Nikkei Poised For A Dive?

Strong fundamentals [going forward] in the Japanese economy do not necessarily translate into a continued strong Japanese stock market... In fact, it may well be the case that the Nikkei has already priced in the Japanese recovery during the past 12 months -- just take a look at its chart which resembles the chart of GOOG before its recent fall.

This week, the Nikkei posted a bearish weekly technical reversal with a close at slightly below 16,300 off the highs both earlier that week and earlier that day (Friday). If conventional technical analysis is to be believed, there is a better-than-50/50 chance of a minimum 10-12% correction toward 14,500 or so, which is where the inverted head and shoulders neckline pattern lies or, rather, lay -- before the market tried (and failed) to push through the highs at around 16,777 or so. Given the violent recent moves in the Nikkei -- a 23% volatility for the 90% puts in June'06, looks to be a cheap way to play this retracement/correction. Stay tuned for more a bit later.