It's worth considering making the first purchase. PBR・(Advance/Decline Ratio + RSI)・20-day moving average minus deviation rate, if there is a final push in the first half of next week, it would mark a bottom. Mr. Hiroshi Koya
Reassessing where stock prices stand,
"Data that makes you want to buy,"
A volatile week has ended. Yet the Dow Jones finished the week up 455 points from the previous Friday,
while the Nikkei Average fell by 393 yen. In comparison with NY, the Tokyo market's weakness stands out.
This means that despite the big drop, the rebound strength is weak.
At the moment, several indicators are showing data that occur only once in a few years, if at all.
After checking them, we'll examine where stock prices stand.
PBR (price-to-book ratio) 0.99x
Yesterday's PBR fell to 0.99x, below the seemingly solid 1x. In the seven years since 2013,
PBR 0.99x has occurred only three times: 2016-02-12 and 2018-12-25, and now.
During the Lehman shock, PBR fell well below 1x, but at that time Japan's corporate performance as a whole
was negative and shareholders' equity was eroded; although profits were down, the situation was different from today, where
profits are still positive (as of now).
Yesterday's after-hours low of the Nikkei Average was 20,210 yen; calculated PBR at that price would be 0.96x.
I do not think PBR below 1x will persist for a long time, but I believe a conclusion will emerge in the first half of next week.
I think so.
Advance/Decline Ratio (20-day) below 50%
The ratio fell below 60% for the first time since 2013, on the 14th. Of those days, four occurred from last week into this week. In the past 10 days, it has occurred around the lows almost all the time. Moreover, yesterday's 20-day advance/decline ratio was 48.9%, below 50%.
A break below 50% is the second time since 1/21/2016 (49.1%), and yesterday's level was the lowest in seven years.
Advance-Decline Ratio (20-day) + RSI (20-day) < 80
RSI is calculated as the rise in price divided by (rise in price + fall in price). It measures the magnitude of price movements within the period (here 20 days); in bottom zones it falls below 30 and can dip below 20.
Since 2013, there have been 70 days when the 20-day sum of (Advance/Decline Ratio + RSI) fell below 100, but among them only five days fell below 80, including yesterday, as shown in the table below.
The table below shows:
Advance/Decline Ratio RSI "Sum"
2016-01-20 50.5 20.1 70.6
2016-01-21 49.1 19.6 68.7 Low
2018-10-25 61.8 12.7 74.5
2018-10-29 58.4 15.7 74.1 Low
2020-03-06 48.9 19.3 68.2
The pattern of two consecutive days below 80, with the second day being the low, has emerged. Next Monday, it is expected to fall below 80. Whether the pattern of Day 2 = low persists remains to be seen.
20-day moving average minus deviation of 8% or more
There have been three days where the negative deviation against the 20-day moving average exceeded 8%.
2/28 – 8.75% 3/3 – 8.27% 3/6 – 8.49%
A deviation below 8% for three days in one week has occurred only three times: August and September 2015, and now.
From the three elements above—PBR, (Advance/Decline Ratio + RSI), and the negative deviation from the 20-day average—
it appears that a bottom is within reach. If there is a washout in the first half of next week, it could be considered the bottom, and if you plan to buy in three installments, the first purchase would be a good time to consider.
A volatile week has ended. Yet the Dow Jones finished the week up 455 points from the previous Friday,
while the Nikkei Average fell by 393 yen. In comparison with NY, the Tokyo market's weakness stands out.
This means that despite the big drop, the rebound strength is weak.
At the moment, several indicators are showing data that occur only once in a few years, if at all.
After checking them, we'll examine where stock prices stand.
PBR (price-to-book ratio) 0.99x
Yesterday's PBR fell to 0.99x, below the seemingly solid 1x. In the seven years since 2013,
PBR 0.99x has occurred only three times: 2016-02-12 and 2018-12-25, and now.
During the Lehman shock, PBR fell well below 1x, but at that time Japan's corporate performance as a whole
was negative and shareholders' equity was eroded; although profits were down, the situation was different from today, where
profits are still positive (as of now).
Yesterday's after-hours low of the Nikkei Average was 20,210 yen; calculated PBR at that price would be 0.96x.
I do not think PBR below 1x will persist for a long time, but I believe a conclusion will emerge in the first half of next week.
I think so.
Advance/Decline Ratio (20-day) below 50%
The ratio fell below 60% for the first time since 2013, on the 14th. Of those days, four occurred from last week into this week. In the past 10 days, it has occurred around the lows almost all the time. Moreover, yesterday's 20-day advance/decline ratio was 48.9%, below 50%.
A break below 50% is the second time since 1/21/2016 (49.1%), and yesterday's level was the lowest in seven years.
Advance-Decline Ratio (20-day) + RSI (20-day) < 80
RSI is calculated as the rise in price divided by (rise in price + fall in price). It measures the magnitude of price movements within the period (here 20 days); in bottom zones it falls below 30 and can dip below 20.
Since 2013, there have been 70 days when the 20-day sum of (Advance/Decline Ratio + RSI) fell below 100, but among them only five days fell below 80, including yesterday, as shown in the table below.
The table below shows:
Advance/Decline Ratio RSI "Sum"
2016-01-20 50.5 20.1 70.6
2016-01-21 49.1 19.6 68.7 Low
2018-10-25 61.8 12.7 74.5
2018-10-29 58.4 15.7 74.1 Low
2020-03-06 48.9 19.3 68.2
The pattern of two consecutive days below 80, with the second day being the low, has emerged. Next Monday, it is expected to fall below 80. Whether the pattern of Day 2 = low persists remains to be seen.
20-day moving average minus deviation of 8% or more
There have been three days where the negative deviation against the 20-day moving average exceeded 8%.
2/28 – 8.75% 3/3 – 8.27% 3/6 – 8.49%
A deviation below 8% for three days in one week has occurred only three times: August and September 2015, and now.
From the three elements above—PBR, (Advance/Decline Ratio + RSI), and the negative deviation from the 20-day average—
it appears that a bottom is within reach. If there is a washout in the first half of next week, it could be considered the bottom, and if you plan to buy in three installments, the first purchase would be a good time to consider.
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