Outlook for the Nikkei average this week [29-March-2020]

[Present state recognition of fundamental]

In the US market last week, the stock index rebounded sharply with a major economic response to the recession caused by the new coronavirus. On the other hand, in the medium to long term, the spread of new types of pneumonia, an inward political situation centered on the world's own country, a lack of creditworthiness and credit crunch of banks, a slowdown in China and other economies, a fear of a slowdown in the global economy due to trade wars, etc. The geopolitical risks of the Middle East, the Korean Peninsula and Ukraine need continued attention.

The difference in the yield spread between the US and Japanese markets is 1.11 points less than in the Japanese market, taking into account the 2021 OECD's real GDP forecast announced. The reason for the bargain is due to the difference between S&P500 's PER of 15.8 and the Nikkei average adopted stock price PER 12.5 and Japan-US interest rate difference, GDP growth difference. This is because the difference in GDP growth between Japan and the US in 2020 is 1.1% 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 14.5 (the results for the current term will be revised downwards or the Nikkei average will be around 22530 yen) . In the medium to long term, the Japanese market is low valued at about 3140 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 2021 GDP estimate (now +0.74%) by OECD

⑤ Foreign investors over-buying

Looking at recent movements

① Last week's NYDow weekly foot was positive. The daily bar is under the 200 day line, and it is under the cloud of the ichimoku table. Nasdaq weekly foot was positive. NASDAQ bar is under the 200-day line and it is under the cloud of the ichimoku table. This week we will be paying attention to Housing related indicators, Quarterly financial results announcement , March ISM Manufacturing Business Index, March Employment Statistics. I would like to pay attention to whether NYDow can return above the 25th day line.

② The forecasted profit growth rate for the Nikkei 225 stocks is ROE forecast 7.8%, 0.3 points worse than three months ago, due to the announcement of the latest quarterly financial results. Earnings forecast for this term is -7.1%, 0.5 points worse than three months ago.

③The long-term interest rate in the United States declined, and the interest rate differential between the United States and Japan narrowed from 0.81% to 0.68%. As a result, the yen moved higher from 111 yen to 107 yen.

④ The real GDP growth rate forecast for 2021 in Japan and the United States of OECD was announced, Japan is expected to be + 0.74%, and the United States is expected to be + 1.98%.

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

last week, ① 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 0.8 points lower than NASDAQ in the medium to long term. (It is about 160 yen when it is based on the Nikkei average)  Proportions shrank compared to last week.

The Nikkei is below the clouds in the Ichimoku Kinko Hyo table. The overall divergence rate was -27.2%, a narrower range than last week. The 200-day moving average divergence rate narrowed to minus 11.8%. As the three factors are negative, the mid-term trend is lit with a "red light". The Nikkei average is under the 25_day moving average line but above the 9_day moving average line,  "yellow signal " is lit for short-term trends.

In the US market NY Dow is under the 200_day line and the 25_day line but above the 9_day line. It is under 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 signal" is lit and in the medium term " red signal" is lit.

[Outlook for this week]

Looking at the US market fundamentally, concerns such as interest rate hikes in the United States, US-China trade friction, US political uncertainty, North Korea issues are receding However, Spread of pneumonia infection by new coronavirus, falling crude oil prices, sluggish growth in US corporate performance, falling high yield bond markets , global long-term interest rate decline trend, financial market turmoil caused by credit slumps, 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 most recent LIBOR interest rate has risen despite the decline in short-term interest rates, raising awareness of the possibility of renewed financial instability.

On the other hand, Good news is the US zero interest rate policy and $ 2 trillion in economic measures, 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 · 12 trillion yen ETF Clarification of the duration of interest rate manipulation and monetary easing and ECB deepens negative interest rate and expansion of quantitative easing.

Looking at the technical aspect, the US market is downward 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 foreign exchange market last week, the US exchange rate was higher for the week as long-term interest rates in the United States declined and the long-term interest rate differential between the United States and Japan narrowed. This week is expected to be between 108 yen and 105 yen.

Last week, the Nikkei average was above the expected range. The upper price exceeded the assumed line by about 1,700 yen, and the lower price exceeded the assumed line by about 800 yen. For the Nikkei 225 this week, the upside is expected to be Bollinger Band + 1σ (currently around 21,940 yen), and the downside is assumed to be Bollinger Band-1σ (currently around 17,700 yen).