Nikkei225 and politics

I was on the Channel News Asia Forum today when I came across this thread with the starter trying to draw parallel between Nikkei 225 and the result of the recent election.

The writer wrote that the Nikei fell as a result of the opposition being voted into power and warned that Singapore's market might react the same way if such a change also happen to the political system of Singapore.

I counter argued that the same happened when PAP was voted into power in 2005 ( or somewhere there), so did it signify that the market did not agree with the result? In true fact, the market will fall no matter who win because the price has already factored in the result.

Unfortunately the only thing this guy (I think nick name BigCanonKing) reverted to searching for spelling and grammer mistake to intimidate his opponents rather than involve in genuine debate on the matter. It does show how much wisdom he has.

So now the question is: Does the market approve of the new ruling party? Going back to March 2009, there was a by-election in Japan and the opposition won, and the market reacted. It was because the event was a news and market was not prepared for it.



Fig 1 Nikkei 225 Weekly chart

Referring to the chart, one can easily see a gap up of about 2,000 points on Nikkei. This happened right after the news broke out on Sunday that the opposition won the by-election. To summarize, the market has not factored in this event.

What about the general election that happened over the last weekend? Seriously if we looked at the chart, nothing happened. If I recall correctly, major markets in Asia were having their free fall, yet, Nikkei 225 barely move, in fact there was a gain on the index. It went even higher today before retreating. I estimate that the market is not reacting because it is watch the move of the new ruling party before it makes its next move.

Nevertheless, the RSI and Stochastic on Nikkei indicated that a correction is in order soon. In addition, the index is meeting the downward trendline and at this moment, I think it has not enough momentum to break through.

What I wish to see is that Nikkei break its multi-years bear market and for once reverse its fortune, at least lives of the people there would be better. Let's hope that this new government brings live once again to Japan.