nikkei 225 daily outlook thurs 09 june 2016 remain bearish below 1692017015 1815012016

(Click to enlarge charts)

What happened earlier/yesterday

The Japan 225 Index (proxy for the Nikkei 225 futures) has managed to stage a push up in the closing hours of the Japanese cash market and printed a session high of 16854.  But within our expectation, the Index did not surpass our predefined medium-term pivotal resistance set at 16920/17015.

The mostly likely reason for the aforementioned push up is due to better than expected China imports figures for May where y/y growth shrink by -0.4% versus an expectation of -6.0%. This reduces the risk of a hard landing in the China economy as consumers and corporations start to spend on goods and services.

Please click on this link for a recap on our previous daily short-term outlook/strategy.

Key elements

• Yesterday, push up in price action has managed to stall right at the former broken short-term ascending trendline support from 04 June 2016 low now turns pull-back resistance.
• The key pivotal resistance remains at 16920/17015 (click here for details).
• The hourly (short-term) RSI oscillator remains bearish since its prior bearish divergence signal. This observation suggests that downside momentum of price action remains intact.
• Based on intermarket analysis, the short-term bearish trend of the USD/JPY remains intact as it continues to trade below a descending trendline in place since 31 May 2016. Short-term pivotal resistance for USD/JPY is now at 107.23.  Given USD/JPY’s high direct correlation reading with the Nikkei 225, a further potential decline in USD/JPY is likely to reinforce short-term downside pressure on the Nikkei 225 (see last chart).

Key levels (1 to 3 days)

Intermediate resistance: 16740

Pivot (key resistance): 16920/17015 (medium-term)

Supports: 16470 & 16300

Next resistance: 17250

Conclusion

No change in our short-term bearish bias. As long as the 16920/17015 pivotal resistance is not surpassed, the Index is likely to see the start of another potential impulsive downside cycle to target the short-term supports at 16470 follow by 16300 (03 June 2016 swing low area) in the first step.

However, a break above the 16920/17015 pivotal resistance is likely to damage our medium-term bearish view for a further rally to retest the 31 May 2016 swing high area of 17250.

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