Outlook for the Nikkei average this week [1-September-2019]

[Present state recognition of fundamental]

In the US market last week, buying was dominant in anticipation of progress in trade talks 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 2.97 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 17.7 and the Nikkei average adopted stock price PER 11.7 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 3.0% 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 18.0 (the results for the current term will be revised downwards or the Nikkei average will be around 31780 yen) . In the medium to long term, the Japanese market is low valued at about 11070 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 in the cloud of the ichimoku table. Nasdaq weekly foot was positive. NASDAQ bar is above the 200-day line and it is in the cloud of the ichimoku table. This week we will be paying attention to Housing related indicators, Quarterly financial results announcement , August ISM Manufacturing Business Index, August Employment Statistics. I would like to pay attention to whether NYDow can return above the 25th day line.

②The forecast ROE for Nikkei 225 stocks for the current term is 8.8%, 0.1 points worse than the previous three months due to the announcement of financial results for the April-June period. In addition, the profit growth rate of the business forecast for the current term is + 0.6%,  2.6 points worse than the previous three months.

③The long-term interest rates in the United States decreased, the interest rate differential between Japan and the US expanded.1.77% to 1.78, and the currency exchange rate trended between ¥ 104 and ¥ 106. Last week was a weak yen.

④ The OECD's real GDP growth rate in 2020 in Japan and the US is expected to be + 0.61% in Japan and + 2.28% in the US, so the Japanese market is worse by 1.67 points on this aspect.

⑤ The 3rd week of  June is a over selling. there is a high possibility that the 4th week of  August is a over selling, and this week we are forecasting to over selling.

last week, ① was 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 7.2 points lower than NASDAQ in the medium to long term. (It is about 1500 yen when it is based on the Nikkei average)  Proportions shrunk compared to last week.

The Nikkei average is under the cloud of the ichimoku table. The total deviation rate was -4.9%, and expanded to the negative width compared to last week. The 200-day moving average line deviation rate was -2.6%, and expanded to the negative width compared to last week. Since the three elements ware negative, the "red signal" is lit in the medium term trend. The Nikkei average is under the 25_day moving average line but above 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 and the 25_day line and the 9_day line. It is in the cloud of ichimoku table. NASDAQ is above the 200_day average line and the 25_day average line and above the 9_day average line. It is in the cloud of the ichimoku table. In the short term "green 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 interest rate hikes in the United States, sluggish growth in US corporate performance, financial market turmoil caused by credit slumps, North Korea issues, falling crude oil prices and falling high yield bond markets are receding However, global long-term interest rate decline trend, US-China trade friction, US political uncertainty, lack of creditworthiness and political situation of EU banks, global economic slowdown concern with trade war, geopolitical risk of the Middle East and Ukraine Etc exist as a risk factor.

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.

Although the recent LIBOR interest rate has been on a downward trend, it has been rising for the past five years, implying that global bad debt continues to increase, and is aware of the possibility of a resurgence of financial uncertainty.

On the other hand, the following points can be pointed out as favorable materials. US interest rate cut expectations, 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 ECB Suggests Policy Rate Reductions.

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 no trend in the short term.

Analysis of the foreign exchange market last week showed that the US long-term interest rates declined, but the US-Japan long-term interest rate gap expanded, and the exchange rate was moving toward a weaker yen in weeks. This week, 105 yen to 106 yen is expected. From now on, we need to focus on technical indicators, US market trends, currency movements and foreign investor trends.

Last week's Nikkei average exceeded the expected range. The upper price exceeded the assumed line by about 400 yen, and the lower price exceeded the assumed line by about 750 yen. The expected range of this week's Nikkei average is expected to move between the Bollinger Band + 1σ (currently around 21230 yen) and the Lower is between Bollinger Band-1σ (currently around 20350 yen).