The Nikkei is a prime example what a real bear market can look like when demographic shifts are involved. This bear market always gave me trouble, so I had multiple alternatives to try, or should I say, “forced to try”! This time I looked at the wave positions as one giant triangle, with the potential of coming up to the “D” wave in Primary degree. The mood between a “B”, “D”, Diagonal 1, or an Impulsive wave 1 in a bull market, are next to impossiable to tell apart.
Any asset class on this planet that goes up has a bullish mood to it. The best way to tell them apart is by the pattern it is making in gettting there.
There is a high probability, an “E” wave in Primary degree is coming, which would push the Nikkei to new record lows. This low would also be building a huge bottom base ending in 2022, along with all other world markets. Even if the 2009 bottom is the Cycle degree wave 4 bottom, we would still need a hefty correction between a 60% and 80% net retracement. Every stock index will join the bearish party, as the Nikkei will not stand up to the bears. 2008-2009 is a prime example of how many asset classes crashed together, so I expect it can happen again.
It took the Nikkei index along time before it topped but in the last few months a spike has appeared after which the Nikkei has started to decline. The Nikkei has turned very close to the US indices turning dates. Which could be ending on a Primary degree “D” wave bull market. This also means that the Nikkei could suffer a 3 wave decline resembling another zigzag, but it will be one degree lower. My bottom big trend line is parallel to the top trend line, with the bottom trend line pointing to new all time record lows for the Nikkei stock exchange.
In a nutshell, the Nikkei could end on the same Cycle degree 4th wave right along with all the other 5 indices I cover. I did not keep a record of the Gold/Nikkei ratio, but presently we are sitting at a 16.6:1 ratio. It takes 16.6 Troy gold ounces to buy one unit of the Nikkei. This makes it about as expensive as any of the US indices. I would have to do some back checking to find the cheapest ratios, which I will have to put on my list. For now we have one ratio and I’m sure it is also hitting a brick ratio wall.
Checking the COT report with the Nikkei I see the commercials are net short by a ratio of 1.7:1, which isn’t all that bad, but the speculators are net long by a ratio of 4:1. The speculators are far more bullish than the commercials are bearish, which puts the speculators into a typical bull trap. A “D” wave bull trap.
The single rising trend line I have may give the Nikkei a pause, for a potentially strong counter rally.
On my old blog I had worked on the Nikkei many times as I think this huge looking Nikkei bear market is actually a triangle. When I look back in time to the 1990 peak, I show a Cycle degree wave three top, which I have not changed in many years It still remains as a Cycle degree wave 3 today. Just because it is a mega bear market does not mean we can suddenly turn it into a SC or GSC bear market.
In fact the exact opposite happens as only smaller degree levels come out to make a wave count look bigger than it actually is. Until this bear market is completed, I cannot label any wave count that is bigger than a Primary degree letter. Staying in the sequence is the biggest requirement when trying to figure out where we are.
There is much more to this Nikkei bear market than meets the eye, especially when we look at the length of this in terms of years. I mentioned that 2021 could be another major low, but the Nikkei is already 26 years old and it looks like there is more to come before this Cycle degree 4th wave is completed. By 2021 it would have lasted 31 years! This matches very well to a 30 year cycle so 2021 could also be the end of this Nikkei bear market and US stock bear market.
There is also a very unique coincidental wave count that I noticed, and that is the present “D” wave in the Nikkei matches our present “D” wave top with the US dollar. This makes it very likely that the US dollar and the Nikkei will bottom about the same time and even with the same triangle wave count. I have many Idealized triangles posted so it is just a matter of labeling them for a Cycle degree triangle. We also know from these idealized drawings what should happen once Cycle degree wave IV is located.
I used monthly spacings for the chart above which filters out more of the little wild waves and highlights the important turnings a bit better.
From the 2009 bottom the Nikkei sure did not follow the US markets, but made a very choppy 3 wave bullish move to the 21,000 price level. This move alone is enough to make us think another “bear market rally has finished”, which usally means a new world record low for the Nikkei, will happen.
It also tells us that US stocks are not going to crash to some crazy DOW 1000 price range dating back to the 70’s.