Flash Nikkei - Update following the terrible earthquake.

My deepest condolences to those who lost loved ones in this terrible tragedy. 


Nikkei monthly chart:

Nikkei index fell 6% directly to its Fibonacci retracement, the next support is ~9000 (Fibo), then previous 8800 ie Aug low (which happen to be the Bollinger lower band)


For what it is worth, in Jan 1995, when the Kobe earthquake happened, the market fell 16% in the next three months - which, applied to the Nikkei's Friday close, gives around 8600.

 

Nikkei weekly: It broke through the 50% retracement to test its Bollinger lower band & last Fibo. hence a strong support. If broken, the next support is the previous low (8800). The market is now oversold. Let's wait a few days and see if Nikkei overshoot.

Eurostoxx Weekly:

The chart is testing its 20 week moving average. 

The daily chart is oversold, it could overshoot 30 point lower (ie the next Fibo support).

Conclusion: I maintain the switch out of EM markets to Japan, Europe. The Nikkei's fall is an opportunity to buy, and Asia Pac ex Japan market resilience is an opportunity to sell. Timing wise, do the latter now, and wait for a signal to buy the former. What are those signals? Test of support level, reversal candles etcetc...

The overall bull market is intact. 

Markets do not move straight, don't they? Commodities testing last retracement level. Emerging markets rebounding from oversold...

Commodities, represented by the CRB index, confirmed the break of the 50% retracement level. The Index moved straight to the next resistance, the 62% Fibonacci retracement. This level is the last resistance before the 2008 high. Due to the strength of the this level, the pace of the rally and the fact that it is overbought, a consolidation or correction is to come, like with Equities in February.

CRB monthly chart. Last month the index broke the 50% retracement, and accelerated to the next Fibonacci level, the 62% retracement...So what are Fibonacci retracements? When a stock, index, or a currency falls from a high to a low, it has a tendency to rebound to "sticky" levels: 50%, 38% and 62% of the distance between the high and the low. 0.38 and 0.62 are Fibonacci ratio. Strange, and irrational, just take any chart, pick a top and a bottom, find these levels, and you will see... 
Ok, what's next? The current level is not easy to break, and as the index is very overbought, a consolidation or correction is expected, 2-4% support.


Most Equity indeces have not shown any development. Only Emerging markets have rebounded from a very oversold level. I would take any rebounds to take profit. Why?
Below on the left, the monthly chart of the MSCI Asia Pacific ex Japan, has been moving up with oversold/overbought indicator (stochastic) highs moving down, as shown by the yellow lines. This pattern is called "negative divergence", a warning that it may correct or reverse in the coming month. Be vigilent!

Dollar index: The free fall continues!

The Dollar Index, an index measuring the value of the USD vs EUR, GBP, CAD , SEK, CHF & JPY, continues its fall as shown on the daily chart above on the right. The chart is oversold but the momentum on monthly, weekly and daily charts are clearly down, so way to go...Aiming at 2008 low...~5% downside in the next three months... see monthly chart below.



Conclusion: Consolidation on Equity market, with rebound of Emerging market: an opportunity to sell&switch -as highlighted previously- to Europe, Japan, and US. Commodities are reaching a key resistance and is to consolidate; its trend is still up and aiming probably at 2008 high. This is consistent with the fall of the USD which is similarly aiming at 2008 low.