NIKKEI225: Stocks Gain on Renewed Bullish AI Sentiment

Japanese stocks follow global stock markets higher as AI bets take the front seat over geopolitical concerns and monetary policy.

The NAS100 gained 0.80% at one point this morning and the NIKKEI225 was up by 1.95%. Investors are taking advantage of the stock market dip to place their money into the AI tech sectors.

Japanese households are also taking advantage of the dip that materialized after the BoJ hawkish policy at the last meeting on July 31. Retail investors seem to be taking the sharp drop in stock prices as an opportunity.

Individual stock investors bought a total of ¥481.8 billion of Japanese stocks between July 29 and August 2, which includes the 10% drop in prices after the central bank meeting. Retail investors can take advantage of tax-saving plans known as Nippon Individual Savings Account.

It seems that the average household is willing to hold on to their investments and ride out the selloff. While many are looking to get into stocks at a discount.

We know that sharp single day drops in price can force margin investors and some funds with strict rules to sell their holdings, worsening the rout.

Investors are putting Middle East tensions to the sidelines for now. The US government has warned Israel that a strike from Iran is imminent. However, it seems that those concerns aren’t in play for the time being.

Technical View

The chart below for the NIKKEI225 shows a bear market undergoing a correction. The recent selloff led the market into a bear trend. The dip to 30,694 on April 5, then gave way to a retracement.

The current candle is finding resistance at the Kijun Sen (crimson line), which also coincides with the resistance from a previous dip in April of 36,675 (green line).  The two indicators will create extra resistance, and I would expect a correction lower here.

To the upside, the market will find further resistance at 37,599 (red line), which corresponds to the dip that was followed by the all-time high. Should the market break that level the next resistance will be at 39,447 (purple line) and the bottom of the Ichimoku cloud.