Momentum to push through new highs

Comparison of Three Scenarios for New Highs

The Nikkei Stock Average rose to new intraday highs for six consecutive sessions from the start of the year.

The strength to push prices to new highs is evident in the number of new highs. The cumulative number of new highs over the past 20 days is 3,829, which averages 191 per day, and when including other indicators over the past four years, the momentum is comparable to the peak reached in May 2013.

In the past four years, this is the third time the market has pushed up to new highs in this manner. We compare the scenes where the number of new highs peaks against the previous two instances.

(Average until the number of new highs peaks)

Number of new highs　 2013　　 2015　　 2016

Peak date　　　05/22　　03/17　　12/15

Number of new highs　　　　 309         197         191

Trading value         3.31       2.56        2.78

（Trillion yen）

Advancing-Declining Ratio 130.1     129.7     151.6

（％）

RSI             80.7       82.7        89.2

Magnitude of increase         2,310       1,449     1,411

（yen）

（Note 1）Data are the average over one month up to the peak in new highs

（Note 2）RSI = increase amount ÷ price range, calculated over 20 days

（Note 3）Increase amount is compared to 20 days earlier

Peak of new highs ≒ high stock prices

The three scenarios above each have their own characteristics.

In the current case, the high level of the RSI has persisted. This indicates that rotation among sectors is functioning well. Additionally, RSI remains high. Over the period, days with declines are few, and even when declines occur, they are limited to modest drops.

In the past two occurrences, the peak in the number of new highs coincided with the high of the stock price.

The May 2013 case had the cumulative number of new highs peak on 5/22, which was the market’s top; and last year, the high price was reached on the fourth day after the peak in the number of new highs.

At present, the five-day average of the number of new highs peaked at 271 on 12/12. The upside momentum may be weakening.

With foreign investors, who have been driving the stock price higher, going into the Christmas break, trading may slow next week. Looking ahead, we should anticipate a short-term difficulty in prices.

I would like to consider this on a short-term basis.