The Japanese market reacted immediately to the uncertainty over the Fed's future action as the Nikkei 225 reversed sharply on May 23. Moneyshow's Tom Aspray views this correction as a buying opportunity because once the correction is complete the recent highs should be overcome later in the year.
The Nikkei 225 was up almost 5% in Monday's trading as it reacted positively to the strong close in the US market last Friday. As I discussed in the Week Ahead column, the technical evidence does not yet confirm that the correction is really over.
There was a mixed close Monday in the US market and the NYSE A/D ratio was negative all day, which is consistent with a failing rally. The overnight decision by the Bank of Japan not to implement further stimulus has pressured stocks with the Nikkei closing lower.
A weak close Tuesday in the US averages, especially below last Friday's lows will confirm that the correction has resumed. The next drop should provide a buying opportunity in the Japan-targeted ETFs, and the charts reveal some attractive levels where new buying should be considered.
Chart Analysis: The weekly chart of the Nikkei 225 futures reflects Tuesday's trading and shows we are currently lower for the week.
The WisdomTree Japan Total Dividend Index (DXJ) has a current yield of 1.17%, trades an average of over seven million shares per day, and has an expense ratio of 0.48%. The ETF uses futures contracts to neutralize its yen exposure.
NEXT PAGE: Another Japan-Focused ETF to Buy on Next Dip