Oh Nikkei You're So Fine...

...or not.

THAT'S WHAT A BEAR MARKET LOOKS LIKE !!!

And there is no sign that it is over yet. OK, maybe the daily chart suggests that it is a little oversold at the moment, but all of the longer time frames look like they are ready to plumb new lows. The 7,000 level will need to hold or else there will be NO support for this market. Whatever levels below 7,000 may have been support are so old (from the 80's or even the 70's) they are meaningless. If the Nikkei breaks below 7,000 and then rallies back above that level AND holds, that will be a BIG reversal. But that is conjecture. It hasn't happened yet. An equally likely scenario is that the market plunges to new depths if 7,000 does not hold. Hard to imagine that after already suffering an 82% decline there is the possibility that the market could drop 50% from HERE. But this is a distinct possibility that should not be dismissed.

More importantly for the US (and the world since the US economy is the center of global economic activity) this could be an important example. We are in a similar condition to Japan circa 1996. The stock market had dropped sharply (-65%) and rallied strongly (+50%) off those lows. Interest rates had been cut to exceptionally low levels, 0.50% in 1996 Japan. Government debt was at a similar level (80% of GDP) and would more than double in the next decade. By 1996 prices had already fallen more than 5% based on wholesale CPI index. The differences are the Japanese still had a savings rate above 10% in 1996 and they had a trade surplus. We have exactly the opposite condition. That will reverse. But it will be painful.

Finally, a long-term chart of the the Nikkei in log scale for those of that persuasion.