under the cloud of the ichimoku table. The total deviation rate was -2.7%, and it has shrank to the negative range compared to last week. The 200-day moving average line was -0.6% and it has shrank to the 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 moving average line but above the 9_day moving average line,  "yellow light " is on for short-term trends.

In the US market NY Dow is above the 200_day line and the 25_day line and the 9_day line and. It is in the cloud of ichimoku table. NASDAQ is under the 200_day average line and the 25_day average line but above the 9_day average line. It is under 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 downward trend in the medium-term, and no trend in the short term.

Analyzing the exchange market last week, the long-term interest rate in the US declined, the long-term interest rate gap between the US and Japan shrank, but the exchange rate was weaker in the week. This week it is assumed from 112 yen range to 114 yen range.

Last week's Nikkei average was within the expected range. The upper price was lower than the assumed line by about 470 yen, the lower price exceeded the assumed line by about 210 yen. This week's Nikkei average is expected to move between the Bollinger band + 2σ (currently around 23630 yen) and the lower price is between 25 yen line -200 yen (around 22100 yen now).