The Nikkei 225 Index has declined, entering a bear market. The index recently dropped to 30,793 points, its lowest level since October 31, 2023. Additionally, we have seen the Nikkei 225 entering a bear market, with a 24% decline from its peak on December 27, 2024, when it reached 40,398 points, to the low recorded two days ago. The index has also fallen by 17% since the beginning of the year. The index is currently trading near the 31,500-point level.
These notable declines in Japanese stocks can be attributed to several factors, the most important of which are:
- Tariffs imposed by the Trump administration on all countries, including Japan. A 24% tariff was applied to Japanese goods exported to the United States.
- The strength of the Japanese yen, which is currently trading near 145 yen per US dollar, discouraging foreign currency holders from investing in Japanese markets.
- Uncertainty over Japan’s monetary policy, especially regarding interest rates, with expectations of two interest rate hikes in the coming period, putting pressure on Japanese stocks.
It seems that technical indicators are likely to put additional pressure on the Nikkei 225 in the near future for several reasons:
- A bearish crossover between the 50-day moving average at 37,690 points and the 200-day moving average at 38,538 points, indicating a downward trend for the Nikkei 225.
- The Relative Strength Index (RSI) currently stands at 27, indicating a bearish momentum for the Nikkei 225.
- A bearish crossover between the MACD (Moving Average Convergence Divergence) in blue and the Signal Line in orange in the negative territory, indicating negative momentum for the Nikkei 225.
- The Positive Directional Indicator (DMI+) is at around 7 points, while the Negative Directional Indicator (DMI-) stands at approximately 49 points. We can observe a significant gap between these two indicators, which means that selling pressure on the Nikkei 225 is strong. Most importantly, the Average Directional Index (ADX) in green is at around 39 points, indicating that the momentum for this downward trend is strong.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice. All trading involves risk.
