It Looks Like the Selling's Over in Japan (EWJ)

There is mounting evidence that the sell-off in Japan may be over. Yes, the bleeding looks as if it has finally stopped. The band-aid is the strong economy with the latest data showing a revision of Q1 annualized GDP jumping from 1.9% to 3.1%. This comes after news last Friday that machinery orders surged in April. Japanese stocks have subsequently closed in the black in the past two trading sessions. See the advancers v. decliners chart below.

Investment capital inflows and outflows for the month of May shows foreigners were net sellers of Japanese stocks for first time in two-years while Japanese retail investors were net buyers for the first time in four months. The foreigners will be back -- the valuations and quality of Japanese large-caps are too good to pass up.

The TOPIX Index (1st section) of approximately 1,600 of the largest Japanese stocks peaked on April 7th at 1,783.72. Last Thursday it may have bottomed at 1,482.22, down 16.9% from April 7th. Today it closed at 1,510.89, still down 15.3% from April 7th.

The Nikkei 225 Stock Average also peaked on April 7th at 17,563.37. Last Thursday it closed at 14,633.03, down 16.7% from April 7th. Today it closed at 14,833.01, still down 15.5% from April 7th.

Lastly, let's look at the advancers versus decliners over the past six trading sessions on the TOPIX 1st Section. The figure in black above each bar is the ratio of advancers to decliners (a 1.0 reading would mean they are equal). Data is courtesy of the Tokyo Stock Exchange. I didn't include volume data in the chart because I don't have access to historical data beyond the past week for a more thorough analysis. For your reference see recent volume figures listed below the chart.

June 5: 1,518,960,000
June 6: 1,541,540,000
June 7: 1,960,380,000
June 8: 2,652,450,000
*June 9: 3,168,550,000
June 12: 1,959,280,000

*High volume on Friday is attributed to the expiration of June futures and options contracts.