Weekly Technical Outlook on Major Stock Indices 05 Oct to 09 Nov 2018

Bearish reaction seen on S&P 500 below key medium-term resistance ahead of mid-term elections

S&P 500 – Bearish reaction below key medium-term resistance





Key Levels (1 to 3 weeks)

Pivot (key resistance): 2745/66 (excess)

Supports: 2704 (trigger), 2590/85 & 2540/30 (long-term downside trigger)

Next resistances: 2822 & 2864

Medium-term (1 to 3 weeks) Outlook

The SP 500 Index (proxy for the S&P 500 futures) had indeed staged the expected minor corrective rebound towards the 2745 medium-term pivotal resistance as per highlighted in our previous weekly technical outlook report (click here for a recap).

The Index had soared to a high of 2766 seen in last Fri, 02 Nov European session after an earlier media report out in the Asian session that highlighted the making of a “Trump Put” where U.S. President Trump tasked officials to draft a trade deal with China to be signed after the upcoming G20 meeting at the end of Nov 2018.

Interestingly, the Index had started to sell off on last Fri, U.S. session and ended the day with a daily close below the predefined 2745 key medium-term pivotal resistance. Key technical elements are still bearish as follow;

  • Last Fri, 02 Nov U.S. session ended the day with a bearish daily “Spinning Top” candlestick pattern coupled with a bearish divergence signal seen in the 4-hour Stochastic oscillator. These observations suggest a reversal in the prior positive optimism triggered by the “Trump Put” and a slowdown in the upside momentum of the minor corrective rebound since 29 Oct low of 2603 (see daily & 4 hour charts).
  • Sector rotation analysis from relative strength charting (based on S&P sectors ETFs) is still not advocating a bottoming process as high weightage “risk-on/high beta” sectors such as Technology, Consumer Discretionary, Industrials, Financials & Communications Services have continued to underperform against the S&P 500. On the other hand, “defensive/low beta” sectors; Consumer Staples, Utilities & Real Estate (just joined the bandwagon) continued to lead in last week’s rebound (refer to 3rd & 4th charts).
  • Elliot Wave/fractal analysis suggests last Fri 02 Nov, steep up move seen in the Asian session is likely the ending c/ wave of intermediate degree/multi-week  expanded corrective sideways range configuration labelled as a/, b/, c/ where last Fri high of 2766 stalled at a Fibonacci retracement/projection cluster before it shaped the daily “Spinning Top” candlestick pattern at the end of the last Fri U.S. session. These observations suggest that the Index may start to shape a new impulsive down move structure at this juncture (see 4 hour chart).

Therefore, we maintain the bearish bias below the 2745/66 (excess) key medium-term pivotal resistance and added 2704 as the downside trigger level (the whipsaw formed at the pull-back support of the former long-term ascending channel resistance from Mar 2009 low). A break below 2704 reinforces the start of another potential impulsive down move structure to target the next supports at 2590/85 follow by 2540/30 next.

However, a daily close above 2745 invalidates the bearish scenario for an extension of the corrective rebound towards the next resistance at 2822 (17 Oct 2018 swing high & 61.8% Fibonacci retracement of the decline from current all-time high of 21 Sep 2018 to 29 Oct 2018 low) 

Nikkei 225 –  A new potential impulsive down move structure looms



Key Levels (1 to 3 weeks)

Pivot (key resistance): 22030/320 (excess)

Supports: 21500 (trigger), 20550/330 & 19950/750

Next resistance: 23000

Medium-term (1 to 3 weeks) Outlook

The expected rebound that took shaped since its recent 20800 swing low of 26/29 Oct 2018 seen in the Japan 225 Index (proxy for the Nikkei 225 futures) had stalled right at the predefined key medium-term pivotal resistance of 22030 (also the pull-back resistance of the former major ascending channel support that broke on 24 Oct 2018).

The Index spiked up and challenged the 22030 level on last Fri, 02 Nov 9 (printed a high of 22320 in the Asian session) before a daily close back below 22030 after the end of the U.S. session.  In addition, the 4-hour Stochastic oscillator has shaped a bearish divergence signal its overbought region which suggests that the recent upside momentum of price action has eased.

