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Tuesday, November 11, 2014

Beware of the "Abe" Rhetoric

As I reported in this recent post on Japan's Nikkei Futures Index, price has entered "froth" (major resistance) levels seen in the beginnings of the 2007/08 financial crisis. As of tonight (Tuesday), price has held above the "line-in-the-sand" level of 16,666 and is now trading at 17,325, as shown on the Weekly chart of NKD below.

Beware of speculation that Prime Minister Shinzo Abe may be "considering dissolving parliament to shore up support," as reported today in this Bloomberg article. This report may have simply been released to stir up emotions in the market place to lure short-sellers into the mix at these critical levels.

Volumes spiked on November 4th after retreating from a high of 17,480 set on the 3rd and have been subdued since that day (including today). Watch for a climb and hold above 17,480 to the next confluence resistance level of 18,365...if we see a build in volumes approaching that level, we may see a continued push above resistance...if not, or if volumes decline, this may signal that a formidable decline is imminent somewhere in between 16,666 and 18,365 down to, potentially, 15,000, 13,700, or 12,600 (or even lower). In any event, we may see increased volatile and large overnight and intraday swings occurring in between those levels for awhile until a firm direction is established.

In my opinion, a rejection of the Nikkei at these levels is a rejection of Japan's economic recovery and Prime Minister Abe's policies...negative effects of such a rejection may very well spill over into the U.S. and European markets.

No doubt, markets will be awaiting any "new" news or promises from the upcoming joint Fed-ECB conference in Washington on November 13th. UPDATE November 13th: no new news, as reported by Nasdaq.com.