Citigroup：短期日经指数展望 09.27

27 September 2007 4 pages

Technical analysis: Near-term Nikkei outlook

Confirmation the intermediate rally is ongoing

 Intermediate rally ongoing — The Nikkei 225 breasted its end-August rally high
of 16,569 today, confirming to our mind that the intermediate rally from 15,273
(8/17) is ongoing. We still think this rally phase could last to around October 2
or mid-October. Our focus is on whether it can rally past resistance at 16,850-
16,900.
 Bests end-August rally high — The juncture at 15,764 (9/10) represented a
near-term second bottom versus 15,273 (8/17), and by breaking above the
high logged during this spell—16,569 (8/31)—the ultra-short-term wave
pattern has turned upward. By transitioning to a rally leg phase around
September 11, the chances of the rebound continuing to around October 2 or
to October 16 or 22 have improved.
 Near-term resistance around 16,850-16,900 — The near-term focus over this
period is on whether the Nikkei can quickly rise above resistance at 16,850-
16,900. Similarly, the focal point for TOPIX is on whether it can clamber above
immediate rally resistance at 1,634 or thereabouts.
 Rally could extend to 17,800 or so — If the Nikkei does make it above 16,900
and TOPIX reaches a point above 1,634 at an early stage, the chances of the
rallies extending to around 17,800 for the Nikkei and around 1,736 for TOPIX
through mid-October would be improved, in our view.
 Stock selection — Over this spell, we envisage that while old and new themes
will be intertwined, with 1) resource plays trying for a further leg up (the theme
of the last few years) and 2) domestic-demand stocks, financials, and smaller
caps, which have been stagnating for a year or more, bottoming (a new theme),
the drivers of the rally through to mid-October will after all be resource names.
 Resumed downward march after mid-October? We think the current
intermediate rally is the second minor (rally) wave in the second medium term
(corrective) wave, which takes as its starting point 18,261 (7/9), and we doubt
the Nikkei will rise to break above 18,261 (7/9). We see a reasonable likelihood
of a second downward leg from mid-October and advise investors to think
about preparing for subsequent renewed declines while the rally lasts.