Weekly Technical Outlook on Major Stock Indices 10 Dec to 14 Dec 2018

S&P 500 – Bears are in firm control

Key Levels (1 to 3 weeks)

Intermediate resistance: 2695

Pivot (key resistance): 2726

Supports: 2603 & 2540/30 (long-term downside trigger)

Next resistance: 2825/40

Medium-term (1 to 3 weeks) Outlook

The SP 500 Index (proxy for the S&P 500 futures) had staged the expected downside reversal as expected right below the predefined 2825/40 medium-term pivotal resistance where we raised several scepticisms on the rally that took shape from 23 Nov 2018 low of 2625 prior to the G20 Trump-Xi dinner deal that concluded with a trade war cease fire for 90-days agreed on 01 Dec 2018. The Index had plummeted to hit the upper limit of the first medium-term downside target/support of 2625 as per highlighted in our previous weekly technical outlook report (click here for a recap).

So far, the movement of the S&P 500 has played out within our bearish expectations as per highlighted earlier in our longer-term strategic Q4 2018 Global Markets Technical Outlook

What’s in store for this week

The daily RSI oscillator has just broken below its ascending trendline support at the 45 level that corresponds with the Index’s 29 Oct 2018 low of 2603 which indicates a revival of medium-term downside momentum that put the 2603 level at risk of a bearish breakdown.

In the shorter-term (1 to 3 days), the recent push down from last Fri, 07 Dec high of 2708 seems to be overextended on the downside as the 4-hour Stochastic oscillator has reached an extreme oversold level. In addition, Elliot Wave/fractal analysis suggests that the recent movement of the Index since 07 Dec 2018 low of 2620 may has taken a minor “expanded sideways flat” corrective formation where the Index shall see a potential final push up to complete the c wave of the “expanded sideways flat” before another impulsive wave occurs. The intermediate resistance/potential terminal point of the c wave of the “expanded sideways flat” stands at 2695.

Therefore, we maintain the bearish bias in any bounces towards the 2695 intermediate resistance with a maximum limit set at the tightened key medium-term pivotal resistance at 2726 (close to the 61.8% Fibonacci retracement of the recent decline from 03 Dec 2018 high to today, 10 Dec Asian session current intraday low of 2610 & congestion zone formed on 29/30 Nov 2018) for another potential down move to target the long-term downside trigger level of 2540/30, also the neckline of the major bearish reversal Head & Shoulders configuration that is taking shape since 01 Jan 2018 high (see monthly chart).

On the other hand, a clearance above 2726 put the bears on hold for an extension of the corrective rebound to retest the range resistance of 2825/40 in place since 17 Oct 2018.     

Nikkei 225 – Minor rebound before potential new impulsive downleg

Key Levels (1 to 3 weeks)

Intermediate resistance: 21720

Pivot (key resistance): 22110

Supports: 20800 & 20550/330

Next resistance: 22780/23000

Medium-term (1 to 3 weeks) Outlook

The Japan 225 Index (proxy for the Nikkei 225 futures) had shaped the expected bearish reaction right below the 23000 key medium-term pivotal resistance as per highlighted in our previous weekly outlook report which was also close to the pull-back resistance of the former major ascending channel support from June 2016 low (previous rallies had been rejected twice on 07 Nov & 03 Dec 2018).

No change, we maintain the bearish bias but do note the risk of a minor rebound at this juncture (above the intermediate support of 20800) towards the 21720 intermediate resistance (the pull-back resistance of a former minor ascending range support from 26 Oct 2018 low) first before another potential impulsive down leg materialises to retest the 26/30 Oct 2018 swing low of 20800 before targeting the 20550/330 medium-term support (the swing low areas of 09 Feb/23 Mar 2018 & the neckline of a major bearish reversal “Double Top” configuration that is in shape since 23 Jan 2018 high).

On the other hand, a clearance above the tightened key medium-term pivotal resistance of 22110 put the bears on hold for an extension of the corrective rebound to retest the range resistance of 22780/23000 (the swing high areas of 07 Nov/03 Dec 2018).

