<P><FONT size=5>Citigroup£º¶ÌÆÚÈÕ¾­Ö¸ÊýÕ¹Íû09.27</FONT></P>
<P><FONT size=5>27 September 2007 ª¥ 4 pages</FONT></P>
<P><FONT size=5>Technical analysis: Near-term Nikkei outlook</FONT></P>
<P><FONT size=5>Confirmation the intermediate rally is ongoing</FONT></P>
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<P><FONT size=4> Intermediate rally ongoing ¡ª The Nikkei 225 breasted its end-August rally high<BR>of 16,569 today, confirming to our mind that the intermediate rally from 15,273<BR>(8/17) is ongoing. We still think this rally phase could last to around October 2<BR>or mid-October. Our focus is on whether it can rally past resistance at 16,850-<BR>16,900.<BR> Bests end-August rally high ¡ª The juncture at 15,764 (9/10) represented a<BR>near-term second bottom versus 15,273 (8/17), and by breaking above the<BR>high logged during this spell¡ª16,569 (8/31)¡ªthe ultra-short-term wave<BR>pattern has turned upward. By transitioning to a rally leg phase around<BR>September 11, the chances of the rebound continuing to around October 2 or<BR>to October 16 or 22 have improved.<BR> Near-term resistance around 16,850-16,900 ¡ª The near-term focus over this<BR>period is on whether the Nikkei can quickly rise above resistance at 16,850-<BR>16,900. Similarly, the focal point for TOPIX is on whether it can clamber above<BR>immediate rally resistance at 1,634 or thereabouts.<BR> Rally could extend to 17,800 or so ¡ª If the Nikkei does make it above 16,900<BR>and TOPIX reaches a point above 1,634 at an early stage, the chances of the<BR>rallies extending to around 17,800 for the Nikkei and around 1,736 for TOPIX<BR>through mid-October would be improved, in our view.<BR> Stock selection ¡ª Over this spell, we envisage that while old and new themes<BR>will be intertwined, with 1) resource plays trying for a further leg up (the theme<BR>of the last few years) and 2) domestic-demand stocks, financials, and smaller<BR>caps, which have been stagnating for a year or more, bottoming (a new theme),<BR>the drivers of the rally through to mid-October will after all be resource names.<BR> Resumed downward march after mid-October? We think the current<BR>intermediate rally is the second minor (rally) wave in the second medium term<BR>(corrective) wave, which takes as its starting point 18,261 (7/9), and we doubt<BR>the Nikkei will rise to break above 18,261 (7/9). We see a reasonable likelihood<BR>of a second downward leg from mid-October and advise investors to think<BR>about preparing for subsequent renewed declines while the rally lasts.</FONT></P>