Watching Japan's Nikkei Futures Index

09 February 2012

Data released tonight showed another monthly decline in CGPI y/y (change in the price of goods sold by corporations) in Japan. This level is approaching zero and is in danger of falling into negative territory, as it did in 2009.
Since it's a leading indicator of consumer inflation, this suggests that Japan's inflation is teetering on deflation...one to watch for future month's releases.

The Daily chart below of Japan's Nikkei e-mini futures index, NKD, shows that price has pushed above a major downtrend line from the July 2007 high (broken green) and has stalled today at the declining 200 sma (broken pink). Price is sitting just below 9100 (red), which represents price resistance, through which it declined on August 8th, 2011, the Monday after Standard and Poor's downgrade of the U.S. credit rating.
It will be interesting to see if near-term support holds at 8910ish or if near-term resistance holds at 9100...a solid break and hold below/above these levels on sustained volumes should set up the next move for this index.