Hang Seng – Minor rebound before another potential fresh downleg

Key Levels (1 to 3 weeks)

Intermediate resistance: 26300

Pivot (key resistance): 26740

Supports: 25000 & 24490/24000

Next resistance: 28000

Medium-term (1 to 3 weeks) Outlook

The Hong Kong 50 Index (proxy for Hang Seng Index futures) had continued to drop lower as expected after the bearish break below the 26170 downside trigger level as per highlighted in our previous weekly technical outlook report.

No change, we maintain the bearish bias but do note the risk of a minor rebound at this juncture towards the 26300 intermediate resistance (the pull-back resistance of a former minor “bearish flag” support from 30 Oct 2018 low) with a maximum limit set at the tightened key medium-term pivotal resistance of 26740 (61.8% Fibonacci retracement of the recent decline from 03 Dec high to today, 10 Dec Asians session low & gapped down formed on 06 Dec 2018) before another potential impulsive downleg materialises to target the 24490/24000 support (the 26 Oct 2018 swing low area).

On the other hand, a clearance above 26740 negates the bearish tone for an extension of the corrective rebound to retest the 28000 resistance (the 26 Sep 2018 swing high, 50% Fibonacci retracement of the decline from 07 Jun 2018 high to 26 Oct 2018 low & 1.00 Fibonacci expansion of the up move from 26 Oct low to 02 Nov 2018 high projected from 13 Nov 2018 low).

ASX 200 – 5708 is the key resistance to watch

Key Levels (1 to 3 weeks)

Intermediate resistance: 5660

Pivot (key resistance): 5708

Supports: 5560, 5470 & 5310

Next resistance: 5782

Medium-term (1 to 3 weeks) Outlook

The Australia 200 Index (proxy for the ASX 200 futures) had staged the expected bearish breakdown from the “Expanding Wedge” support in place since 21 Nov 2018 low and dropped towards the first medium-term downside target/support of 5590/60 zone as per highlighted in our previous weekly technical outlook report (printed a low of 5545 in today, 10 Dec Asian session).

Given that the 4-hour Stochastic oscillator has reached an extreme oversold level, the Index may shape a minor rebound first at the 5560 intermediate support towards the 5660 intermediate resistance with a maximum limit set at the tightened 5708 key medium-term pivotal resistance (pull-back resistance of the former “Expanding Wedge” support & 61.8% Fibonacci retracement of the recent decline from 03 Dec high to 10 Dec 2018 low) before another potential impulsive downleg materialises to target the next medium-term supports at 5470 and 5310.

On the other hand, a break above 5708 negates the bearish tone for squeeze up to retest the last week swing high area of 5782.

DAX – 11240 is the key resistance to watch

Key Levels (1 to 3 weeks)

Intermediate resistance: 10940/11050

Pivot (key resistance): 11240

Supports: 10440, 10180 & 10050/9965

Next resistance: 11600/690

Medium-term (1 to 3 weeks) Outlook

Last week, the Germany 30 Index (proxy for the DAX futures) had staged the expected bearish breakdown below the 11340 downside trigger level and tumbled towards the medium-term downside target/support of 10800/700.

No major changes on its key technical elements. A point to note will be the risk of a minor rebound at this juncture (above 10600) where the 4-hour Stochastic oscillator has just shaped an exit from its oversold region. The Index may see a push up first towards 10940/11050 intermediate resistance (the former swing low areas of 25 Oct/20 Nov 2018) with a maximum limit set at the tightened 11240 key medium-term pivotal resistance (the upper boundary of the minor descending channel from 14 Jun 2018 high & 61.8% Fibonacci retracement of the recent decline from 03 Dec high to 10 Dec 2018 low) before another potential impulsive downleg materialises to target the next medium-term supports at 10440 and 10180.

On the other hand, a break above 11240 put the bears on hold for a squeeze up to retest the 11600/690 range resistance that stalled previous rallies since 02 Nov 2018.

Charts are from City Index Advantage TraderPro & eSignal