The JP225 cash index is edging higher today, a tad below the May 1, 2023 print of 29,352, which is the highest traded level for 16 months. Despite the aggressive rally since the March 15 low, the bulls seem to be still hungry for higher highs even though the momentum indicators are sending mixed signals.
While the Average Directional Movement Index (ADX) appears to be stabilizing at decent levels signaling a bullish trend, the stochastic oscillator has broken below its overbought territory. It is now testing the resistance set by its moving average (MA) and the next move is key for market sentiment. A failure to break above its MA could be perceived as a strong bearish signal.
Should this be the case, a retest of the January 14, 2021 and March 29, 2022 high at 28,976 and 28,649 respectively will come first. The busy 28,394-28,399 area, defined by the 61.8% Fibonacci retracement level of the September 14, 2021 – March 8, 2022 downtrend and the June 9, 2022 high, would then come into play.
If the bulls decide to ignore the mixed technical signs, they will most likely have another go at the crucial 29,229 level. The path appears to be clear then until the 29,967 level set by the November 16, 2021 high.
To conclude, JP225 index bulls seem ready for a higher high, but the market appears to be extra fragile. A bearish move from the stochastic can quickly turn the sentiment in favour of the bears.
