Nikkei futures (NKD) have pushed to fresh all-time highs, extending the upswing that began from the 23 March 2026 low. In Elliott Wave terms, wave 1 ran to 63,880 before wave 2 retraced to 59,352, with the latter described as a zigzag correction. The move through the prior wave 1 peak is presented as confirmation that wave 3 is under way, keeping the impulsive advance intact.
From the wave 2 base, the sub-waves are mapped with wave (I) ending at 62,075 and wave (II) holding at 61,040, then wave (III) reaching 65,695 and wave (IV) dipping to 64,650. Wave (V) rose to 66,520 to complete wave ((I)) of a higher degree. A corrective wave ((II)) is now developing to retrace the cycle from the 20 May 2026 low, while 59,352 is framed as key support and the pullback is expected to resolve within a 3, 7, or 11 swing sequence.
Current Pullback as Opportunity Within a Bullish Trend
Given the Nikkei’s powerful uptrend, we see the current pullback as a chance to get ready for the next move higher. The market just hit a new all-time high of 66,520, and this current dip is a healthy consolidation within a very strong bullish phase. We are looking for this corrective wave to find a bottom, creating an opportunity to join the established upward trend.
Monetary Policy and Corporate Earnings Bolster Nikkei Strength
This optimistic view is supported by recent actions from the Bank of Japan, which signaled its intent to maintain its accommodative monetary policy at its meeting last week. This contrasts with other central banks and helps fuel investor confidence in Japanese equities. The BoJ’s stance is a key reason we believe the market’s underlying strength will continue.
The policy has kept the yen weak, with the USD/JPY exchange rate recently crossing the 165 level for the first time since the late 1990s. This is a significant tailwind for Japan’s major exporters, whose overseas earnings are worth more when converted back into yen. This currency advantage directly boosts the profitability of many companies that dominate the Nikkei index.
In fact, the corporate earnings season that concluded earlier this month showed this effect clearly, with many export-oriented firms reporting record profits and upgrading their forecasts for the year ahead. This fundamental strength provides a solid foundation for the technical rally we have been observing. Historically, periods of sustained yen weakness, like during the Abenomics era of the mid-2010s, have coincided with multi-year bull markets in Japanese stocks.
Therefore, we should use this current dip to position ourselves for more gains. As long as the market stays above the key support level of 59,352, the overall bullish structure remains firmly in place. We will be watching for signs that this short-term correction is complete before expecting the primary uptrend to resume.
