Nikkei-225 resistance proves too strong

The Nikkei-225 broke resistance on Monday and has continued to fall during the week. This is of course another downtrend in global equity markets. The question is how low will it fall? We see the most likely support levels as 9,065 (interim) and 6,850. The possibility of the market falling to 6,850 is pretty dire. But that is what happens when people are fearful of the future, and are unable to spend because they are concerned about losing their job or face ever-tightening rises in interest rates.

It will be hard for market pundits to appreciate but the worst has yet to come. The recovery in the stockmarket was of course the result of government stimulus. There is talk that the property market is about to recover as well. We do not believe that at all. We think there are safe places to buy, but cities and tourist meccas are not among them, and will not be for several years yet.
Much will depend on whether government continues spending. It seems impossible because of the damage they are doing to the underlying economy. Stimulus absorbs underlying lack in market capacity by stimulating demand, but in as much as governments don't constitute 'productive' capacity, the implication is that they do not create wealth. They simply redistriiute money, which means they are inflationary. Right now they are among the few spending money. The greater share of the economy they represent, the more protracted the slump. The implication is that we are either going to see failures or have a long drawn-out recession like Japan. I would suggest its going to be some compromise between collapses and protracted recession. i.e. We are looking at selective intervention.
For the reasons above I sold a position I had in KDDI last Friday before their was considerable carnage this week.

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Andrew Sheldon www.sheldonthinks.com