The Japanese Nikkei 225 index almost reached the 21 000 mark a year ago – in June 2015 – but it was not meant to be. Instead, the bears took the wheel and just 8 months later – in February 2016 – the index was down by more than 6000 points to 14791. It is currently hovering around 16670 so now seems to be a good time to see what the charts have to say about the future prospects of the Nikkei 225.
It is true that the decline to 14 791 could be seen as a three-wave A-B-C zig-zag. The problem is that the following recovery to 17 759 seems to be corrective as well. That is why, instead of a corrective pullback, we believe the weakness from 20 951 should be counted as a series of first and second waves. According to the Elliott Wave Principle, wave 3 of (3) of (III/C) to the south should be expected soon. The third wave is the most powerful and violent phase of the impulsive sequence. So, if this is the correct count, things might get very unpleasant for those, who are still bullish on Nikkei 225. Now does not seem to be the right time to “buy the dip”.
