nikkei 225 daily outlook thurs 17 mar 2016 maintain potential bearish stance noise below 17180300 re

(Click to enlarge charts)

What happened yesterday/earlier

In our previous short-term daily outlook/strategy published on Wed, 16 March 2016 (click here for a recap), the Japan 225 (proxy for the Nikkei 225 futures) has traded sideways in the U.S. session which was just above the 16870 downside trigger level (printed a low of 16886).

In this morning, 17 March 2016 Asian session, the Index has spiked up towards the 17180/300 short-term pivotal resistance as market participants digested yesterday’s dovish U.S. Federal Reserve’s rhetoric.

The Fed’s  median updated interest rate hike projections has been reduced to only 2 rate hikes for this year versus an expectation of 4 hikes set in the December 2015 meeting.

The Fed “dot plot” of interest rate projections will be updated every quarter and the next projection will be released in the 14/15 June 2016 meeting. In yesterday’s concluded meeting, market participants are expecting a reduction in the projected interest rate hike to 3 rather than 2 for 2016 and the more dovish tone is due to weaker global growth and heightened risks from the recent financial market turmoil in early February.

Key elements

• This morning spike up in price action has managed to stall at the 17180/300 short-term pivotal resistance that has been highlighted in yesterday’s outlook/strategy.
• The daily (medium-term) RSI oscillator is still showing no clear signs of a revival in upside momentum as it continues to trace out a bearish divergence signal. This observation is still supporting a bearish scenario that the countertrend rally cycle from 12 February 2016 low is coming to a potential end where the Index is likely to shape a decline (retracement) at this juncture.
• The first short-term support to watch remains at 16870 which is defined by the lower boundary (support) of the ascending channel in place since the start of the countertrend rally from 12 February 2016 low.

Key levels (1 to 3 days)

Pivot (key resistance): 17180/300

Supports: 16870 & 16500

Next resistance: 17500/700

Conclusion

We are maintaining our bearish stance on the Index as the short-term pivotal resistance at 17170/300 has not been taken out and considered this morning’s rally in price action as a “noise”.

A break below the first support at 16870 is likely to trigger a further potential decline to target the next support at 16500 in the first step.  On the flipside, a clearance above the 17300 short-term pivotal resistance is likely to negate the expected bearish tone to see a “squeeze” up to target the 17500/700 resistance.

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