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While stock indices in Asia and Emerging markets have been very weak this year, Japan is reflecting relative strength compared to them (down a good deal less).

This chart looks at the Nikkei 225 index over the past 30-years on a monthly basis.

At this time the Nikkei index is attempting to break above its 1996 highs and it is testing the halfway point (50% retracement level) of the 1989 highs and 2009 lows at (2).

If the Nikkei index breaks out at (2), it will send a bullish message to this index which would spill over into hard-hit stock indices in Asia. If it should break out it would send a positive message to stock in the states as well.

What the Nikkei does at (2) will be very important for stock markets around the world. Keep a close eye on what this index does in the weeks ahead!