There was a daily-scale compression in the main Japanese equity index that has broken upward. The weekly version of the same index has also compressed and is apparently also breaking up but we have to wait for Friday to see if this is still the case at the end of the week:
This is the first of the major indices to compress in the recent period of trendless, ranging behaviour so we must consider if it has implications for the rest. The Japanese equity market (like the Chinese) has some history of moving on its own and there is a stimulus package currently being deployed there to boost demand and growth. This makes it seem likely that there will now be another ‘leg’ up in the bull market that started almost a year ago. Buy now, but be ready to jump out if the weekly compression break is not confirmed very soon – this week or next.
The signals that we have been reporting from the US, Europe and elsewhere in Asia are bearish however, so we do not see any reason to change direction in our other stock market advice. Bear in mind that the recent bearish Asian signal that we reported in the November 5th edition was the Taiwanese compression and subsequent break down, but this was only at a daily scale. It seems probable that the Japanese stimulus package will lead to ‘leakage’ of money into the stock markets of nearby countries - all other attempts at money pumping have inflated stock and real estate markets – so it would be unwise to be too bearish of Asian markets here. If Japan ‘takes off’ others will too.