- The Nikkei 225 fell during the trading session on Tuesday, as volume returned to the markets.
- With that being the case, it looks as if we are trying to form some type of basing pattern.
- The ¥26,000 level is an area that I think a lot of people will pay attention to, and I also believe that the market sees support all the way down to the ¥25,000 level, which of course is a large, round, psychologically significant figure.
If we do continue to drift lower from here, it’s possible that we could see a bit of a bounce. That bounce should be a nice buying opportunity if we have that happen. The ¥26,500 level above should be a resistant barrier that is going to cause problems. If we were to break above there, then it’s likely that we could go looking to the 50-Day EMA, which is sitting near the ¥27,300 level. The 50-Day EMA will attract a lot of attention, and it may be worth noting that we recently had broken down below the 200-Day EMA with that indicator, forming the “death cross.” We have been in a trading range for quite some time, and we are closer to the bottom of it.
Choppiness Ahead
If we are in fact in a massive trading range, it should be noted that the ¥29,000 level above is the top. We will have to wait and see whether we get any momentum from the bottom because if we do it could be a nice buying opportunity. However, if we were to break down below the ¥25,000 level, then we could see this market drop down to the ¥22,500 level, based on longer-term historical price action.
In the short term, I would anticipate a lot of choppy behavior, especially as we are waiting for the jobs number on Friday, which can give us an idea as to how the Federal Reserve will behave, which can have a major influence on what the Bank of Japan must do in the interest rate market. They are keeping rates low, but rates have risen since allowing the 10 years to flow to the 50-basis points level. The noisy behavior should continue more than anything else, but I think you could probably say that about most indices right now.
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