NIKKEI: How Much Lower Can the Sell-Off Go?

A stronger yen and signs of cooling U.S. economy hit chip-related and financial stocks especially hard.

The recent sell-off in the Nikkei 225 is primarily driven by a combination of factors:

Global Economic Concerns: Fears of a potential recession in the United States, fueled by recent economic data, have led to a risk-off sentiment in global markets.

U.S. Interest Rate Worries: The prospect of continued high interest rates in the U.S. has dampened investor enthusiasm for riskier assets like stocks.  

Yen Strengthening: The Bank of Japan's recent policy adjustments have led to a stronger yen, which negatively impacts Japanese exporters, a significant component of the Nikkei.   Tokyo Electron and Daiwa Securities have fallen far more than 10%. The 10-year Japanese government bond yield has fallen as well.

Technically speaking, the charts are oversold as follows:

1)Weekly Chart:

Shooting star + resistance at the higher Bollinger band + bearish Stochastic crossover.

That has been a trifecta for a decline to the lower Bollinger band, which happened last week.

Moves accelerate when a shelf is lost, and price lost its support last week, hence the rapid move to the next one.

This chart includes price action until last week.

The opening for this week is visiting the point of control of the new volume shelf, there are interesting signs to watch.

2)Daily Chart: