Nikkei bouncing back as Japan stares at bull market
Anyway, the bust was ugly with the sharemarket falling to lows of 7971.72 and the average home in Tokyo falling to 1/10th of its boom-time value. There was still sharemarket money to be made in that time as the market did fluctuate. But the best time to get in was the low point as the Nikkei climbed an impressive 227 per cent after that. You had to be nimble as it turned in June 2007 and tested the old lows again.
Since 2009 Mark Umansky, a certified financial technician and councillor with the Australian Technical Analysts Association, sees the Nikkei as moving into interesting territory. Despite testing old lows again in 2011 it has been making useful gains in recent times as the "higher low" formations on the chart testify.
Indeed, Umansky believes it may be about to prove it has been in a four-year accumulation phase when patient professionals have been building up portfolios.
That confirmation would occur if the index breaks through 11,500 and stays there and would be an indication that further gains are in the pipeline. What's more, if the market continues to rise and breaks through the high reached in 2007 of about 18,100 Umansky says the market could then be entering a rare phenomenon known as a 10-year accumulation phase showing the professional investors have been patient and confident over a very long period.
If that comes to pass he says Japan may be in for a major bull market that could see stocks reach levels of around 28,000. But for that to happen, the economy would have to perform well and the market would have to make its way through a number of resistance levels shown on the chart.
There's a bit that could go wrong along the way, with the government promising a $US224 billion ($A217 billion) stimulus package while the national debt is predicted to reach 237 per cent of GDP this year. For heavily indebted Italy the figure is 127 per cent and about 105 per cent for the US.
This column is not financial advice. rodmyr@gmail.com
Frequently Asked Questions about this Article…
The Nikkei peaked at 38,957 points in December 1989 during the boom, then plunged to lows around 7,971.72 as the bubble burst. Property values also collapsed (Tokyo homes fell to about one‑tenth of boom value). After hitting the low point, the index later climbed roughly 227% from those lows.
Since 2009 Mark Umansky, a certified financial technician and councillor with the Australian Technical Analysts Association, has noted 'higher low' formations and sees the Nikkei moving into interesting territory. He believes the market may have been in a multi-year accumulation phase as professionals steadily built portfolios.
According to the analysis in the article, a sustained break above 11,500 would be a confirmation of a stronger uptrend. If the index then clears the 2007 high of about 18,100, it could signal an even longer accumulation phase and potentially open the door to much higher levels.
The article suggests that if the economy performs well and the market clears several resistance levels, Japan could enter a major bull market. One projection mentioned is stocks possibly reaching around 28,000, though that outcome depends on sustained economic and market strength.
A key risk highlighted is Japan's large fiscal stimulus — about US$224 billion (roughly A$217 billion) — combined with a very high national debt level (predicted around 237% of GDP in the article). High debt could constrain policy flexibility and present headwinds compared with other indebted countries like Italy or the US.
Historically, the best returns tended to come from buying near the market low. The article notes that after the post‑1989 low the Nikkei climbed about 227%, showing that patient, well‑timed entries around major lows can produce strong gains — though timing and risk management remain important.
An accumulation phase describes a period when professional investors quietly buy and build positions over months or years without dramatic price spikes. The article mentions a possible four‑year accumulation and even a potential 10‑year accumulation if certain resistance levels are breached, which would imply sustained institutional confidence.
No — the article explicitly states it is not financial advice. It presents historical data and technical observations, but everyday investors should do their own research or consult a licensed financial adviser before making investment decisions.
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