$Topix100 -break out?Seems the Japanese market is breaking out after a lengthy consolidation hitting both lower and higher boundaries of the pattern multiple times, third time lucky?
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🏯 TOPIX FUTURES: JAPANESE BULL SAMURAI IS STILL ALIVELegendary investor Warren Buffett was on a trip to Tokyo, the capital of Japan, two months earlier in mid-April 2023, and the titans of the country's giant energy and commodity conglomerates were there to make their presentations.
As usual, over glasses of Coca-Cola NYSE:KO - one of Buffett's most famous investments, they walked into Warren Buffett's suite at the luxury Four Seasons hotel and individually told the 92-year-old American investor the same thing: Japanese trading houses are cheap and should accelerate their move beyond commodities.
The support of the Oracle of Omaha is an important vote of confidence in the big five Japanese trading houses - Mitsubishi Corporations TSE:8058 , Mitsui TSE:8031 , Sumitomo TSE:8053 , Itochu TSE:8001 and Marubeni TSE:8002
It's also a broad endorsement of Japan, that is considered to have outlived its heyday 30-35 years ago, as well as considered less relevant than Asian counterparts such as China and India.
But there's one big question: Is Buffett betting on phasing out fossil fuels, the trading house products themselves, or a combination of the two? Or something else, like impact of the weak yen!?
Buffett's Berkshire Hathaway NYSE:BRK.B reported in August 2020 that it had acquired about 5% of the shares of five trading houses, that sent their stocks up and raised their total investment value above $6 billion. When the Covid-19 pandemic dampened demand for goods, it pushed down the value of company stocks, four of which traded below book value.
“They were selling, I thought, at a ridiculous price,” - Buffett said to CNBC in March 2023.
Three years after the Covid-19 pandemic (that is now hardly remembered) Warren Buffett's bets on Japan have nearly tripled to over $17 billion.
But even this Growth does not stop Buffett. Staying in Tokyo this spring, Buffett confirmed intentions to buy more shares, and participate in more big deals.
In addition, Berkshire recently unveiled plans to issue its own yen-denominated bonds, which help hedge against the depreciation of the yen against the US dollar as well as depreciation of Japanese stocks in dollar terms.
The technical main chart is dedicated to futures on the TOPIX index TSE:TOPIX widely known, along with the Nikkei 225 index $TSE:NKY .
The TOPIX index is an important stock market index for the Tokyo Stock Exchange (TSE) in Japan, tracking all the local companies of the TSE Prime-market division.
Buffett's mission to Japan marked, as it easy to find in the technical picture of TOPIX ( TSE:TOPIX ) - a significant moment, as a result of the breakdown of the key long-term resistance, with the prospect of further more than doubling the index TSE:TOPIX and its market value.
Equity Markets Top OutIf there is ever a chart that gives you the best equity warning signals in modern financial history, the Topix has got to be it as the 1.8k/2k level has preceded all major turning points. Couple of other warning signals for this cycle:-
-> The collapse of bond prices, $ZB has broken down from a bear flag which implies interest rates are on the rise again. All these talk of whether if the current inflation is transitory or permanent is just a distraction, the fact remains lots of fiscal stimulus is being pumped into the real economy (versus the Fed's funny money which stays on bank balance sheets as reserves) and the US is a twin deficit economy. So don't take Japan's experience with deflation as the default template; Think more Latam.
-> $EURUSD has broken out of a > decade long downtrend. That is significant and expected as interest rate parity tells you currency of a high yield economy gets sold therefore we are definitely in a weak USD environment. This creates a nasty feedback loop into inflation as every other commodity is priced in the USD and the US is an import economy (only major exports are agriculture-based) so as rates go higher, USD gets weaker and inflation goes higher.
On a side note, I would not go chasing after commodities as an inflation hedge for now. Commodities have largely priced in the weaker dollar and have surged so much that narrative switches to potential oversupply and demand destruction. Quick scan of hard and soft commodities shows significant tops being put in with lower highs or exhaustion tops. This is not a demand driven commodity super-cycle so at some point, producers are just going to forward hedge their production en-masse and factories will slow purchases and find alternatives.
Other things to think about:-
-> retail margin is back at extreme levels and as assets with conceptual earnings (eg. BTC, Telsa etc) get sold, watch out for margin calls.
-> The Indian Covid-19 variants are extremely contagious and most probably airborne. As I am given to understand, there are still 4 daily flights between the US and India, domestic air travel in the US is at peak levels while large parts of the US remain resistant to safe distancing protocols. These combined is a bad cocktail mix that the market has not priced in.
Helmets on, as usual, happy hunting and stay safe.
The Honey Badger Market: Japan, time to take money off the tableThe last time I did a chart series was in mid-Mar warning of a bounce in the markets. Since then, markets have been on a tear and behaving somewhat like a honey badger, it doesn't care if there are still 1,000 daily Covid-19 deaths in the US, race riots and Trump reigniting the Sino-US trade wars. Maybe markets are optimistic there are only 5 more months of Trump-induced madness and you never bet against an election year and a Fed with a printing press.
Perhaps, maybe, if, but I prefer to let the weight of the evidence influence my course of action. So here goes...the Honey Badger Market chart fest!
Chart fest" Bad news and good news 4/7Having some away from markets and want to shoot out some charts.
The bad news is, on a long-term basis, markets are just starting to break down.
The good news is, in the short-term, markets are testing long-term support and could mount a significant relief rally.
Japan has already broken down from the Abenomics and Kuroda Bakooka trend line, I would expect a retest of the trend break before we get a big move down.
Time GuesstimateWe are in a bullish trend now. Then...
Down(or up) trend after the time target based on the wave analysis
The preponderance of evidence: Topix, 1800 is magical?This is part of a series of charts which I will posting for the reader to make up his/her mind based on the weight of the evidence.
Do note, these are weekly charts which means the implications of which will occur over the next 12, 18, 24, 36 months.
Topix - bullish countThe Japanese Topix is certainly in an interesting place right now having just crossed two lines of major resistance. As ever with Elliott Wave there are lots more ways I could have placed a count in this chart but I am going with this one for now as my preferential count.
