Outlook for the Nikkei average this week [10-March-2019]

[Present state recognition of fundamental]

In the US market last week, selling was dominant as OECD downgraded the growth prospects of the global economy and the euro zone economic outlook was cut down. 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 3.34 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 16.4 and the Nikkei average adopted stock price PER 12.2 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 20.6 (the results for the current term will be revised downwards or the Nikkei average will be around 35460 yen) . In the medium to long term, the Japanese market is low valued at about 14430 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 negative. The daily bar is above the 200 day line, and it is above the cloud of the ichimoku table. Nasdaq weekly foot was negative. 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 , Retail sales in January, New York Fed Bank Economic Index in March. I would like to pay attention to whether NYDow can return to the 25th day line.

② The expected profit increase for the Nikkei 225 hires will be 9.1% with the announcement of the financial results for the October-December term, 0.2 points worse than 3 months ago. In addition, the profit growth rate for the current business forecast is -5.8%, 3.5 point worse than three months ago.

③ Long-term interest rates in the US rose, and the interest rate differential between Japan and the US expanded from 2.70% to 2.77%, and the exchange rate was a move toward the depreciation of the yen at the 112 yen level from the 110 yen level.

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

last week ①,②,⑤ was a bearish 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 3.6 points lower than NASDAQ in the medium to long term. (It is about 760 yen when it is based on the Nikkei average)  Proportions have been same level compared to last week.

The Nikkei average is above the cloud of the ichimoku table. The total deviation rate was -5.7%, and changed the negative width compared to last week. The 200-day moving average line deviation rate was -4.5%, and the negative width expanded. Since the two elements are negative, the "yellow signal" is lit in the medium term trend. The Nikkei average is under the 25_day moving average line and the 9_day moving average line,  "red signal " is lit for short-term trends.

In the US market NY Dow is above the 200_day line but under 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 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 "red signal" is lit and in the medium term "yellow signal" is lit.

[Outlook for this week]

Looking at the US market fundamentally, concerns such as the rise in US interest rates, sluggish US business performance, financial market turmoil due to credit contraction, the situation in North Korea, the decline in the high yield bond market are decreasing. However, due to the trend of declining long-term interest rates worldwide, economic slowdown in the US, slump in crude oil prices, uncertainty in US politics, lack of credit and political situation in banks in the EU region, economic slowdown in emerging countries such as China and trade warfare Concern over the global economic slowdown, geopolitical risks in the Middle East and Ukraine, etc. exist as risk factors.

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, the following points can be pointed out as favorable materials. In addition to monetary easing measures such as the possibility of moderate rate hike in the US, policy expectation of President Trump, setting of 2% inflation target by the Bank of Japan, introduction of negative interest rate and purchase of ETF of 80 trillion yen · 6 trillion yen ETF Clarification of the duration of interest rate manipulation and monetary easing and announcement of maintaining the level of policy interest rates by the ECB during the year.

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

Last week 's Nikkei average fell below the expected range. The upper price matched the assumed line, but the lower price was 230 yen lower than the assumed line. This week's Nikkei average is expected to move between the upper price on the 25th line (now around 21220 yen) and the lower price on the Bollinger band -2σ (around 20500 yen now).