The Nikkei 225 fell sharply throughout the day on 6 November, closing at ¥57,434, its lowest level since April. Against a backdrop of concerns over AI regulation and the impact of the U.S. midterm elections, a large bearish candlestick emerged, with the focus on whether this marks a selling climax or the start of a downtrend.
On 6 November, the Nikkei 225 closed at ¥57,434.77, down ¥3,643.13 from the previous day, and traded near its low for most of the session. The decline was the third-largest on record, marking five consecutive sessions of losses. The index opened at ¥60,374.35 and fell to an intraday low of ¥56,745.80, dipping below ¥57,000 during the session.
The sell-off originated in U.S. markets, where the impact of the U.S. midterm elections and growing concerns over AI regulation drove sharp declines in the Dow, Nasdaq and S&P 500. In Japan, funds flowed out of AI- and semiconductor-related stocks, sending share prices across the Tokyo market sharply lower. Another notable feature was that the market broke below the previous low on 4 November before closing.
Technically, the focus is on movements around the 200-day moving average, at approximately ¥61,960. Although the close was about 7.3% below the 200-day moving average, the moving average itself continues to trend upward, leaving open the possibility that, under the principles of Granville’s law, the decline could be interpreted as a pullback within a long-term uptrend. The RSI entered oversold territory, while the Nikkei Volatility Index stood at 44.60, a high level. The short interest ratio was relatively low at 35.3%, suggesting that cash-raising sales were the primary factor.
Conditions for a rebound in this phase include the Nikkei 225 holding above the 6 November low, the Nikkei Volatility Index failing to exceed its previous high and falling to the low 30s, the RSI recovering to the 30% range, an attempt to fill the gap and recover to the ¥60,000 range, and a recovery to the 200-day moving average on a closing basis. Potential downside targets are the ¥56,500–¥57,000 range, around ¥55,700, around ¥54,000, and the ¥50,500–¥51,000 range.
This article states that the outlook for the market phase could change significantly depending on whether the conditions for a rebound are met, and that trends in earnings for AI-related companies, currency stability and the substance of regulatory measures will influence the market’s future direction.