Index Pulls Back from 50-Day EMA

In general, this is probably best thought of as a range-bound market, with more of a slightly negative attitude.

The Nikkei 225 initially tried to rally on Monday but gave back gains to show signs of weakness. At this point, the market continues to see a lot of volatility, and it is worth noting that the market has been somewhat sideways, with a certain amount of a slight tilt. The ¥27,000 level offered a little bit of noise, and as a result, the Monday candlestick was negative.

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If we continue to drop from here and break down below the bottom of the candlestick for the Monday session, then the Nikkei more likely than not will reach the €26,400 level. The €26,000 level is the next target, and if we break down below there it’s likely that the ¥25,600 level will get targeted. This is an area where we have seen a lot of buying pressure previously, forming a bit of a “double bottom.” At this point, the market is more likely than not going to have a fight on its hand, because if we were to break down below that level, then it’s likely that the market will reach the ¥25,000 level.

On the other hand, if we were to turn around a break to the upside, the 200-day EMA is currently near the ¥27,400 level and dropping. I think that is only a matter of time before the 50-day EMA comes into the picture to offer dynamic resistance. Stock markets around the world continue to cause a bit of trouble, as the market overall is rather somewhat negative, due to the fact that the monetary policy around the world continues to tighten, with the notable exception of Japan itself.

That being said, the market is likely to see a lot of noisy behavior, and perhaps sellers on short-term rallies. However, we can somehow take out the ¥28,400 level, which could open up a bullish run, but more likely than not we would need to see other indices do the same thing in order for Tokyo to follow right along. As things stand right now, it seems like “risk-off” is the overall attitude of market participants in global stock markets, and Nikkei should follow along. In general, this is probably best thought of as a range-bound market, with more of a slightly negative attitude.