Reasonable pessimism takes priority

#NIKK225

Key zone: 42,400 - 43,400

Buy: 43,200 (after a strong breakdown of 43,000); target 45,000; StopLoss 42,700

Sell: 42,000 (on a strong negative foundation); target 40,500; StopLoss 42,500

Markets are trading cautiously, and while the S&P 500 and Nasdaq 100 indexes barely moved, broader sentiment was restrained by mixed corporate earnings and expectations of a potential rate cut in September. The Dow Jones is trying to correct, while other indexes are attempting to hold their support zones.

European stocks showed modest growth: the pan-European Stoxx 600 index added 0.3%, Germany’s DAX rose 0.2%, and France’s CAC 40 gained 0.6% — driven by cautious optimism over the conflict in Ukraine. The most active dynamic came from the FTSE 100 (+0.24%), but there are no specific UK factors behind this growth, so a correction is expected.

In Asia, sentiment is more negative.

The Nikkei 225, after reaching record highs last week, fell by 1.5% amid weakness in the technology sector and declining exports. The broader Topix index dropped 0.57%, with losses concentrated in technology stocks after a heavy sell-off in chipmakers.

Synchronized weakness in indexes and trade balance data once again highlighted Japan’s dependence on global semiconductor demand cycles — a factor that has become central for short-term market performance. In July, Japan’s exports fell 2.6% year-on-year, the sharpest drop in more than four years. The reason was lower US demand, as Trump’s new tariffs sharply cut trade flows. Imports fell 7.5%, compared to forecasts of -10.4%, but this still marked the fourth decline this year.

Thus, the financial cushion for the yen is shrinking. The Nikkei 225’s ability to defend its support range will determine whether the rally resumes or shifts into a deeper correction.

Investors are closely watching Powell’s upcoming speech, expected to be his last at Jackson Hole as Fed Chair. Powell is likely to discuss the independence of the US monetary regulator and prepare markets for a possible 0.25% rate cut in September.

Economic signals remain mixed, and the dynamics of US equities are most dependent on Powell’s comments, upcoming retail earnings, and the further course of tariff policy.

So we act wisely and avoid unnecessary risks.

Profits to y’all!