The Nikkei Average recovered last week, closing at ¥65,606, up ¥1,244 from the previous Friday. This week, the focus is likely to be on technical conditions, including a break above the 5-day moving average, and changes in supply and demand ahead of the SQ settlement date.
The Nikkei Average broke out of its range last week and closed at ¥65,606, up ¥1,244 from the previous Friday. The market's recovery was supported by buying prompted by easing concerns over the situation in the Middle East, as well as stock selection centered on AI- and semiconductor-related names. TOPIX and other stock indexes also recovered.
Technically, a break above the 5-day moving average will be the key focus for a full-fledged recovery in share prices, while an upward turn in the MACD is also being watched. At the same time, the 75-day moving average could act as resistance on the upside, making the phase in which the 5-day line breaks above the 75-day/25-day lines important. There have been cases in the past when momentum strengthened from this point, and the market's subsequent direction will depend on the movement of the 5-day line.
This week, expectations surrounding monetary policy in Japan and the United States and stock selection based on corporate earnings are among the factors likely to influence the market. With the SQ settlement date approaching, the market's direction could change depending on developments in the Japan-US interest-rate differential and the results of US indicators such as CPI, PPI and retail sales. AI- and semiconductor-related stocks continue to make a relatively large contribution, but movements among individual names are expected to diverge.
Among individual stocks, SoftBank Group, Fujikura and Ibiden were observed at times among the top contributors to gains, while FANUC, Tokyo Electron, Advantest and Taiyo Yuden ranked among the leading contributors to declines. Stock selection based on corporate earnings in Japan and the United States could continue to support the market this week, and investors should be alert to sharp changes in trading volume.