nikkei 225 daily outlook fri 03 june 2016 maintain short term bearish bias below 16750 resistance 18

(Click to enlarge charts)

What happened earlier/yesterday

After hitting a low of 16440 in yesterday’s U.S. session, the Japan 225 Index (proxy for the Nikkei 225 futures) has started a slow climb upwards to print a high of 16628 (+1.14%) in line with the recovery seen in the major U.S. benchmark stock indices (S&P 500 has managed to close above 2100 after hitting an intraday low of 2089).

In  this morning session, 03 June 2016, the  Japan 225 Index has continued to show positive gains as it printed a higher high of 16708 despite a weaker than expected Labour Cash Earnings growth of 0.3% y/y for May versus a consensus of 0.9%. Interestingly, the rally has managed to stall right below the 16750 predefined short-term pivotal resistance highlighted in our yesterday’s short-term technical outlook/strategy.

Please click on this link to recap our previous daily short-term outlook/strategy.

Key elements

• The significant short-term resistance remains at 16750 which is the former pull-back support of the short-term rectangle range and now 38.2% Fibonacci retracement of the recent decline from 31 May 2016 high to yesterday low of 16440.
• The hourly (short-term) Stochastic oscillator is oriented to the downside and still has further room to manoeuvre before reaching an extreme oversold level.
• The significant short-term support rests at 16330 as defined by the minor swing low areas of 13/16 May 2016.

Key levels (1 to 3 days)

Pivot (key resistance): 16750

Support: 16300

Next resistance: 16990 & 17300

Conclusion

Maintain short-term bearish bias. As long as the 16750 daily short-term pivotal resistance is not surpassed, the Index is likely to shape another potential downleg to target the next support at 16300.

However, a break above the 16750 short-term pivotal resistance is likely to negate the bearish one to see a relief rally back towards the next resistance at 16990.

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