Outlook for the Nikkei average this week [3-February-2019]

[Present state recognition of fundamental]

In the US market last week, buying became dominant as a result of major companies' good results and the FRB clearly stated their postponement of the monetary policy normalization pace at FOMC. 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 3.29 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 16.0 and the Nikkei average adopted stock price PER 12.1 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 3.3% 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 20.0 (the results for the current term will be revised downwards or the Nikkei average will be around 34490 yen) . In the medium to long term, the Japanese market is low valued at about 13700 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 under 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 , Manufacturing orders received in December, ISM non manufacturing industries index in January. I would like to pay attention to whether NYDow can keep on the 25th day line.

② The estimated ROE of the Nikkei 225 hires is expected to be 9.1, due to the April-June quarter earnings announcement, which is 0.1 points worse than three months ago. In addition, The profit growth rate for the current business forecast is -3.6%, 0.9 points better than three months ago.

③ Long-term interest rates in the US declined, and the difference in interest rates between Japan and the US shrank from 2.77% to 2.71%, and the exchange moved from 108 yen to 109 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 4th week of  January is a over buying. there is a high possibility that the 1st week of  February is a over buying, and this week we are forecasting to over buying.

last week ① was a bullish 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 3.5 points lower than NASDAQ in the medium to long term. (It is about 730 yen when it is based on the Nikkei average)  Proportions have expanded compared to last week.

The Nikkei average is under the cloud of the ichimoku table. The total deviation rate was -6.6%, and it has shrank to the negative range compared to last week. The 200-day moving average line was -6.1% and it has shrank to the negative range compared to last week. 3 elements are negative, the red light" is on for the medium term trend. The Nikkei average is above the 25_day moving average line and the 9_day moving average line,  "green 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. It is above the cloud of ichimoku table. NASDAQ is under the 200_day average line but above 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 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, 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 no trend in the medium-term, and upward trend in the short term. The Japanese market is downward 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 declined and the long-term interest rate gap between the US and Japan shrank, so the exchange rate was temporarily stronger yen trend in the week. This week it is assumed from 109 yen range to 110 yen range.

Last week's Nikkei average moved within the expected range. The upper price was lower than the assumed line by about 270 yen, and the lower price exceeded the assumed line by about 60 yen. This week's Nikkei average is expected to move between the Bollinger band + 2σ (currently around 2,1200 yen) and the lower price 25 day moving average line (currently around 20330 yen now).