JAPAN IS IN RECESSION, WILL NIKKEI GO DOWN?

Yesterday came an unexpected news from Japan that its economy dropped by 1.6%. In Q3 means officially Japan is in recession. In the prior quarter the GDP declined by 7.3%, which is the definition of a recession. After this disappointing news the Nikkei suffered its biggest one-day tumble closely 3% this year. Due to this recession anxiety the US markets stayed flat, which is not a real bad news in terms of sentiment. This means Nikkei will go down and we should sell? I doubt that. I would say the opposite of that.

Tonight the investors almost deleted the whole Monday loss and Nikkei gained 2.2%. The world’s third largest economy recession not really scared the investors for more than 24 hours. It is a good sign for more gains. Don’t forget the Main Street and Wall Street they are not walking hand in hand, the stock markets can perform really well against the ugly fundamentals.

Monday Japanese Prime Minister Shinzo Abe called for tax cuts and cash handouts as part of a stimulus package valued at more than $25 billion, which would mean more demand for stocks.

The Nikkei this year on YTD performed really well, and just broke out from the huge triangle pattern in October, so the long side is widely opened for more gains technically.

The BFM Assets Team.