Nikkei index is overbought now!

Having ascended to around 19600 in just 1 day after our recent buy call, Nikkei futures has no more oomph to go much higher and a mini correction has to take place because the market has digested all the positive news and anticipations for the foreseeable future.  This is what we call "buy on rumour and sell on fact".

Let's use binomial probability to detect the change.

Current futures = 19500 (Today closing)

Expected futures = 18500

Date from 5 Jan 17 to 10 Mar 17 = 64 days

Upside deviation for past 1 month= 2.51%

Downside deviation for past 1 month = -1.32%

Risk-free rate = 2.46% as of 4 Jan 16

After inputting all these parameters, the downside probability is 54.2% vs upside probability of 45.8% which is a stark contrast to our posting 2 days ago.  The stark outcome is due to changes in some parameters and is the reason for our buy call termination.

http://sg-stock.blogspot.sg/2017/01/japan-stock-index-nikkei-225-has-more.html