There is a sense of overheating, but the market’s feverishness also remains.

Hot market

As indicators for measuring market warmth, useful as

follows

Market activity (trading value)

Breadth of stocks (advance/decline ratio)

Strength of price uptrends (number of new highs)

and others.

One-month average trading value is 2.79 trillion yen, clearly different from the days when it hovered around 2 trillion yen in August-October, which saw more frequent down days.

It is evident that it is supporting the uptrend, but more than that, it signals the current market’s heat through the strength of stock picking.

Fulfilling the condition for a sustained bullish market is likely, and the high level of the advance/decline ratio continues to indicate a high level of market enthusiasm.

A high level of the advance/decline ratio is considered a prerequisite for a durable market.

The one-month average advance/decline ratio staying above 120% seems to be a necessary condition for the market to stay firm.

(Period when the one-month average advance/decline ratio is above 120%)

120% or more Days Peak

10/17–11/02 13 days 10/31 151.8%

11/10–12/07 19 days 12/07 145.5%

Excluding adjustments before the presidential election, it has become a two-stage rocket-like uptrend. Since mid-October the uptrend has continued, which is also evident from the three-month average of the advance/decline ratio staying above 120% for three weeks.

This is, since May 2013, the first time to reach such a level in about three and a half years, since the first peak of the Abenomics era.

The number of new highs is also at a level comparable to last June’s peak.

The 20-day cumulative count of new highs is 3,040 (about 152 per day), exceeding 3,000 for the first time since last June’s peak.

The power to push prices higher is as strong as at last June’s peak.

In the short term, there is also a sense of overheat.

There is a possibility of price chasing highs remaining.

From the perspective of the advance/decline ratio and the number of new highs, the near-term outlook is overheated, but if the one-month average advance/decline ratio stays in the 120% range and the number of new highs holds around 150, there remains a chance for another high attempt.

Today, both the one-month average advance/decline ratio and the one-month cumulative number of new highs are expected to reach yearly highs.

Even if overheating peaks, there is a rule of thumb that prices can maintain gains through residual heat.

The dollar-denominated Nikkei Average remains steady, and at the current pace, the Nikkei average rises to reflect the yen’s depreciation.

From that perspective, since it first crossed the 114-yen level on November 30, the yen’s depreciation has paused, which is a point of concern, but we expect a continued high-range consolidation.

With that as a premise, I would consider making investments.