Weekly Technical Outlook on Major Stock Indices 17 Dec to 21 Dec 2018

Stock Indices remain below resistances ahead of Fed FOMC

S&P 500 – Risk of minor rebound first before downleg to test key 2530 support




Key Levels (1 to 3 weeks)

Intermediate resistance: 2640/50

Pivot (key resistance): 2695

Supports: 2603, 2540/30 (long-term downside trigger) & 2475/55

Next resistance: 2825/40

Medium-term (1 to 3 weeks) Outlook

Last week, The SP 500 Index (proxy for the S&P 500 futures) had staged the expected minor corrective rebound at the start of the week to print a high of 2685 on Wed, 12 Dec right below the predefined intermediate resistance of 2695 before it reversed down to hit the first medium-term target at 2603 (printed a low of 2593 on last Fri, 14 Dec). (click here for a recap).

As we head into a crucial week before the 2018 ends where the U.S. central bank Fed FOMC will announce its monetary policy plus its future expectations on the movement of the key fed funds policy rates. Click here for the report “A major test for global risk assets next week” published last Fri, 15 Dec where we have highlighted the key reasons and important charts.

 At this juncture, the key elements are still constructive for the Index to resume its medium-term (1-3 weeks) impulsive down move after a minor corrective rebound.

  • The daily RSI oscillator is not showing any signs of bullish reversal (no bullish divergence signal) and still has potential room to manoeuvre to the downside before it reaches an extreme oversold level of 25. These observations suggest that medium-term downside momentum of price action remains intact.
  • Based on last Fri, 14 Dec closing level of 2599, the Index is now just 2.65% away from the key long-term downside trigger level of 2540/30 as per highlighted earlier in our longer-term strategic Q4 2018 Global Markets Technical Outlook. The 2540/30 level also confluences with the neckline of a major bearish reversal Head & Shoulders configuration that is taking shape since 01 Jan 2018 high (see monthly chart).
  • A weekly close below 2530 unleashes a potential primary bear market for the U.S. stock market.
  • The key medium-term resistance for this week will be tightened to 2695 which is defined by the range resistance in place since 07 Dec 2018 high and a Fibonacci retracement/projection cluster (see 4 hour chart).
  • The shorter-term 4-hour Stochastic oscillator has traced out a bullish divergence signal at its oversold region which suggests the risk of a minor rebound at this juncture. Potential push up to retest 2640/50 intermediate resistance as per defined by the upper boundary of the minor descending channel in place since 03 Dec 2018 high and the 50%/61.8% Fibonacci retracement of the recent decline from 12 Dec high to last Fri, 14 Dec 2018 low.

Therefore, we maintain the bearish bias in any bounces below the tightened key medium-term pivotal resistance at 2695 for another potential impulsive downleg to retest 2603/2582 (the range support in place since 30 Oct 2018) before targeting the long-term downside trigger level of 2540/30. A weekly close below 2530 opens up scope for a further decline towards 2475/55 in the first step (the lower boundary of the minor descending channel & Fibonacci projection cluster).

However, a break with a daily close above 2695 invalidates the bearish scenario for a continuation of the corrective rebound towards the 2825/4 resistance of a 3-month sideways range configuration in place since 30 Oct 2018.

Nikkei 225 – 22110 remains the key resistance to watch



Key Levels (1 to 3 weeks)

Intermediate resistance: 21755

Pivot (key resistance): 22110

Supports: 20800, 20550/330 & 20240

Next resistance: 22780/23000

Medium-term (1 to 3 weeks) Outlook

No change on its key elements. we maintain the bearish bias in any bounces below the 22110 key medium-term pivotal resistance for a further potential push down to test 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). A weekly close below 20330 opens up scope for a further potential downleg towards the next support at 20240 (the lower boundary of a minor descending channel from 03 Dec 2018 high & 1.00 Fibonacci extension of the recent decline from 03 Dec high to 07 Dec low projected from 12 Dec 2018 bearish reaction high).

However, a clearance above 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 – Medium-term dowtrend remains intact



Key Levels (1 to 3 weeks)

Intermediate resistance: 26300/370

Pivot (key resistance): 26740

Supports: 25000 & 24490/24000

Next resistance: 28000

Medium-term (1 to 3 weeks) Outlook

Key elements remain negative; thus we maintain the bearish bias in any bounces below the 26740 key medium-term pivotal resistance for another round of potential impulsive downleg to target 25000 follow by the 24490/24000 support (the 26 Oct 2018 swing low area & now the lower boundary of a minor descending channel in place since 03 Dec 2018 high).

However, a daily close above 26740 sees the revival 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 remains 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

No change, we maintain the bearish bias in any bounces below the 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.

However, a daily close above 5708 negates the bearish tone for squeeze up to retest 5782 (the swing high areas of 28 Nov/03 Dec 2018).

DAX – 11240 remains 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 & 11800

Medium-term (1 to 3 weeks) Outlook

The expected minor corrective rebound of Germany 30 Index (proxy for the DAX futures) had managed to stall at the predefined 10940/11050 resistance zone in the early part of last week.

No major changes on is key elements. We maintain the bearish bias below the 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 (also the upper limit of the major “Head & Shoulders” bearish breakout exit target).

However, a daily close above 11240 negates the bearish tone for a squeeze up to retest the 11600/690 range resistance that stalled previous rallies since 02 Nov 2018 and even the 11800 neckline resistance of the recent major “Head & Shoulders” bearish breakdown).

Charts are from City Index Advantage TraderPro & eSignal








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