Nikkei technical outlook

The Nikkei confirms the overall picture that new lows are required. The daily chart has a clear price pattern entering wave 5 down and will drop below 8000. We need 3 closes below 8200 and likely will come close or even test the 20 year low within 2 weeks. Around 7500/800 markets should bottom out. For non-domestic investors, it will be tricky to go long the Nikkei though unless they do hedge the yen, because with a turning Nikkei the Yen will get weaker. Basically the Nikkei is a warning to the world with the Japanese banks being in a similar situation 19 years ago hooked up with toxic and worthless assets in their balance sheets. At that point the Nikkei was at 39000, now we are close to 8000. China's market development looks like a repetition of that when it comes to market valuations. That the Yen rises is just a matter of unwinding carry trades or 'deleveraging trades'. Fundamentally, the Yen should be weak but as long as the wind down process is on, people have to cover back their yen loans or yen shorts.