The JP225 cash index is hovering a tad below the all-time high of 32,705 as the bulls have successfully managed to limit the bearish pressure. It has been an explosive 32% rally from the March 15, 2023 low with almost no corrections taking place. The move appears to be overstretched and maybe a small pullback could be welcomed by both sides.
The stochastic oscillator is confirming this overstretched nature as it continues to trade at its overbought (OB) territory, hovering around its moving average. A break below its OB area would clearly be seen as a bearish signal. In the meantime, the Average Directional Movement Index (ADX) is still pointing to a bullish but gradually weakening trend.
If the stochastic indicator delivers a bearish signal, the bears would quickly like to break the 31,349 level and target the busier 30,711 area set by the February 16, 2021 high and the 23.6% Fibonacci retracement level of the March 8, 2022 – June 7, 2023 uptrend. Even lower, the 29,572-29,705 range would probably be the first true test of the bears’ resolve.
If the bulls decide to ignore the mixed technical signs, they would aim at retesting the all-time high of 32,705. If successful, they would have the chance to record higher highs with 33,000 being the first step.
To sum up, the JP225 index bulls are preparing for a higher high. However, they seem to understand the need for a short-term correction following the aggressive rally since the March 15 low.
