Mastering the Market with Ko no Kōya's Market: Enjoying the Market｜Episode 4 [Kōya Ko no]

Hiroshi Aragane Profile

After joining Nippon Kanyo Kado Maru Securities (now Mizuho Securities) in 1971, he worked as an analyst in the research department. After a stint in the United States, he consistently conducted information and market analysis on Japanese stocks. In 1996 he transferred to an asset management company (now Asset Management One), served as Director of Research, Director of Operations, and later held the post of Executive Managing Director and Head of Investment Trust Operations. He retired in 2012. Since then, he has been active on TV and radio. His experience in market analysis focused on Japanese stocks spans nearly half a century.

Newsletter:https://www.gogojungle.co.jp/finance/salons/8812/

※This article is a reprint/edit of FX攻略.com June 2020 issue. Please note that the market information written in the text differs from present market conditions.

This month’s issue focuses on the phenomenon evident in the Tokyo stock market undergoing a “record-breaking” bear market, the actual dynamics of stock price volatility that influence price rises and falls, and the historically low price-to-earnings (or price-to-book) ratios, in order to provide an overview of how to view the current stock price position.

A Bear Market Aiming for Record Low

Several indicators are showing phenomena that occur maybe once in ten years, and all of them appear only near the bottom. To list them: ① number of new lows exceeding 1,000 ② negative divergence rate against the 20-day moving average of 10% or more ③ 50% collapse of the 20-day moving average of the advance/decline ratio ④ 80% of the (advance/decline ratio + RSI) calculated over 20 days ⑤ price-to-book ratio (PBR) below 1.0—

From these data, stock prices appear to be at the bottom, but the 1-year moving average line that turned downward at the end of February (21,969 yen) remains below. The downward pressure of long-term moving averages is strong, and there is a concern that the bottom-phase movement may continue for a longer period. Therefore, I would like to look at the details of the data mentioned above. (Data as of March 19)