Today, on BNN, I’ll be giving my usual 3 “Top Picks”. One of those picks will be an ETF trading off of the Nikkei. We view the Japanese market as having some upside potential for a few reasons.
The technical breakout on the weekly chart looks appealing on this index. As I write this, the 50 day MA is attempting to move up through the 200 day MA – another good sign. The Nikkei has not taken out its last peak of around 17,000. So the breakout we’ve seen has not been a perfect one. Despite the fact that it’s not an ideal chart breakout yet, there are a couple of other factors that inspired us to take a position in that market.
Fiscal stimulus, as we know in this part of the world, can inspire rising markets if any signs of positive follow-up comes through. In the case of Japan, I note that some figures came out for an increased level of consumer confidence recently. That’s one point that may add some upside to the easy-money environment. Further, a sideways to or weaker Yen – as we are starting to see now – can be bullish for the Nikkei stock market. Note the chart below where I’ve done a correlation study of the Nikkei to the Yen—the bottom pane shows us that the relationship is almost always negatively correlated between the two. The lower that line, the more negatively correlated the two are. Of note, the correlation line has been pretty much always below the “zero” line for this study—suggesting the relationship is negatively correlated by varying degrees most of the time. You can see that relationship on the two price lines in the top pane as well. When the Yen (black line) zigs, the Nikkei (red line) zags.
Bottom line: the Nikkei may be a market to consider for investment at this time.
Keith on BNN
I’m on BNN’s MarketCall today: Wednesday October 5th at 6:00pm.
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ValueTrend Performance numbers posted
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Of special interest should be the line chart at the bottom of the page- showing our relative performance to various indices, and most importantly, the low variance of our returns vs. those indices.
Our income model has also had a good year. Our decision to rotate out of preferred shares and some of our bond holdings and move into high dividend paying stocks has proven successful. The ValueTrend difference is our willingness to reduce our exposure to such stocks and move back into bonds or cash, should we see meaningful trend deterioration.