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.