|
QUICK
LOOK REPORT #17: Nikkei Index
Background: Quick Look Reports will look at a possible dominant trend in an Index, Equity or Commodity and some possible long-term (monthly/yearly) trends which could emerge from the dominant cycle(s) (the datasets will be either daily, weekly or monthly). Quick Look Report # 17 looks at the daily closing prices of the Nikkei Index (N225) from 1992 through Dec 2005. The seven primary daily cycles in the daily Nikkei are: 90, 190, 240, 346, 440, 940 and 1800+ days. The major cycle in the Nikkei is the 940-day cycle (see also comments in Quick Look Report #16 regarding the AMEX Natural Gas Index cycle at 940-days). There are also seven smaller “trading” cycles at 5, 7, 12, 19, 24, 35 and 54 days. In particular, the 11, 19 and 54 day cycles show up in many equities, indexes and commodities in a “rally mode”. This type of approach always seems to find seven large “trending” cycles in virtually all major Indexes/commodities and seven smaller “trading” cycles which has the consequence that none of these markets are actually random but appear to be the direct consequence of world political and Central Bank “monetary policies” by phasing of M3 cycles and commodity (energy) cycles worldwide. This phasing of major cycles appears in the Nikkei and there has been a significant shift in the overall curve (trendline) in the past eight weeks which usually reflects (pending) major currency/bond changes (yield curve inverting?). Chart 1 shows the correspondence between the actual daily closing prices of the Nikkei versus the seven major and minor daily cycles in the Nikkei Index over the period from 1992-2005. The longest cycle in this prediction is the 1800+-day cycle. The cycles match the overall waveform within 5% for all values and the average difference is less than 2%. Chart 2 presents the 935-day cycle in the Nikkei Index and suggests: “the Nikkei tends to form a bottom when this major cycle bottoms!”. A huge trading-type cycle at 935-days also exists in the AMEX XNG since 1994 (and much earlier). Chart 3 compares the 935-day cycle from the Nikkei with the 940-day cycle in the AMEX Natural Gas Index from 1994 thru 2005. These two major cycles are very close in phasing and are running together. An interesting question is why does the Nikkei tend to bottom at the bottom of the AMEX Natural Gas Index 940-day cycle? Is this the result of a phase lag in the supply system or is there more to it? The next predicted bottom in this baby comes up in Jan 2007 and let the fun begin in Nikkei Index for 2007. Chart 4 offers one possible prediction for the detrended Nikkei waveform for 2006. It looks like the Nikkei is forming a top and may be forming a minor double bottom in April/May 2006 with a sideways trading pattern for several months. There is a potentially sharp downside move possible in the Nikkei in late summer 2006 – buyers beware! Remember the 940-day cycle in the Nikkei in 2006 – it was heading down!?Chart 5 offers one possible prediction for the detrended Nikkei waveform for 2007. This suggests a nice coming rally and we will be ready for it after going thru 2006. Let’s hope the Central Banks can get their act together in 2006 so this puppy can be played in 2007. Let’s print more Yen people – no time off for bad behavior next year. Summary: Suggest avoiding the Nikkei in 2006 or await further developments from sidelines – looks like a major downside move could be upcoming after March 2006 and not any high probabilities of cycles adding together to form any rally for 2006. The Nikkei Index is experiencing a sharp upward bias in the trendline which seems to correlate with recent move in natural gas prices. There is a high degree of correlation with major 940-day cycles between Nikkei and AMEX XNG Index which I have not seen previously mentioned on the Internet. In 2007, a major rally is possible in the Nikkei – we will have to see how this continues to unfold as we proceed thru 2006 which is going to be a rough year (in more ways than one). Some interesting correlations should also be looked at in the future between Yen’s cycles and Canadian currency cycles (strong!) and the Nikkei’s cycles. So many cycles and so little time! Crystal Ball (Murky to Unclear): Possible high in Nikkei in late 2008 followed by crash in Nikkei to bottom in mid-2010. After this happens, we have scheduled a coming worldwide Mega-Rally (ok, Biggie Secular Bear Rally) from August 2010 thru whatever and then we all head for Chinese motorcycle/hybrid vehicle stocks with Soy Sauce and exit Wall Street Stage Left (watch when the Lady leaves the StageCoach).
CONTACT
INFORMATION DISCLAIMER: The author is not a registered stockbroker nor a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity, index or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, the author recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments. |
