Mingze Wu | Aug 01, 2013 06:39AM ET
Well, that is unexpected. Even though we’ve mentioned yesterday that a bullish US GDP and dovish FOMC statement will have the off chance to send Nikkei 225 higher, the manner in which Nikkei 225 has rallied today is certainly surprising. First off, price didn’t gap higher, but opened at where we left off yesterday, suggesting that market isn’t exactly extremely bullish about the happenings in US, which would have translated into a morning gap higher if traders were indeed bullish due to overnight events. Price traded consistently higher without any significant pullbacks during the day. Hence it is not unreasonable to say that today’s rally in Nikkei 225 is purely based on the efforts of Nikkei 225 bulls alone, unassisted by anybody else. And the efforts of the bulls did payoff significantly – with price clearing the 14,000 ceiling at literally the last second of trade before Tokyo Stock Exchange closed.
Hourly Chart
Why the bullishness?
There isn’t any apparent reason for today’s rally, with the only plausible explanation being technical bulls wanting to fight back strongly following yesterday’s disappointment. Another plausible explanation could be the fact that Future prices did not really dip below the lows of 30th July, hence encouraging adventurous bulls to enter. One thing led to another, and price eventually broke the previous swing high of Tuesday, allowing for further acceleration towards 14,000. The slightly better than expected Chinese Manufacturing PMI also helped bulls to push prices higher (even though the numbers are highly suspicious).
It is reasonable to be unconvinced by this explanation. But if that is the case, perhaps we could see price falling like a brick eventually especially given the broad bearish momentum seen from the hourly chart.
Monthly Chart
Original post
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