Turning Japanese: Trading J's Equities

Fuller says:
"When most of a market sector is trending persistently, such as global stock markets since mid-August, investors and traders are emboldened to search for laggards. Now laggards usually lag for reasons, including fashion. However, the more leaders appreciate, the more some laggards are likely to look like bargains. So long as the leaders remain in form, many of the laggards will stage late-in-the-cycle catch-up runs.

Japan appears to be a case in point. Until two weeks ago, Japan was the underperformer among developed markets, with the Nikkei and Topix indices languishing near the year's earlier lows, as you can see on these daily charts (NKY & TPX).

And now that the progression of lower rally highs has been broken, this move will attract further participants, who will also notice that the weekly charts (NKY & TPX) look like large developing base formations. A big question is: When will these bases be completed and sustain medium to longer-term uptrends, rather than just tests of the ranging patterns' upper boundaries? When upside breakouts are imminent, we should see a better performance from Japan's Second Section Index (weekly & daily), which led from last year's lows but is lagging at present.

Japan remains my favourite developed country stock market for the long term."