Update on Nikkei: Jan 20, 2022

In our last update on NKD [see: Nov 30 Update], I somewhat snarkily disparaged the index’s legitimacy.

The Nikkei 225 is less a securities index than it is a measure of how much intervention the Bank of Japan feels like throwing its way. It’s what the Dow aspires to be when it grows up.

At the time, NKD was approaching a trend line connecting five recent lows, none of which had quite backtested the obvious Fibonacci support at 26,463. It was also backtesting a TL connecting recent highs.

As the chart above shows, NKD is backtesting a TL off the Feb 16, 2021 highs. This could be all we get, as the BoJ dislikes anything smelling like a correction.

As it turned out, the low that day was all we got. NKD rallied into year end, putting in a respectable +5.1% return for 2021 versus the 1.2% losses which would otherwise have occurred. Japanese “investment” managers no doubt cheered the rally, just in time for bonus calculations.

The rally left a bad taste, though, and I left the 27,156 target where it was – partly for spite and partly because the BoJ’s pathetic manipulation has become laughably predictable. Guess where NKD just tagged?

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