The Nikkei 225 has broken down through major support and will need a miracle to stop things from getting worse, much worse.
Over the last 2 weeks, I have discussed the deteriorating outlook for the Nikkei 225. Here and here.
The sharp sell-off that the market has looked vulnerable to finally came yesterday, and the Nikkei 225 broke major uptrend support. The aggressive selling has continued in today’s session, and the index is currently -700 points and -2.50% on the day, to 27,450.
The market has now lost close to -8% from its May 10th high, with further losses likely.
The price is fast approaching the next key support level of 27,000, and at this rate could be there at some time today.
This support is the only thing stopping the Nikkei 225 from reaching the 200-Day Moving Average at 26,350.
Why is the 200-Day Moving Average Important
The 200-Day is an important marker. Many traders would consider it the most important. Typically a market that is above the 200-day is considered in a long-term uptrend and vice versa.
The Indicator last crossed on the upside as the Nikkei 225 exploded out of its pandemic lows in May 2020. Since then, the market has never closed below it.
Decades of Under-Performance
2021 has seen many country’s stock markets reach all-time highs. All major U.S indices set new records within the last few weeks, as an abundance of cheap money and super-easy central bank policy propelled prices higher and then higher still.
The Nikkei 225 has some way to go if it is to achieve the same feat. The all-time high for Japan’s benchmark index was over 30 years ago.
The index topped out at 39,650 in January 1990. The price would need to increase close to 40% to equal the previous record, and in light of the recent price action, it may be some time before the Nikkei 225 gets back to those dizzy heights.
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Nikkei 225 Price Chart
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