The Topix is the index that is most representative of the Japanese Stock Market and here is its chart since inception, basis 100.

Market manipulator and speculator Jesse Livermore was probably the first person to point out that the crowd tended to fixate on round numbers and gain or lose confidence about them. The TOPIX is close to such a level at TOPIX 1000.

Back in 1985 the TOPIX first consolidated at 1000 — what happened after that was an asset price bubble of Mt. Fuji proportions! The hangover proved extreme and if we were to adjust this for inflation, it would only cast shame on the Emperor!

Fundamental 50% TOPIX rallies, in recent history, have begun when the yield on stocks have crossed the bond yield.

See: 1998, 2003 and 2008.

Now here we are at the Easter Break in 2010; the TOPIX stands at 989.39 after a meltdown low of 700 clocked on 3/12/2009.

Which ever way we look at the TOPIX Chart the current mean comes in at about the 1500 level. Markets will always trend to trade where they are perceived to be an even money bet. Even better, a whole generation of Japanese Investors have probably sworn off stocks. They will be back one day when some honour has been restored!

I estimate the Bucket in TOPIX stocks is only a quarter full. This would give me a high degree of confidence of 1500 plus being achieved over the next couple of years.

Please note

Stoner is a journalist and not a licenced securities advisor. Declaration of interest: NULL.