Weekly Technical Outlook on Major Stock Indices 19 Nov to 23 Nov 2018

Stock Indices continue to evolve within bearish configurations.

S&P 500 – At risk of shaping another impulsive downleg





Key Levels (1 to 3 weeks)

Intermediate resistance: 2748

Pivot (key resistance): 2770

Supports: 2603 & 2540/30

Next resistance: 2825 (trigger) & 2864/70

Medium-term (1 to 3 weeks) Outlook

The SP 500 Index (proxy for the S&P 500 futures) had staged a bearish breakdown below the 2762 lower limit of the medium-term neutrality zone as per highlighted in our previous weekly technical outlook (click here for a recap). The medium-term (1-3 weeks) bearish view has been reinforced where the positive post U.S. mid-term elections euphoria has been evaporated.

Key elements remain negative as follow;

  • Price action of the Index had managed to drop back below the former major ascending channel support from 11 Feb 2016 low. For a recap, the 11 Feb 2016 low was the bearish capitulation point for the prior extreme negative sentiment triggered by the 3rd shock Chinese Yuan devaluation (see daily chart).
  • The daily RSI oscillator has remained below a significant corresponding resistance at the 60 level coupled with a bearish divergence signal seen in the shorter-term 4-hour Stochastic oscillator at its overbought zone. These observations suggest that medium-term downside momentum remains intact.
  • Sector rotation analysis from relative strength charting (based on S&P sectors ETFs) is still not advocating a bottoming process as higher 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 remain in outperformance mode (refer to 3rd & 4th charts).
  • The key medium-term resistance for the Index stands at 2770 which is defined by the descending trendline in place since 03 Oct 2018 high and a Fibonacci retracement/projection cluster (close to 61.8% retracement of the recent push down from 07 Nov 2018 high & 1.00 projection of the recent rebound seen from 15 Nov 2018 low).

Therefore, as long as the 2770 key medium-term pivotal resistance is not surpassed, the Index is likely to stage another leg of potential impulsive down move to retest the 29 Oct 2018 low of 2603 before targeting the key long-term downside trigger level of 2540/30 (also the Feb 2018 low).

On the other hand, a break above 2770 negates the bearish tone for a probe to retest the 17 Oct/07 Nov swing high area of 2825. Only a daily close above 2825 opens up scope for an extension of the corrective rebound from 29 Oct 2018 low towards the next resistance at 2864/70 (76.4% Fibonacci retracement of the decline from 21 Sep 2018 high to 29 Oct 2018 low & the former medium-term swing high area of 26/29 Jan 2018).

Nikkei 225 – Watch the 21535 downside trigger level



Key Levels (1 to 3 weeks)

Intermediate resistance: 22000

Pivot (key resistance): 22170

Supports: 21535 (trigger), 20800 & 20550/330

Next resistance: 23000

Medium-term (1 to 3 weeks) Outlook

The 8.5% rally seen in the Japan 225 Index (proxy for the Nikkei 225 futures) from its 29 Oct 2018 low led by the U.S. mid-term elections results and an impending possible trade deal to be signed by U.S. and China on the side-lines of the G20 meeting on 30 Nov 2018,   Japan 225 Index (proxy for the Nikkei 225 futures) has fizzled right at the descending trendline resistance in place since 01 Oct 2018 high and also the 50% Fibonacci retracement of the prior down move from 01 Oct 2018 high to 29 Oct 2018 low at the 22640 level.

Since last week low of 21480 printed on 13 Nov 2018, the Index has started to evolve into a minor “Symmetrical Triangle” range configuration with is upper limit/resistance and lower limit/support at 22000 and 21535 respectively. Also, last week’s decline has led the Index to dropped back below the former major ascending channel support from Jun 2016 low now acting as a resistance at 22170 which also confluences with the descending trendline from 01 Oct 2018 high and the 61.8% Fibonacci retracement of the recent push down from the post U.S. mid-term elections high of 07 Nov 2018 to 13 Nov 2018 low.

