Without more stimulus, Japan’s Nikkei is likely to falter and tumble into a larger decline, says LA Little on Minyanville.com.

Markets usually require a push for a larger move—whether up or down. They don't just run higher or crash lower without a reason or at least without the perception of a good reason. So, if we ask ourselves what that reason might be, there are many possibilities but overriding theme now seems to be a lack of further Central Bank quantitative easing. Given that these markets have flourished on the free money for so long, one would have to think that without more free money they will not fare as well.

But the analysis has to include another piece of the puzzle and that's the economic health or lack thereof. Keeping quantitative policies at equilibrium or tapering them a bit won't necessarily cause a crisis in confidence as long as the market participants have the perception that the economy is improving. We need look no further than the US experiment to see that the markets have only stalled, not faltered, since the Federal Reserve began to drain liquidity.

The problem and the source of the next crisis will emanate in those places where the economics do not support market prices. If we look at the four large markets where either government or central bank stimulus has been applied in mass, the most problematic of the four are Japan and China, while the US and European markets continue to hang at their highs for the most part.

Although it is a toss-up between Japan and China as to which might trigger the next crisis, if we look to the stock markets of the respective countries and the history of intervention, the Chinese government has shown over and over again that they will step in and stimulate as needed. Being a reasonably centrally controlled entity they can effectively do this rapidly and effectively. Japan, however, hasn't shown the willingness yet to step back up to the plate and dig their hole deeper and as is usually the case, they will likely be forced to do so. That's the way it usually works.

Looking at the charts, the Nikkei 225 ($N225) is showing signs of a larger decline coming, one that could take it back to the 13,000 level, away from that magical 16,000 level it initially soared to then eventually retested and failed to exceed. Without more stimulus it is unlikely to get back to those levels.

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Most government institutions are reactionary, not proactive. Central Banks aren't quite as bad, but are still more reactionary than proactive, and the next flood of money will likely be the result of a major market or markets starting to crumble. The set-up is currently in Japan and it is worth watching as it appears to be the odds on choice.

By LA Little, Contributor, Minyanville.com