NIKKEI225 Stocks Feel Nvidia Earnings Hawkish BoJ

Yesterday’s Nvidia earnings beat analysts’ expectations, but not enough to fuel another rally.

The AI-tech fueled rally came to a halt yesterday after hours when Nvidia earnings report showed Q2 revenue of $30 billion, when most forecast where for $28 billion. That’s an impressive beat by any standard.

However, investors weren’t convinced as the stock lost nearly 8% in after-hours trading. The general sentiment in the global stock market has been led by an AI-tech rally and it has an effect on NIKKEI225.

AI investors were probably expecting some spectacular results to keep the rally going. And there’s also the fact that many would have decided to take some profits after such an impressive run.

Japan’s main stock index followed US markets lower and ended the day yesterday down 0.34% after being up by just as much. Today’s markets are reflecting on the move yesterday, and some investors are seeing the dip as a buying opportunity, the NIKKEI225 is up 0.75% on the day.

The 2-year JGB auction had a 0.385% yield compared to the last auction’s yield of 0.0565%. The number is in line with recent monetary tightening from the BoJ and includes the forward view of higher central bank interest rates soon.

BoJ officials have recently reiterated that there will be further hikes if the economy continues to perform.

Technical View

The day chart above shows a sideways market for the NIKKEI225 (yellow rectangle). The current price level has hit the resistance at the level that was broken after the BoJ raised rates at the end of July.

That level also coincides with the resistance level from February (blue line) of 37,934. From the Ichimoku system we see the market is still in a bull trend. The market is still below the cloud, despite having recovered almost 100% of the losses post BoJ.

The next move will be determined by a breakout of the rectangle formation. A break to the upside will meet the resistance of the cloud, although here it’s weak, as the cloud is thin. The market will find further resistance at 39,447 (purple line), which corresponds to a previous peak.

To the downside, major support comes from the dip in June at 37,599 (red line). Should that break the next support level is at 36,675 (green line) which corresponds to the dip in April, which led to the rally to the all-time high.