Nikkei 2013-16

Of the stock market charts we’ve looked at so far, the Nikkei stands out as the one with the maximum exposure of the next two years to the global economic situation and other events.

2013

At the time of writing, the Nikkei, along with other markets has been rising since November. It has continued to rise as the Yen has fallen- this is not unexpected – investors like to maintain their overall exposure to a market ( what is more unexpected is a rise of the markets where the currencies have strengthened), however the index, unlike those of the US and UK is a long way from its 2007 peak and still a fraction of its 1980s bubble values.

 As February starts the conditions continue, but there is more caution and the level of trading is reduced. With uncertainty over the value of the economy assets and technologies in place it is difficult to justify further significant gains in the next couple of months

 The situation is further complicated by April and May when there is a return to the weakness of previous years. There is a feeling that the market can’t go too far without underlying structural changes in the economy. However at the same time there is a short term boost due to incoming funds from monetary/currency shifts.

June represents the beginning of a major turning point. A mix of global and technological influences, even shocks, begin to have a significant effect

 Conditions are mixed in July and August. The new situation continues, but there is a surprising sense of stability – the likely impact is that the market remains flat during these months.

September sees a reactivation of the conditions and a turning point in the market.

 There is a lessening in intensity by October and a mix of positive and negative influences suggest that the last few months of the year will be characterised by minor fluctuations but no new trend.

 

2014

The conditions of mid 2013 continue into Early 2014, with the mix of structural challenges, somewhat upbeat sentiment and liquidity  but accompanied by continued economic inertia. Once again it seems that the market will have difficulty finding a direction and there may even be a pull back as some Nikkei components suffer financially.

The period March to May seems to be accompanied by fear on the part of investors. This may be the impact of events elsewhere, there is still an ongoing potential for shocks and dramatic shifts.

Although the background themes continue throughout June to Oct, the effects are moderated. There is even the potential for a market bounce around July as positive sentiment and good news take over for a while.

August is then uneventful with merely a review of the broader conditions taking the front seat.

But Sept and Oct demonstrate positive themes again despite concerns about profitability there is a belief that the market represents good value.

The last 2 months of 2014 see a return to the longer terms worries however. A particularly difficult time, probably globally, means that sentiment is generally negative and the market will fall. However we must remember that this has been a generally depressed market for  a generation and so any falls are in the context of this. We might lose recent gains but no more.

 2015

2015 starts as 2014 ends, but with some additional negative influences. January and February is likely to be a difficult time with depressed valuations.

March and April are slightly better, but although there are some positive longer term influences, the short term situation is still tricky. The market is unlikely to fall further but is unlikely to show any significant rises either.

There is no significant change from May through to September either. The difficult situation remains, although somewhat alleviated by positive news etc.

 Around August and September there is a little bit of light relief from the on-going difficulties but investor fear continues.

However the conditions are changing and October sees the last of the significant restrictions and a feeling that finally the market might be out of the woods.

As a result November and December are without much action at all. In fact there  might be  a moderately positive feel

 

 2016

Although throughout the year the mood that has pervaded for some years now still continues, there are the beginnings of a new environment.

January and February 2016 will be a period of consolidation and strength although not of volatility or significant trend rises.

March to May are also likely to be positive months. Many of the longer term difficult conditions have waned, even if they are not completely resolved and there are some real positive green shoots that will allow the market to rise ( though be aware we are not talking about bubbles) at last.

The period June to September is more mixed, with not all the news supporting the positive trends but there is nothing that seems enough to break those trends. While there will be more fluctuations the market direction remains upwards.

The general tone continues into October. In fact there could even be some speculative buying at this time. However once again not all the news support this and investors are advised to take advantage of the upside but to watch for short term drops

November and December  are once more positive but there is still a lot of caution to be overcome. Don’t expect any significant rises yet

 

It is noteworthy that 2017 shows some dramatic shifts in tone in this market and it will be interesting to look at these when we get to the next batch of forecasts.