Sunday, November 16, 2014

NIKK Tokyo Nikkei Index Weekly Chart 7-1/2 Year High C&H Negative Divergence Developing

The NIKK is at 7-1/2 year highs taking out the 17488.97 high on 10/11/07 by only two points to create a record high not seen since the summer of 2007 at 17490.83 on 11/14/14. The next record high resistance above is the 18297.00 high from 6/20/07. Banzai!

The purple cup and handle pattern shows the base of the cup at 7K and breakout line at 11.5K so 16K is the upside target which is achieved satisfying the C&H. Price gapped up on news of the BOJ shock and awe QE on Halloween. Japan promises to keep destroying the yen to send stocks higher. The chart is negatively diverged over the last year although there is near term momo due to the BOJ goosing. So price may play around at this elevated level at 17.4K-18.4K to end the year. An island reversal pattern may occur if price drops to 16.9K-ish and then collapses through the gap down to 16.3K and lower.

The ADX shows a strong trend for the Nikkei rally in late 2005 into 2006, then a strong trend for the selloff during the 2008-2009 crash, then a strong trend for the obscene BOJ-induced rally during 2013 (the weaker yen in 2013 also created the +30% rally in US stocks in 2013) but there is not a strong trend for the BOJ money printing this year, and recent Halloween goosing; the ADX is down at 17 uninspired about creating a strong trend higher.

The BOJ is printing yen like madmen to create the upside in the Nikkei and in US stocks. Japan got sick of two decades of deflation so they decided to destroy their currency to create inflation and try to jump start the economy. Instead they likely destroyed their economy. As long as traders maintain confidence in the central bankers, stocks float higher. The expectation is that the BOJ will be disappointed in the lack of oomph created in the NIKK as we move into the new year. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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