ASX 200 and Nikkei 225 Analysis: Technicals and COT Outlook

The ASX 200 futures are at a pivotal point as compressed volatility suggests a breakout is near. While a bull flag is forming, the bias remains tilted to the downside with targets at 8616 and 8500.

The Nikkei 225 has tested record highs but now faces signs of exhaustion, while COT data on Nikkei futures shows waning participation, raising questions about the sustainability of Japan’s equity rally. Together, these signals highlight the need for traders to remain cautious as global indices navigate critical levels.

View related analysis:

ASX 200, Nikkei 225 Futures Technical Outlook

ASX 200 Futures (SPI 200) Technical Analysis

The ASX 200 appears to be at a pivotal moment. Volatility has been compressed over recent sessions, suggesting that a breakout in either direction is likely.

Last week I highlighted the case for a continued move lower towards the February high at 8616, or even the lows around 8500, though this may require Wall Street and other global indices to also weaken.

The bearish case gained weight on September 3, when momentum accelerated after three consecutive down days and a lower high formed beneath the record peak near 9000. This pattern suggested a deeper pullback could be in play rather than a simple ABC correction.

The bullish counterpoint is that a small bull flag may be forming on the daily chart. Yet even if prices break initially higher, my bias remains for a move down to at least the February high before a durable trough is established.

Ultimately, I expect the ASX to test lower levels, with either a direct break from current prices or a fade into rallies towards 9088—on the assumption that 9000 will not be retested in the near term.

Chart analysis by Matt Simpson - Source: TradingView, ASX SPI 200 Index Futures

ASX 200 Futures (SPI 200): 4-hour Chart

The 1-hour chart shows ASX 200 futures respecting trendline resistance, with momentum turning lower after a bearish engulfing candle formed at that level. The 200-bar SMA also acted as resistance before the reversal candle confirmed.

Overnight consolidation has produced a potential bear flag, so traders will be watching closely after the open for a direct break lower. If prices initially turn higher, bears may look to fade rallies into the 200-bar SMA or trendline resistance.

Chart analysis by Matt Simpson - Source: TradingView, ASX SPI 200 Index Futures

Nikkei 225 Futures (NK) Technical Analysis

Last week I outlined a bullish bias for Nikkei 225 futures over the near term, based upon a falling wedge pattern during an uptrend on the daily chart. Prices were quick to reach target around the base of the target, near its record high.

However, volatility has resurfaced around that key level to show an immediate hesitancy to continue higher. And we could find the Nikkei vulnerable to a shakeout if today’s US inflation figures fail to adequately soften current market expectations of multiple Fed cuts.

The 4-hour chart shows that the Nikkei may also be about to print a lower high, with a doji breaking a 6-bar rally. The fact that the doji has high volume also suggests a ‘change of hands’ from bulls to bears.

Ultimately, I am on guards for a pullback over the near term given the pickup of voltatility around the Nikkei’s previous record high. Bulls may be better positioned to seek bullish setups around lower levels.

Chart analysis by Matt Simpson - Source: TradingView, Nikkei Futures (NKD1!)

Nikkei Futures COT Report: Positioning Analysis

Nikkei bulls may want to note that net-long exposure to Nikkei futures has been trending lower since 2023. Open interest on Nikkei futures, often used as a proxy for volume, is also declining – suggesting diminishing participation behind the rally.

While these developments don’t necessarily signal an imminent peak for the Nikkei, they do highlight a potential loss of momentum as this bullish trend matures.

Chart analysis by Matt Simpson - Source: CME, LSEG

Key Economic Events for Traders (AEST / GMT+10)

09:50 JPY BSI Large Manufacturing Conditions, Foreign Bonds Buying, Foreign Investments in Japanese Stocks, PPI (Aug) (USD/JPY, EUR/JPY, Nikkei 225)
11:00 AUD MI Inflation Expectations (Sep) (AUD/USD, AUD/JPY, AUD/NZD)
18:00 USD IEA Monthly Report (WTI Crude, Brent Crude, USD/CAD)
20:00 GBP Thomson Reuters IPSOS PCSI (Sep) (GBP/USD, EUR/GBP, GBP/JPY)
20:00 EUR Germany Thomson Reuters IPSOS PCSI (Sep) (EUR/USD, EUR/GBP, DAX)
21:00 USD OPEC Monthly Report (WTI Crude, Brent Crude, USD/CAD)
22:15 EUR Deposit Facility Rate, Marginal Lending Facility, Monetary Policy Statement, Interest Rate Decision (Sep) (EUR/USD, EUR/GBP, DAX)
22:30 USD Continuing Jobless Claims, Core CPI, CPI, Initial Jobless Claims, Real Earnings (Aug) (S&P 500, Nasdaq 100, USD/JPY)
22:45 EUR German Current Account Balance, ECB Press Conference (Jul/Sep) (EUR/USD, EUR/GBP, DAX)00:15 EUR ECB President Lagarde Speaks (EUR/USD, EUR/GBP, DAX)
00:30 USD Natural Gas Storage (WTI Crude, Brent Crude, USD/CAD)
01:00 USD Cleveland CPI (Aug) (S&P 500, Nasdaq 100, USD/JPY)
01:30 USD 4-Week Bill Auction, 8-Week Bill Auction (S&P 500, Nasdaq 100, USD/JPY)
03:00 USD 30-Year Bond Auction (S&P 500, Nasdaq 100, USD/JPY)
04:00 USD Federal Budget Balance (Aug) (S&P 500, Nasdaq 100, USD/JPY)
06:30 USD Fed's Balance Sheet (S&P 500, Nasdaq 100, USD/JPY)

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.