Japanese and U.S. equity markets are regaining their composure this week after last week's sharp sell-off, but lack a clear direction. This article explains the principles of Wyckoff theory and introduces a perspective for interpreting the intentions of large investors.
Through the 21st this week, Japanese and U.S. equity markets appear to be regaining their composure after the frantic action caused by the sharp sell-off, but their direction remains unclear. With concerns over the situation in the Middle East, Japanese and U.S. monetary policy events next week, and earnings reports from U.S. hyperscalers ahead, markets remain in a wait-and-see mode. Domestic and overseas market trends are organized by comparing Figures 1 and 2.
Wyckoff theory is an analytical method that divides stock-price movements into four phases: Accumulation, or the bottoming range; Markup, the rising phase; Distribution, or the topping range; and Markdown, the declining phase. Given the difficulty of identifying market tops and bottoms, understanding this theory is described as useful when assessing turning points.
The core of the theory lies not only in chart patterns but also in interpreting the investment behavior and intentions of large institutional investors. It is noted to be more difficult to understand than other methods, such as Dow theory and Elliott wave theory. Wyckoff theory may make it easier to understand market turning points and price action during reversal phases.
The current analysis focuses on how next week's key events could affect the movement of the Nasdaq Composite Index and the market's future course. No specific forecast is presented, and the outlook remains dependent on forthcoming signals.