- JP225 cash index hovers below the 50-day SMA
- Geopolitical developments continue to affect sentiment
- Momentum indicators on the fence at this juncture
The JP225 cash index is trading higher today with the bulls interested in canceling out last Friday’s sizable red candle. It has been a strong short-term upleg from the October 4 low at 30,273, but the bulls need a new peak, above the September 15 high at 33,649, in order to stop the developing bearish pattern of lower lows and lower highs.
In the meantime, the momentum indicators are still undecided on the direction of the next leg in the JP225 index. The RSI is moving sideways, very close to its midpoint, and the Average Directional Movement Index (ADX) is trying to edge above its 25-threshold but the move lacks vigor. More interestingly, the stochastic oscillator jumped higher and above its moving average. However, it now appears to be slowing down, potentially reflecting that the current move higher might not have legs.
Should the bulls remain committed to continuing the rally, they would try to break above the 32,224-32,453 area, which is populated by the 50- and 100-day simple moving averages (SMAs), and the June 16, 2023 downward sloping trendline. If successful, they would then have the chance to make a higher high and potentially test the June 16, 2023 high at 34,006.
On the other hand, the bears are trying to build upon last Friday’s move. They could try to defend the June 16, 2023 trendline and then push the JP225 cash index below the 23.6% Fibonacci retracement level of the March 8, 2022 – June 16, 2023 uptrend at 31,764. Even lower, the busy 30.299-30,711 range could test the bears’ resolve again.
To sum up, the JP225 index bulls are trying to record a higher high but they are now facing a key resistance area without the support of the momentum indicators.
