The Nikkei 225 index has suffered a dramatic decline, plummeting more than 25% in less than a month and reaching a nine-month low near the psychologically important 30,000 level. This sharp downturn has sparked concerns about a potential bear market.
Several factors have contributed to the bearish sentiment. Negative news from the U.S. labor market has heightened recession fears, while the Bank of Japan’s interest rate hike to support the weak yen has added to the downward pressure.
Previous analysis on July 15 had indicated signs of weakness in the Nikkei 225, with an expectation of a potential breakdown in the second half of the year. However, the actual decline has been far more rapid and severe. Despite a brief counter-attack from bulls near the 38,000 level, the bears have maintained control.
Technical analysis of the Nikkei 225 chart shows a breakdown of the previous upward channel, with the price approaching the 30,000 support level. The RSI indicator is deeply oversold, suggesting extreme bearish sentiment. However, the strong bounce from the 30,000 level could indicate the activation of demand, potentially marking a selling climax as described in Wyckoff methodology.
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Given the heightened volatility, a period of consolidation is likely as the market attempts to find a new equilibrium. The 30,000 to 30,400 support zone and the previously broken 34,000 resistance level could define the range for this consolidation phase.
While the outlook remains uncertain, the Nikkei 225’s sharp decline and oversold conditions have opened the possibility of a potential rebound. However, the overall bearish sentiment and economic headwinds suggest caution is warranted.
The market may now be in a Wyckoff accumulation phase, with the potential for a subsequent markup phase. Traders should closely monitor price action and volume for confirmation.
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