From a technical perspective, the 17-year market

Judging the trend from the mid-term line

The market’s trend is judged by the slope of the mid-term line. Notably,

the mid-term lines are the 3-month line, the 100-day line, and the 6-month line.

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Among them, the 3-month line and the 100-day line bottomed on August 26 of last year,

and one month later, on September 26, the 3-month line and the 6-month line

made a golden cross, confirming that the market had entered an upward trend.

As of the end of last year, the stock price was about 15% higher than three months earlier,

the slope was steep, but after some quick adjustments, the stock price is expected to be in an upward trend in the first half of the new year.

Annual range is about 4,000 yen

The annual range for the past three years is as follows.

Year 2014: 4,025 yen

Year 2015: 4,072 yen

Year 2016: 4,542 yen

There is no guarantee that what happened for three consecutive years will continue into the fourth year,

but even calculating the annual change, it remains in the 20% range,

making it a reasonable estimate for annual movement. If last year’s year-end price (19,114 yen) is used as the baseline,

the maximum would be 23,000 yen and the minimum would be

15,000 yen.

From the assumption that the trend is “up” as described above,

if you allocate 4,000 yen to “up” and 1 to “down,”

the range becomes 22,000 to 18,000 yen.

Turning point is the April–June period

After the market bottoms, the 3-month line and the 6-month line cross upward in a golden cross,

and the uptrend is confirmed. The market in 2012, 2014, and 2016, from bottom to the following year, has sides of peak and bottom

both occurring in the April–June period. This implies that the time from bottom to peak is almost about one year.

If the low of last year is taken as a baseline for one year, the first half of the New Year market is expected to be sturdy.

If you apply an upside of 7,000 yen, the high target would be

High: 22,000 yen.
Low High Increase

12–13 years 8,295 15,627 +7,332

(6/04) (5/22)

14–15 years 13,910 20,868 +6,958

(4/14) (6/24)

Profit growth is returning

The actual earnings per share (EPS) for the Nikkei Average over the past five years are shown below.

End of May 2012: 449 yen

End of May 2013: 620 yen

End of May 2014: 1,035 yen

End of May 2015: 1,133 yen

End of May 2016: 1,102 yen

May values are the figures as of the time when the March quarter earnings announcements were finished.

Profit increased sharply in 2012 and 2013, then in 2014 the growth rate slowed to a rise of less than 10%,

and in 2015, due to further yen appreciation in the latter half, the profit fell by about 3%.

As of the end of last year, a growth of about 5% was expected. For the next fiscal year, a growth rate of about 10% is anticipated. If converted to the Nikkei Average basis, EPS would be about 1,300 yen.

Judging from the profitability and growth potential of Japanese stocks, the estimated fair value P/E ratio for Japanese stocks is around 15 times. If you consider fluctuations up and down, the range for the P/E ratio would be 13.5–16.5 times.

With EPS of 1,300 yen and assuming a P/E of 16.5, the share price would be around 21,500 yen.

The assumed range for the Nikkei Average as of 2017 is

High: 21,500–22,000 yen

Low: 17,500–18,000 yen