No change; maintain bearish bias below the 22030/320 (excess) key medium-term pivotal resistance and added 21500 as the downside trigger level to reinforce the potential start of another impulsive down move to target the next support at 20550/330 in the first step.

However, a daily close above 22030 invalidates the bearish scenario for an extension of the corrective rebound towards the 23000 multi-month range resistance in place since 21 May 2018. 

Hang Seng – Corrective rebound target met



Key Levels (1 to 3 weeks)

Intermediate resistance: 26200

Pivot (key resistance): 26700

Supports: 25090 & 24360/24000

Next resistance: 28000

Medium-term (1 to 3 weeks) Outlook

The Hong Kong 50 Index (proxy for Hang Seng Index futures) had shaped the expected corrective rebound from its recent 26 Oct low of 24487 and stalled right below the predefined 26700 key medium-term pivotal resistance.

It printed a high of 26782 on last Fri, 02 Nov European session before it staged a downside reversal and ended the U.S. session with a daily bearish “Shooting Star” candlestick pattern right below the medium-term descending channel resistance from 07 Jun 2018 high. These observations suggest that the recent upside momentum of price action has started to ease.

Therefore, as long as the 26700 key medium-term pivotal resistance is not surpassed, the Index is likely to shape another potential impulsive down move structure to retest the 25090 intermediate support before targeting 24360/24000 (Fibonacci projection & the medium-term descending channel support from 07 Jun 2018 high).

On the other hand, a daily close above 26700 negates the bearish tone for an extension of the corrective rebound towards the 28000 major resistance (pull-back resistance of the former major ascending trendline support from Feb 2016 low & 21 Sep 2018 swing high).

ASX 200 – Floated up towards resistances



Key Levels (1 to 3 weeks)

Intermediate resistance: 5900

Pivot (key resistance): 5990

Supports: 5785 (trigger), 5560 & 5470

Next resistance: 6115

Medium-term (1 to 3 weeks) Outlook

Last week, the Australia 200 Index (proxy for the ASX 200 futures) had staged a bullish breakout above the upper limit of the neutrality zone at 5785 and drifted up towards the 5950/5990 resistance zone.

It printed a high of 5876 on last Wed, 31 Oct before it traded sideways, the on-going rebound from 26 Oct 2018 low of 5611 has stalled right at the pull-back resistance of a former medium-term descending channel support from 29 Aug 2018 and close to the 38.2% Fibonacci retracement of the decline from 29 Aug 2018 high to 26 Oct 2018 low at 5900. In addition, the 4-hour Stochastic oscillator has flashed a bearish divergence signal at its overbought region. These observations suggest that the recent upside momentum of price action has started to ease.

Flip back to a bearish bias below the 5990 key medium-term pivotal resistance and a break below the 5785 trigger level is likely to reinforce the start of a potential new impulsive down move to target to next support of 5560.

On the other hand, a clearance above 5990 invalidates the bearish scenario for an extension of the corrective rebound to retest the 6115 resistance (former swing low of 07 Sep 2018).

DAX – Squeezed up towards resistance



Key Levels (1 to 3 weeks)

Pivot (key resistance): 11600

Supports: 11400 (trigger), 11050 & 11800/700

Next resistance: 11800/900

Medium-term (1 to 3 weeks) Outlook

Last Fri, 02 Nov, the Germany 30 Index (proxy for the DAX futures) had challenged the 11600 key medium-term pivotal resistance but failed to have a daily close above it (printed an intraday high of 11691).

The on-going rebound from 26 Oct 2018 swing low area of 11050 has started to lose upside momentum as the 4-hour Stochastic oscillator has traced out a bearish divergence signal at its overbought region.

No change, maintain bearish bias below the 11600 key medium-term pivotal resistance with 11400 as the downside trigger to reinforce the start of another potential impulsive down movement to retest 11050 before targeting the next support at 11800/700.

On the other hand, a daily close above 11600 invalidates the bearish scenario foran extension of the corrective rebound to retest11800/900 (the neckline resistance of major Head & Shoulders bearish reversal breakdown).

Charts are from eSignal & City Index Advantage TraderPro










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