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  • JP 225 index plummets to 10-month low amid global stock meltdown

  • Oversold signals detected; but bulls could show up above 33,585

 

Japan’s 225 stock index (cash) started the month on the wrong foot, sinking by a massive 21% to a 10-month low of 30,361 in the wake of recession fears in the US and as the bruised yen finally entered a bullish cycle.

Technically, the index suffered its sharpest correction below its 200-day simple moving average (SMA) since the pandemic, reaching the lows from October 2023 before closing the day around 33,336. The latter overlaps with the 161.8% Fibonacci extension of the April-July upleg, which is currently buffering downside pressures.

However, for the index to run towards the 35,470 barrier, the price might first need to overcome the nearby resistance line at 33,585. Even higher, April’s low of 36,692 and the 200-day SMA could block the way towards the 38,000 psychological mark.

According to the RSI and the stochastic oscillator, the market is hovering near oversold levels. Hence, the bears could soon get exhausted. Nevertheless, a close below the 33,130 region could postpone any recovering attempts, shifting the spotlight towards the ascending trendline which connects the 2020 and 2023 lows at 31,400, although the line was unable to stop Monday’s freefall. If selling forces persist, the price might revisit the October double bottom area of 30,300. The 29,300 region could be the next pivot point.

In brief, Japan’s 225 index erased all its progress from late 2023 in short-period of time and some recovery could be justified given the oversold signals. Still, selling interest may not evaporate in the coming sessions, unless the price manages to step above 33,585.