On 18th March, when Nikkei was trading at 11787, we had stated that “While concluding a 13 years bear market (Since 1990-2003), the Nikkei made a low of 7603 in Apr 03. Subsequently it has climbed to the recent high of 18300 (Feb 07) and started its decline. Yesterday, it has made a low of 11691, which is exactly on 0.618% retrenchment of the entire rise from Apr 03 to Feb 07; Technically, 0.618 is the “golden” ratio, and if the fall is arrested, in couple of weeks, near about 11400-600 levels, we may see a revival, at least for the time being, in one of the weakest market in the world”
Since then, 11691 remained untouched and Nikkei has moved up to 13485, in a 4 week long rally, before correcting to present levels. A rise of neat 15% in 4 weeks, when the street was beating the “chest” with recession in US, rise in crude prices, global inflationary pressure etc. Further, in the process the Nikkei has also broken (upward) a falling parallel channel, drawn from 17488 (Oct 07) on the weekly charts.
A fall below 11691 will unfold a disastrous scenario for the bulls. However, even though its little bit premature to say, the long term charts are pointing towards a bull market in Japan in the near term.
As of now, the bulls are in consolidation faze, after a 15% gains. They will regain the control, once surpassed the recent high of 13485, within the next 3-4 weeks. On the downside 12430 is a strong support for the bulls, a close below this will turn the tables in favor of the bears, with probability of re-test of the recent bottom of 11691.
