Outlook for the Nikkei average this week [17-February-2019]

[Present state recognition of fundamental]

In the US market last week, buying became dominant, due to the progress of trade negotiations between the United States and China. 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 3.40 points less than in the Japanese market, taking into account the 2020 OECD's real GDP forecast announced. The reason for the bargain is due to the difference between S&P500 's PER of 16.3 and the Nikkei average adopted stock price PER 12.0 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 20.4 (the results for the current term will be revised downwards or the Nikkei average will be around 35400 yen) . In the medium to long term, the Japanese market is low valued at about 14500 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 2020 GDP estimate (now +0.68%) 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 above the cloud of the ichimoku table. Nasdaq weekly foot was positive. NASDAQ bar is above the 200-day line but above the cloud of the ichimoku table. This week we will be paying attention to Housing related indicators, Quarterly financial results announcement , December's orders for durable goods, February Philadelphia Fed Manufacturing business confidence index. I would like to pay attention to whether NYDow can keep on the 25th day line.

② The expected increase in the Nikkei 225 brand name is expected to be 9.2% with the announcement of settlement of accounts for the October-December period, which is the same level as the 3 months ago. In addition, the profit growth rate for the current business forecast is -3.7%, 1.6 points worse than three months ago.

③ Long-term interest rates in the US rose, and the difference in interest rates between Japan and the US expanded from 2.67% to 2.69%, and the exchange rate moved from 109 yen to 111 yen range.

④ The OECD's real GDP growth rate in 2020 in Japan and the US is expected to be + 0.68% in Japan and + 2.13% in the US, so the Japanese market is worse by 1.45 points on this aspect.

⑤ The 1st week of  February is a over selling. there is a high possibility that the 2nd week of  February is a over selling, and this week we are forecasting to over selling.

last week ① was a bullish factor but ⑤ 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 5.5 points lower than NASDAQ in the medium to long term. (It is about 1150 yen when it is based on the Nikkei average)  Proportions have shrank compared to last week.

The Nikkei average is above the cloud of the ichimoku table. The total deviation rate was -5.6%, and the negative width shrank compared to last week. The 200-day moving average line deviation rate was -5.4%, and the negative width shrank. Since the two elements are negative, the "yellow signal" is lit in the medium term trend. The Nikkei average is above the 25_day moving average line and the 9_day moving average line,  "green signal " is lit for short-term trends.

In the US market NY Dow is 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 is above the 200_day average line and the 25_day average line and the 9_day average line. It is above the cloud of the ichimoku table. In the short term "green signal" is lit and in the medium term "green signal" is lit.

[Outlook for this week]

Looking at the US market fundamentally, concerns such as the US economic slowdown, 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, sluggish crude oil prices,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 purchase of government bonds ended at the end of 2018.

Looking at the technical aspect, the US market is upward trend in the medium-term, and upward trend in the short term. The Japanese market is no trend in the medium-term, and upward trend in 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, and the exchange rate was weaker yen trend in the week. This week it is assumed from 109 yen range to 111 yen range.

Last week's Nikkei average exceeded the expected range. The upper price exceeded the assumed line by about 590 yen, the lower price exceeded the assumed line by about 310 yen. This week's Nikkei average is expected to move between the Bollinger band + 3σ (current 21370 yen) and the lower price 25 day line (around 20680 yen now).