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Brief: Nikkei 225 Overbought, Dow Jones Rallies, DAX Index Pauses

The Nikkei 225 index is in an unstoppable bull run a few days after it hit its highest level since 1991. Today, the index is up by more than 1.80% and is trading at ¥25,350, which is the highest it has been in 29 years. This trend is being supported by strong corporate earnings and the relatively weaker Japanese yen.

Yesterday, the Nikkei index reacted to earnings by companies like Shiseido, Nexon, and Resona. Today, the top Japanese companies that will release their quarterly earnings will be Mitsubishi Estate, Toshiba, Dentsu, and Japan Real Estate. Among the top performers in the Nikkei today are DeNa, Casio Computers, and Sumitomo that are all up by more than 7%.

In Hong Kong, the Hang Seng index has risen by more than 0.30% as traders remain cautiously optimistic about the upcoming relationship between the United States and China. That is because under the Trump administration, relationships between the two countries had soared, which was not good even for Hong Kong companies. The Hang Seng index is also rising because of the Covid vaccine, which will lead to more commerce in the city.

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Technology stocks like Alibaba, Xiaomi, and Tencent are the worst-performers today, having dropped by more than 5%. Like yesterday, real estate firms like Swire Pacific, China Resources Land, CK Asset, and New World are among the best-performers in the Hang Seng.

In the United States, futures tied to the Dow Jones, S&P 500, Nasdaq 100, and Russell 2000 are all rising as traders remain optimistic about vaccine. They are also rising because of the so-called Santa rally, which happens before Christmas.

In Europe, DAX index and FTSE 100 futures are little changed as traders wait for key earnings. Among the European firms that will release their earnings are Flutter Entertainment, E. ON, Coca-Cola, and Scout 24.

Looking ahead, the economic calendar will be muted today, with no major releases scheduled. The only event will be the start of the ECB annual meeting, where key officials like Christine Lagarde will speak.

Nikkei 225 technical outlook

The Nikkei 225 index has been on an uptrend this year. It has jumped by more than 55% from its March bottom of ¥16,280. This month, it has moved above the previous YTD high of ¥24,100. As a result, it remains above all short, medium, and long-term moving averages.

However, it is getting overbought, as evidenced by the Relative Strength Index (RSI), which has risen to the highest level since June. Therefore, while the upward trend will likely continue, there is a possibility of a pullback in the near term.

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