Index Continues to Grind Lower

The fact that we are in a down-trending channel suggests that we have quite a bit of structure in this market that is negative, albeit ever so slightly.

The Nikkei 225 has fallen ever so slightly during the trading session on Tuesday, as we continue to hang around the ¥26,500 level. At this point, the market has been very noisy and difficult to trade for a bigger move, but the one thing that you can see is that we are starting to grind lower, but the keyword is probably going to be “grind.”

Keep in mind that the Nikkei 225 has to worry about the global markets, and whether or not global trade is going to start falling. Most of the major companies on the Nikkei 225 are along the lines of Sony, Mitsubishi, etc. In other words, they are major exporters, so the demand coming from different countries will have a major influence on how the Nikkei 225 performs.

Looking at the market, it’s obvious that the attitude of the market is struggling a bit, despite the fact that the Bank of Japan is doing massive amounts of quantitative easing. However, it’s also worth noting that inflation numbers are starting to take up a little bit in Japan, which is something that we have not seen for decades. Perhaps people are starting to worry about growth and sales for the various corporations, and that might be part of what we are seeing.

For what it is worth, the 200 Day EMA sits below, near the ¥25,000 level. Not only is it a large, round, psychologically significant figure, but it is also an indicator that a lot of people will pay close attention to. Beyond that, the market had bounced from this area recently, so all things being equal I think that might be where we start aiming for. The market has the 50 Day EMA above offering resistance and has been quite interesting dynamic resistance overall.

You can also make an argument that we are in a down-trending channel, which suggests that we have quite a bit of structure in this market that is negative, albeit ever so slightly. If we were to break above the ¥28,000 level, then it would be a significant breakout that allows the Nikkei 225 to reach the ¥30,000 level again, but at this point, it does not look like we have the type of momentum to make that happen. Keep in mind that most indices will move in concert, so pay attention to the other major ones to get an idea as to what to do in the Nikkei 225.