click for ginormous chart
Nikkei 20 years
Source: Kimble Charting

 

Awesome chart from Chris Kimble showing the Nikkei going back to 1982 — in particular, the downtrend that began in 1989 and still persists to this day.

Chris notes that Declines of 32% to 60% taken place at this level for the past 20 years!

One would normally expect a pullback and consolidation after a long move up to a major trendline, and under pre-Abenomics stimulus, that would be my highest probability outcome (pre-stimulus, I have no idea!).

The key here is if and when the Nikkei breaks through that trendline, it is likely the beginning of a longer term multi-year breakout. This is why we put on Japan exposure for clients much earlier this year.

 

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Disclosure: Clients are long GAL, DXJ, which have substantial exposure to Japan.

Category: ETFs, Investing, Technical Analysis

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

13 Responses to “Nikkei Downtrend (1982-Present)”

  1. stephenknapp1 says:

    Buy the dip and pack a lip.

  2. PeterR says:

    The steepness and rapidity of the recent rise looks suspect IMO. Can the Nikkei data be correlated to inflation, currency rates (Yen, US Dollar, Euro, Chinese Yuan, etc.), or something else?

  3. Willy2 says:

    Ah, but that assumes that “Abenomics” will work and – IMO – there’s no chance on god’s green earth that this will happen, that Japan will be able to defy the laws of gravity/deflation. If “Abenomics” would work then why did the other japanese stimulus programs in the 1990s fail ?

    From 2000 up to say 2007/2008 Japan benefited from the rise of China but it didn’t reverse the deflationary trend, it only helped japanese companies to deleverage MORE.

    Something similar happened after 1918. WW I led to a surge in demand for japanese and US made military related goods (arms, uniforms, etc.). After WW I, when that european demand vanished into thin air, the US went through an extremely short but severe deflationary burst. But Japan kept fighting to prevent that deflationary trend tooth and nail. It didn’t help anyway because the result was that in 1927 the japanese stockmarket completely collapsed. (Source: e.g. Hugh Hendry, Thomas Woods) And that collapse led to the rise of the japanese military. When one applies that to the current situation in the US then that doesn’t bode well for the US, doesn’t it ??

    In that regard the US & Japan are today repeating exactly the same mistakes of what happened in Japan in the 1920s.

  4. catclub says:

    Is it standard to chart with a log vertical scale? Why?
    Chemists or physicists do it because something has exponential behavior.
    Is there some theory in charting that requires it? A quick look at the web site showed some linear and some log charts.
    This chart would obviously look different with a linear scale, since a straight line on a log scale is
    a curve on a linear scale.

    • On longer temr charts, yes, absolutely

    • ZevCapital says:

      Log scales are used when you are plotting a large range of numbers. It isn’t due to exponential behavior per se, but it has to do with the large differences in numbers when dealing with exponential data sets. Long-term charts of Dow, for example, can range from 50 to 15,000. Log scales help us visualize the small numbers as well as the big numbers. (I’m a physical chemist by training)

  5. ancientone says:

    To answer Willy2, the previous stimulus programs didn’t work because they were ended too quickly. It has to be done until the economy “catches fire” and keeps growing on it’s own.

    • Willy2 says:

      The reason the stimulus in Japan didn’t work was that housing prices have come down some 50 to 70% since 1989 and they seem to keep falling. And a falling yen doesn’t help either because it leads to more price inflation and that in turn makes it harder for japanese to service their debts. Leading to more defaults and more credit destruction (=Deflation). Japan after 1989 didn’t completely collapse because they were an industrial & export power machine that kept exporting to the rest of the world. But now that demand is waning it’s “game over” for Japan as well.

  6. This is a good reminder that the nominal 17 year secular bear markets can run significantly longer than 17 years. Japan is up to 24 years now… it’s only the 13th year for the U.S.

    Personally I take “trend lines” on long-term charts with a grain of salt.

    Finally, folks, remember that the Nikkei’s recent rise, like the S&P’s is just a form of leveraged credit creation by the monetary powers that be. When central banks print money, some buyers are willing to pay a higher price to some sellers — but — EVERYONE’s portfolio rises in nominal value, creating faux “wealth” which is multiples of the credit used in the actual transactions… and the levered-up asset “valuations” allow asset-holders to borrow even more credit on the margin, or do all kinds of other things. It’s a lovely picture for all who participate, but only temporarily.