The Nikkei has been in a long and painful bear market for U.S. investors since 1989.
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My work on the Nikkei 225 turned bullish in late November, when the Japanese stock market index was just below 27,000. In my Nov. 28 report to clients, I spotlighted the powerful and huge 30-year base from which the Nikkei had begun to break out. It closed Tuesday at 30,156.
From the first chart, you can see a gigantic rounding base. And within the base is what I call a high-level consolidation (see the dashed lines from 2017 to 2020). That upper consolidation within the large base is a final “refueling stop” that often occurs just before prices explode higher from the base. If my analysis is correct, then prices should not retreat to that upper consolidation area for many, many years.
Despite the powerful gains in the Nikkei from the 2009 bottom until recently, it has been an unprofitable investment for U.S. investors. Why? Because when the Nikkei is adjusted back into U.S. dollars, it has vastly underperformed every U.S. stock-market index. That’s because the dollar has appreciated while the yen has declined in value. From the Nikkei’s February 2009 bottom until last July, a U.S. investor would have underperformed the S&P 500 by a whopping 30%…