We flip back to a bearish bias with the 22170 level as the key medium-term pivotal resistance. A break below the minor “Symmetrical Triangle” range support at 21535 is likely to trigger another potential fresh impulsive down move towards the 29 Oct 2018 low of 20800 in the first step before targeting the Feb/Mar 2018 swing low areas of 20550/330.

On the other hand, a clearance above 22170 see an extension of the corrective rebound in place since 29 Oct 2018 low towards the 23000 multi-month range resistance in place since 21 May 2018.

Hang Seng – Bearish elements remain intact



Key Levels (1 to 3 weeks)

Pivot (key resistance): 26700

Supports: 26060 (trigger), 25090 & 24360/24000

Next resistance: 28000

Medium-term (1 to 3 weeks) Outlook

Last week, the Hong Kong 50 Index (proxy for Hang Seng Index futures) had managed to stage to expected push down to hit the first support/target of 25090 as it printed a low of 25013 on 13 Nov 2018.

Thereafter, it has staged a rebound of 5.2% to print a current intraday high of 26408 in today, 19 Nov Asian session which is still below the 26700 predefined key medium-term pivotal resistance (the minor swing high area of 02 Nov 2018 & the lower boundary of the medium-term descending channel from 07 Jun 2018 high). In addition, the on-going rebound from the 25461 minor swing low of 14 Nov 2018 has evolved into a minor bearish reversal “Ascending Wedge” configuration coupled with a bearish divergence signal seen in the 4-hour Stochastic oscillator at its overbought zone. These observations suggest a lack of upside momentum of price action and it is likely that the rebound in place since 13 Nov 2018 low is corrective in nature.

We maintain the bearish bias below the 26700 key medium-term pivotal resistance and added 26060 as the downside trigger level (minor “Ascending Wedge” support). A break below 26060 is likely to reinforce the start of another potential impulsive down move to retest 25090 before targeting the next support at 24360/24000 (Fibonacci projection & the lower boundary of the medium-term descending channel in place since 07 Jun 2018 high).

On the other hand, a daily close above 26700 invalidates the preferred bearish scenario 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 – Further potential down move ahead



Key Levels (1 to 3 weeks)

Intermediate resistance: 5782

Pivot (key resistance): 5950

Supports: 5560, 5470 & 5310

Next resistance: 6115

Medium-term (1 to 3 weeks) Outlook

The Australia 200 Index (proxy for the ASX 200 futures) has continued to drift downwards as expected through the bearish break of the 5875 downside trigger level. Last week, it declined by 4% to print a low of 5684 that made it the worst performing stock index in our coverage

Key elements remain negative, maintain bearish bias and adjusted the key medium-term pivotal resistance to 5950 (the descending trendline in place since 29 Aug 2018 low & former swing high areas of 17/19 Oct 2018) for a further potential down move to target the next supports at 5560, 5470 and 5310 next.

On the other hand, a break above 5950 negates the preferred bearish tone for a squeeze up towards the next intermediate resistance at 6115 (close to 61.8% Fibonacci retracement of the decline from 29 Aug 2018 high to 26 Oct 2018 low & former swing low areas of 07 Sep/02 Oct 2018).

DAX – 11600/690 remains the key resistance to watch



Key Levels (1 to 3 weeks)

Pivot (key resistance): 11600/690

Supports: 11250 (trigger), 11050 & 10800/700

Next resistance: 11800/900

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) has traded sideways below the predefined 11600/690 key medium-term pivotal resistance and above a minor range support at 11250.

Maintain bearish bias and added 11250 as the revised downside trigger level. A break below it reinforces the start of a potential fresh impulsive down move to retest the 25/26 Oct 2018 swing low area of 11050 before targeting the next support at 10800/700.

On the other hand, a clearance above 11600/690 put the bears on hold for an extension of the corrective rebound in place since 26 Oct 2018 low towards the 11800/900 neckline resistance of major “Head & Shoulders” bearish reversal breakdown.

Charts are from City Index Advantage TraderPro & eSignal








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