What lies behind the stock price rise since October and its sustainability — KōHiroshi Arano's "From the Technical Room"

Delivery date: 2016/10/22 08:02

“Broadening of issues” and “Relative decline in selling pressure” were the main factors behind the stock price rise


This week, the Nikkei Stock Average rose above the May 31 high and reached its highest level in six months. Looking at the background of the rise, it can be summarized into three points. First, there was “broadening of issues” (i.e., rise in the turtling-to-advancing ratio); second, a relative decrease in selling pressure; and third, a large net buying by overseas investors in combined futures and cash markets. The weekly状況 is shown below.








(Weekly basis gains and growth rate)
~10/07 ~10/14 ~10/21
Gains: +410 yen ▲ 3 yen +328 yen
Gains rate: +2.49% ▲0.0% +1.95%

The gains occurred in the first and third weeks, while the second week was flat. In the second week, the number of advancing issues was almost the same, and the short-selling ratio did not change from the previous week. This was a factor limiting the price rise, but what deserves attention here is that overseas investors bought a total of 182.3 billion yen in futures and cash, yet did not contribute to the rise in stock prices. It has also been seen in other weeks that unless overseas net buying exceeds around 1 trillion yen, it does not trigger a stock price rise.










(Overseas investor net buying/selling)
~10/07　　 ~10/14
Cash:　　 280.5 billion yen 113.1 billion yen
Futures:　 487.3 69.2
Total:　　 767.8 182.3
(Note) Futures are TOPIX + Nikkei 225 (including mini trades)

(Broadening of issues)
~10/07 ~10/14 ~10/21
Turtling-to-advancing ratio 169.4% 99.9% 174.8%
Advancers 1,154 927 1,168
(per day)
Decliners 681 928 669
(per day)

Currently, the 1-month moving average (MA) turtling-to-advancing ratio
has exceeded 140% (10/18 140.6%, 10/20 145.4%) for the first time this year.
In 2015, only five trading days saw a 140% level; the two days in February (2/19 141.7%, 2/20 146.2%), and October for three days (10/23 145.6%, 10/26 140.8%, 10/28 149.5%). From these data, the rise in stock prices is approaching the limit of the turtling-to-advancing ratio to a certain extent.

(Short selling ratio, weekly average)
~10/07 ~10/14 ~10/21
Short selling ratio 37.3% 37.9% 37.8%
Week-on-week change ▲3.0% +0.6% ▲0.1%



The average short selling ratio since the beginning of the year is 39.9%,
and the 37% range this month suggests the selling pressure is relatively easing, contributing to the stock price rise.






The 5-day MA short selling ratio has remained in the 30% range for 14 consecutive days.
It seems unlikely that selling pressure will ease further, so attention is on whether the 30% range will continue.



Sustainability of the upward factors

Among the factors driving this month's stock price increase, the rise in the turtling-to-advancing ratio is near its limit, and further decreases in selling ratio are becoming difficult. At the moment, assuming there is no big overseas net buying like in the first week of October, this month's rise seems to have progressed to a fairly high level. The range of 16,500–17,000 yen seems to have risen by about 300–500 yen due to this month's gains. Even if the stock price stops rising, the downside is not expected to be significant, and a firm trend is anticipated.





Thus, the impact of this month’s rise appears to be sustained.