This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

The Nikkei's Ominous Meltdown

NEW YORK (TheStreet) -- Japan's Nikkei (NKY) stock index has seen its price action break down over the past few weeks, leading many to question if global equities have reached a top.

The Nikkei index tumbled on early trade Friday, weakened by Wall Street's large decline the day before. Within the first 20 minutes of the Tokyo Stock Exchange opening, the index quickly declined 2.8%. Although major equity indexes across the world have begun to pull back, few have fallen as far as Japan's stock market.

The infamous death cross, a technical term used when a stock or index's 50-day moving average crosses below its 200-day moving average, looks to be in sight for the Nikkei. A death cross signals that there has been a change in the asset's trend. In this case, Japanese equities could trend lower for the next few months to a year if the cross takes place. The index has not experienced a death cross since summer of 2012, when tensions surrounding the U.S. debt ceiling were high.

This time around, equity market fatigue and declining momentum stocks have led investors to bid CurrencyShares Japanese Yen Trust (FXY) higher. Japan relies heavily on its export industry, and when the value of its currency significantly increases it hurts demand for domestic equities. The yen has traded at suppressed levels over the past year as the country's central bank put into place an unprecedented stimulus program to promote economic growth.

Although the yen has been artificially weakened, recent investor anxiety at home and abroad has led investors to push funds into the traditionally safe Japanese currency.

Momentum stocks such as Facebook (FB) and Netflix (NFLX) have sold off considerably the past few months. This is troubling to investors because high-flying momentum stocks were the biggest beneficiaries of the Federal Reserve's easy money policy, and strong demand for such stocks kept markets moving higher.

Anxiety over weakening equity sectors, as well as lingering geopolitical risks, like the continuing conflict between Russia and Ukraine, have investors preparing for future negative events.

While few indices have declined as much as the Nikkei to date, developments in various global assets such as the iShares Barclays 20+ Year Treasury Bond (TLT) could also be indicating a downturn in equity markets worldwide.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,279.74 +13.75 0.08%
S&P 500 2,010.40 -0.96 -0.05%
NASDAQ 4,579.7890 -13.6380 -0.30%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs