Weekly Technical Outlook on Major Stock Indices 20 Aug to 24 Aug 2018

The smell of bearish forces still lingers on for major stock indices

S&P 500 – 2880 remains the key medium-term resistance to watch




Key Levels (1 to 3 weeks)

Intermediate resistance:2864

Pivot (key resistance): 2877/80

Supports: 2790, 2740 & 2700

Medium-term (1 to 3 weeks) Outlook

Last week, the SP 500 Index (proxy for the S&P 500 futures) had managed to stage the expected push down towards the intermediate support/target of 2790 (printed a low of 2803) on 15 Aug before it recouped its all its losses due to two main “feel good” sentiment factors.

Walmart ‘s Q2 2018 earnings that managed to beat expectations coupled with a strongest revenue growth in more that a decade at stores open for at least 12 months. Secondly, U.S. and China trade officials had started to return to the negotiate table on 22 and 23 Aug to avert further escalation of the on-going trade tensions where the second tranche of US$ 16 billion worth of tariffs on China imports is scheduled to go into effect on 23 Aug.  Click here for a recap on our previous weekly outlook.

Overall, technical elements are still show the risk of a major cyclical top in the making where market breadth has continued to show weakness as indicated by relative strength analysis on the S&P 500 sectors via the respective ETFs (refer to the 3rd chart). “Risk on” sectors with higher weightages; Industrials (XLI), Financials (XLF) and Consumer Discretionary (XLV) have continued to show weakness in terms of relative strength against the S&P 500.  In contrast, defensive sectors such as Consumer Staples (XLP) and Utilities (XLU) have outperformed since 28 Jul 2018 and Walmart is the 4th largest component stock of the Consumer Staples (8.41% weightage based on last Fri, 17 Aug closing price).

Therefore, we maintain the bearish bias as long as the 2880 key medium-term pivotal resistance is not surpassed for another potential downleg to target the 2790 intermediate support (swing low areas of 17/23/02 Aug 2018 & the lower boundary of the “Ascending Wedge” in place since 02 Apr 2018 low). A break below 2790 opens up scope for further downside pressure towards 2740 next (the former minor swing high areas of 27/29 Jun 2018 & 38.2% Fibonacci retracement of the up move from 02 Apr 2018 low to 07 Aug high of 2864).

On the other hand, a daily close above 2880 invalidates the bearish scenario to kickstart the bullish impulsive upleg scenario to target the next resistance at 2940 (the upper boundary of the primary ascending channel from Feb 2016).

Nikkei 225 – 22400 remains the key medium-term resistance to watch



Key Levels (1 to 3 weeks)

Pivot (key resistance): 22400

Supports: 21750, 21460 & 21100

Next resistances: 22840 & 23020

Medium-term (1 to 3 weeks) Outlook

The Japan 225 Index (proxy for the Nikkei 225 futures) had traded sideways below the predefined 22400 key medium-term pivotal resistance.

No change, we maintain bearish bias below the 22400 key medium-term pivotal resistance for a further potential push down to retest 21750 before targeting the 21460 support (the swing low of 05 Jul 2018 & the lower boundary of the major ascending channel in place since Jun 2016 low).

However, a clearance above 22400 negates the bearish tone for a squeeze up to retest the range resistance zone of 22840/23020 in place since 22 May 2018.

Hang Seng – Bearish breakdown below 28000 major support, further potential downside



Key Levels (1 to 3 weeks)

Intermediate resistance: 28000

Pivot (key resistance): 29100

Supports: 26790 & 26000/25500

Next resistance: 30100

Medium-term (1 to 3 weeks) Outlook

Last week, the Hong Kong 50 Index (proxy for Hang Seng Index futures) had managed to stage the expected bearish breakdown below the 28000 major support (the primary ascending support in place since Feb 2016 low of 18056) and tumbled to hit the 27000 intermediate support/target (printed a low of 26734 on 15 Aug).

No change, maintain bearish bias below 29100 key medium-term pivotal resistance for another potential downleg to retest 26790 minor swing low area of 15 Aug 2018 before targeting the next support at 26000/25500 (the swing low of 6 Jul 2017, a Fibonacci retracement/projection cluster & the lower boundary of a minor descending channel in place since 07 Jun 2018).

However, a clearance above 29100 invalidates the bearish tone for an extension of the mean reversion rebound to test the next intermediate resistance at 30100.

ASX 200 – 6380 & 6230 remains the range to watch



Key Levels (1 to 3 weeks)

Supports: 6230 & 5980

Resistances: 6350/80 & 6455/490

Medium-term (1 to 3 weeks) Outlook

The Australia 200 Index (proxy for the ASX 200 futures) had probed the upper limit of the predefined medium-term neutrality zone of 6380 on last Fri, 17 Aug U.S. session before it staged a retreat.

Elements remain mix at this juncture, thus prefer to maintain the neutrality stance with an adjusted lower limit of the neutrality zone shifted up to 6230 (the lower boundary of the medium-term ascending channel in place 04 Apr 2018 low & now 23.6% Fibonacci retracement of the up move from 04 Apr 2018 low to last Fri, 17 Aug U.S. session high of 6380).

A daily close above 6380 shall trigger the start of another bullish upleg to target the next resistance at 6455/490. On the other hand, bears need to have a daily close below 6230 to kick start a potential multi-week corrective down move to target the next support at 5980 in the first step (swing low area of 29 May 2018 & the lower boundary of the major ascending channel in place since 10 Feb 2016 low).

DAX – Further potential downside towards the last line of defence at 11900/800



Key Levels (1 to 3 weeks)

Intermediate resistance: 12420

Pivot (key resistance): 12540

Supports: 12100 & 11900/800

Next resistance: 12890

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) had staged the expected bearish breakdown below the major/primary ascending trendline support from Feb 2016 low now turns pull-back resistance at 12420. It printed a low of 12112 on last Wed, 15 Aug which is closed to our intermediate support/target of 12100 before it traded sideways.

No change, maintain bearish bias below the key medium-term pivotal resistance of 12540 for another potential downleg to retest the 12100 support in the first step (swing low areas of 27/28 Jun 2018 & the exit potential of the minor “Head & Shoulders” bearish breakdown) follow by 11900/800 next (the neckline support of the major Head & Shoulders).

On the other hand, a break above 12540 put the bears on hold for another round of choppy up move to retest the 12890 swing high area of 27 Jul 2018.

Charts are from City Index Advantage TraderPro & eSignal







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