On Monday, the 27th, the Tokyo stock market saw the Nikkei Stock Average surge 821 yen from the previous trading day to 60,537 yen, continuing its sharp rise. After breaking through the key 60,000 yen level, it accelerated even further, at one point rising nearly 1,200 yen and bringing the 61,000 yen range into view. The strength was nothing short of astonishing. Recent price movements have evolved from a roller coaster to something resembling a time machine, confronting us with a market that even shakes the very concept of time. While the Nikkei Average lost some momentum at the close, it still landed in the mid-60,000 yen range with a gain exceeding 800 yen.

The phrase often heard on Wall Street, "most hated rally," aptly describes the current state of the Tokyo stock market. This means that the overwhelming majority of investors are disappointed by the stock price gains. The famous words of contrarian investor John Templeton - "Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria" - precisely capture human psychology, but the "euphoria" that forms the background to the final phrase about bull markets "dying" does not exist in today's stock market. Everyone thinks "there's no way to ride this kind of market. It's abnormal" and stays on the sidelines, but the market rises as if mocking them. Investors with some experience might think they can profit handsomely from short positions through "short selling" or "buying puts (selling calls)," but in such cases they face not only opportunity losses but also, the deeper they go, substantial actual losses.

Particularly with short-term trading, investors are at the mercy of AI-driven buying and selling that operates without regard to logic, and according to market participants, "the reality is that ultra-short-term trading like day trading mostly becomes fodder for AI trading" (online securities market analyst). They suggest that in the near future, individual investors will purchase AI systems, and "it will take on the appearance of a proxy war by AI rather than psychological battles between humans." Needless to say, humans directly entering the front lines of the market using a mouse or keyboard is like jumping into AI's gunfire unarmed and being pulverized in seconds. They point out that this tendency is already evident.

In South Korea, the humanoid "Atlas" developed by a subsidiary of Hyundai Motor is famous, and because it delivers performance far superior to humans, workforce reductions and job destruction at production sites could occur at any time. This harbors the risk of reaching an endpoint where the intense labor efficiency of AI robots and accompanying rationalization effects steal human jobs and the economy stops functioning. If we replace employees with traders, the stock market is similar, and we may have already entered an era of "And Then There Were None." There are no labor unions here. Investors must either arm themselves with AI or simply leave.

While the Nikkei Average has broken through the uncharted 60,000 yen level and, carried by momentum, surged to near 61,000 yen in a strong market, today's Prime Market saw a distorted situation where the number of declining issues exceeded the number of advancing issues. This is still fairly common, but what is surprising is that in just one day, there were 41 new highs versus 223 new lows. This is abnormal. Incidentally, on Friday the 24th of the previous week, there were 29 new highs versus 201 new lows, and on the 23rd, the day before that, there were 22 new highs versus 252 new lows. The reality of the current Tokyo market is actually tilting toward a bearish market.

In that sense, perhaps staying on the sidelines is more correct than jumping into the fray. However, even in what appears to be a bearish market, AI and semiconductors alone are in a class of their own, with capital rotating at high speed in a narrow area like the whirlpools of the Naruto Strait. Even if the Nikkei Average rises furiously and the NT ratio exceeds 16 times, reaching a record high, the pinpoint perspective on individual stocks is a separate matter. Here, we explore the periphery of the semiconductor sector. In the US stock market, the Philadelphia Semiconductor Index (SOX Index) with its 18-day winning streak is in the spotlight, but alongside it, the Russell 2000 is also showing strong performance at record high levels, suggesting a capital shift from large-cap to small- and mid-cap stocks is being observed. The Tokyo market seems fairly likely to follow this trend. Semiconductor-related stocks have become a hunting ground. Focus on OSAKA ORGANIC CHEMICAL INDUSTRY LTD. <4187>, KANTO DENKA KOGYO CO.,LTD. <4047>, Asahi Diamond Industrial Co.,Ltd. <6140>, ENOMOTO CO.,LTD <6928>, and others. Among ultra-small-cap stocks with market capitalization below 3 billion yen, inspec Inc. <6656> deserves renewed attention.

Tomorrow marks the ex-rights day for April, effectively entering the May market. Other scheduled events include the announcement of the March unemployment rate and March job openings-to-applicants ratio, both to be released before the morning session opens, as well as the announcement of the Bank of Japan's Monetary Policy Meeting results and BOJ Governor Kazuo Ueda's press conference scheduled after the close. The April "Outlook for Economic Activity and Prices" (Outlook Report) will also be disclosed. Among domestic major company earnings announcements, high attention is focused on Shin-Etsu Chemical Co., Ltd. <4063>, ORIENTAL LAND CO.,LTD. <4661>, KOMATSU LTD. <6301>, Mitsubishi Electric Corporation <6503>, Socionext Inc. <6526>, NEC Corporation <6701>, DENSO CORPORATION <6902>, and others. Overseas, the February US S&P CoreLogic Case-Shiller Home Price Index and April US Consumer Confidence Index will be released, along with a US 7-year bond auction. Individually, investor attention is also directed toward Coca-Cola earnings announcement. (Gin)

Source: MINKABU PRESS

*Translated by generative AI. Click here for the original article.