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I am a great fan of the ProfitSource ‘walk through’ tool. Well yes you can walk back in time and see how useful indicators were at the time in the sense of giving us a guide for the future. There are really few, true predictive tools or indicators in reality. One of the few is of course the Elliott Wave. And it is always useful to step back and see how Elliott was making the call at the time.
Today we look at the Nikkei.
When I first went to Japan 30 years ago I was so impressed at its super efficiency, its negotiation prowess, its business process and methodologies. Some of you may recall ‘Just In time’ – JIT - which emerged out of the Japanese motor industry back in the 60s. I was definitely still at school then.
‘Just in Time’ was a stock/parts delivery system whereby stock was delivered just before they were needed meaning there was no stockpiling behind each stage of production. It has saved trillions over the decades and was a system adopted in numerous parts of the world. The recent earth quake and radiation fall out caused mayhem in the motor spare parts when production of vital parts – often small – shut down factories in Japan and other parts of the world. The JIT doomsayers won their point albeit briefly.
But lets look at the Nikkei:
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A plain line chart – so powerful – tells a story - dramatically. It is a 20% of its zenith late 80s.
So the latest tsunami/earthquake was the last thing that was need for this besieged economy. An economy that had become a victim of its own success – deflation, decreasing domestic demand, increased competition from Asian markets in their target export market and a firming yen making export very tough anyway.
Some thought the Nikkei was finally on the crest of a new wave before the earthquake hit:
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And then…
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But if you go to the pre earthquake chart you will see an exhausted run up – the end of many wave five highs over many years.
It really was just a tease – just more range trading:
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Where to for the Nikkei? – maybe just further down at worst and range trading at best.
Enjoy the ride
Tom Scollon
Chief Analyst |