Outlook for the Nikkei average this week [5-April-2020]

[Present state recognition of fundamental]

In the US market last week, the rise in the number of people infected with the new coronavirus continued to stall and the stock index fell. 
On the other hand, in the medium to long term, there are concerns about the bank's lack of credit and credit crunch due to the recession caused by the prolonged expansion of new pneumonia and the default of high yield bonds. 
In addition, there is concern that the global economy will slow down due to the economic slowdown in China and trade wars, etc. due to the inward political situation centered on its own country. In addition, geopolitical risks in the Middle East, the Korean Peninsula and Ukraine need to be kept in mind.

The difference in the yield spread between the US and Japanese markets is 1.55 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 16.1 and the Nikkei average adopted stock price PER 11.9 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 1.5% 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 14.6 (the results for the current term will be revised downwards or the Nikkei average will be around 21870 yen) . In the medium to long term, the Japanese market is low valued at about 4050 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 negative. The daily bar is under the 200 day line, and it is under the cloud of the ichimoku table. Nasdaq weekly foot was negative. 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 , Weekly new unemployment claims, Producer Price Index for March. 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 7.3%, 0.8 points worse than three months ago, due to the announcement of the latest quarterly financial results. Earnings forecast for this term is -12.5%, 5.8 points worse than three months ago.

③Although long-term interest rates in the U.S. declined and the difference between the U.S. and Japanese interest rates narrowed from 0.68% to 0.61%, the yen weakened in the currency exchange rate range of 106 yen to 108 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 4th week of March is a over selling. there is a high possibility that the 1st week of April is a over selling, and this week we are forecasting to over selling.

last week, ①,⑤ ware 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 6.3 points lower than NASDAQ in the medium to long term. (It is about 1120 yen when it is based on the Nikkei average)  Proportions expanded compared to last week.

The Nikkei is below the clouds in the Ichimoku Kinko Hyo table. The overall divergence rate was -43.7%, a narrower range than last week. The 200-day moving average divergence rate narrowed to minus 18.7%. As the three factors are negative, the mid-term trend is lit with a "red signal". 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 under the 200_day line and the 25_day line and 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 and the 9_day average line. It is under the cloud of the ichimoku table. In the short term "red 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, worsening U.S. corporate earnings, 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, positive factors include the U.S. zero interest rate policy and $2 trillion in economic measures, expectations for President Trump's policy, monetary easing measures such as the Bank of Japan's 2% inflation target, the introduction of negative interest rates and the purchase of 80 trillion Japanese government bonds and 12 trillion yen in ETFs, as well as expectations for economic measures by the Japanese government that exceed the level of the Lehman Shock, large-scale economic measures by the EU countries, and the ECB's announcement of deepening negative interest rates and expanding quantitative easing.

Looking at the technical aspect, the US market is downward trend in the medium-term, and downward trend in the short term. The Japanese market is downward trend in the medium-term, and downward trend in the short term.

Analysis of the foreign exchange market last week showed that the US long-term interest rate fell and the US-Japan long-term interest rate differential narrowed, but the yen weakened weekly. This week is expected to be between 107 and 109 yen.

Last week, the Nikkei 225 stayed within its expected range. The upper price was about 1970 yen below the assumed line and the lower price was about 250 yen above the assumed line. This week, the Nikkei 225 is expected to move between the 25-day line (currently near 18930 yen) at the upper end and the Bollinger Band -1σ (currently near 17380 yen) at the lower end.