Weekly Technical Outlook on Major Stock Indices 21 May to 25 May 2018

S&P 500 – Continues to exhibit positive elements

Key Levels (1 to 3 weeks)

Intermediate support: 2700

Pivot (key support): 2680

Resistances: 2760/65 & 2800

Next support: 2585

Medium-term (1 to 3 weeks) Outlook

Last week, the SP 500 Index (proxy for the S&P 500 futures) had traded sideways below its recent minor high of 2741 printed on 14 May 2018 as market participants grappled with the risk of a further liquidity tightening conditions as the U.S. 10-year Treasury bond yield remained bullish above the 3% key (printed an intraweek high of 3.115% & ended with a weekly close of 3.067% on last Fri, 18 May, a 7-year high). Click here for a recap on our previous weekly technical outlook.

From a technical analysis perspective, we do not foresee a major top in the S&P 500 at this juncture and maintain a potential medium-term impulsive upleg scenario within this on-going melt-up phase in place since Feb 2016 low. Key elements as follow:

• In today, 21 May Asian session, the Index has staged a bullish breakout from a minor “Symmetrical Triangle” range configuration in place since 14 May 2018 high reinforced by a positive turn in U.S, and China trade relations as U.S. Treasury secretary reported that President Trump will put planned tariffs against China on hold for now (see 2nd chart).
• Higher beta/risk sensitive benchmark U.S. stock indices such as the Nasdaq 100 (technology oriented) and Russell 2000 (small caps) have continued to outperform the S&P 500 from relative strength charting analysis (see 3rd chart). 

Therefore, we maintain the bullish bias as long as the 2680 key medium-term pivotal support holds (the pull-back support of the former medium-term “Symmetrical Triangle” range resistance from 29 Jan 2018 & close to the 38.2% Fibonacci retracement on on-going up move from 03 May low to 14 May 2018 high of 2741) for a further potential upleg to target the next resistances at 2760/65 (minor swing high areas of 15/16 Mar 2018) follow by 2800 next (the minor swing high area of 12/13 Mar 2018 & 1.618 Fibonacci projection of the up move from 03 May 2018 low).

However, failure to hold at 2680 invalidates the previous medium-term bullish breakout scenario seen on 10 May 2018 for another round of the choppy decline to retest the support of the 4-month range configuration at 2585.

Nikkei 225 – Uptrend remains intact

Key Levels (1 to 3 weeks)

Intermediate support: 22700

Pivot (key support): 22550

Resistances: 23280, 23550 & 23850

Next support: 20000

Medium-term (1 to 3 weeks) Outlook

The Japan 225 Index (proxy for the Nikkei 225 futures) had continued to inch upwards as expected and hit the lower limit of the intermediate resistance at 23000 (printed a current intraday high of 23051 in today, 21 May Asian session).

Key technical elements remain positive as the Index manages trade within a medium-term ascending channel in place since 03 Apr 2018 low (see 2^nd chart) with the daily RSI oscillator that remains positive above its first corresponding support at the 62% level. These observations suggest that medium-term upside momentum of price action remains intact.

Therefore, we maintain the bullish bias with an adjusted key medium-term pivotal support now at 22550 (former swing high areas of 27 Feb/02 May 2018 & close to the 23.6% Fibonacci retracement of the on-going up move from 24 Mar low to 21 May 2018 current intraday high of 23051) for a further potential push up to target 23280 (76.4% Fibonacci retracement of the recent decline from 23 Jan high to 24 Mar 2018 low) follow by 23550 (former minor swing low areas of 10/26 Jan 2018) and even 23850 next (upper boundary of the aforementioned medium-term ascending channel & 0.764 Fibonacci projection of the up move from 24 May 2018 low).

On the other hand, a break below 22550 shall negate the bullish tone to trigger a deeper pull-back to retest the next support at 20000 (psychological, former congestion range resistance from 13 Mar/16 Apr 2018 & 38.2% Fibonacci retracement of the on-going up move from 24 Mar low to 21 May 2018 current intraday high of 23051).

Hang Seng – Impending potential bullish breakout where 31800 remains the upside trigger

Key Levels (1 to 3 weeks)

Supports: 29070, 28100 & 26000/25750

Resistances: 31800 & 33430/530

Medium-term (1 to 3 weeks) Outlook

The Hong Kong 50 Index (proxy for Hang Seng Index futures) had continued to inch higher to print a current intraday high of 31507 in today, 21 May Asian and it is now just 1.2% away from its medium-term 31800 range resistance in place since 27 Feb 2018.

A clear break above 31800 (a daily close above it is preferred due to a previous failure intraday breakout seen on 21 Mar) shall kick start a potential impulsive upleg to retest its current all-time high area of 33430/530 in the first step.

ASX 200 – Pull-backed towards key medium-term support

Key Levels (1 to 3 weeks)

Pivot (key support): 6054/40

Resistances: 6150, 6210 & 6280

Next support: 5980/60

Medium-term (1 to 3 weeks) Outlook

Last week, the Australia 200 Index (proxy for the ASX 200 futures) had undergone a pull-back of 1.4% from its intermediate resistance of 5150 (former swing high area of 09 Jan 2018.

Interestingly, the pull-back in price came close to the 6054/40 key medium-term pivotal support (the ascending trendline in place since 04 Apr 2018 low & the 23.6% Fibonacci retracement of the on-going up move from 04 Apr low to 10 May 2018 high) as it printed a low of 6057 in last Fri, 19 May U.S. session. Thereafter, it staged a gapped up of 0.4% in today, 21 May Asian opening session.

We maintain the bullish bias for another round of potential upleg to retest the 6150 intermediate resistance before targeting the next resistances at 6210 follow by 6280 (Fibonacci projection cluster – see 4 hour chart).

On the flipside, failure to hold at 6054/40 opens up scope for a deeper pull-back to retest 5980/60 (the pull-back support of the former “Symmetrical Triangle” range resistance from 09 Jan 2018).

DAX –  Uptrend remains intact

Key Levels (1 to 3 weeks)

Intermediate support: 13020

Pivot (key support): 12850

Resistances: 13245/75 & 13560

Next support: 12630 (downside trigger) & 12300/200

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) had a further push up as expected to hit the intermediate resistance/target of 13140/13150 at the later part of last week before it staged a pull-back on last Fri, 18 May.

The pull-back in price action has managed to hold above an intermediate support at 13020 (the pull-back of the former minor “triangle range” resistance from 11 May 2018 -  see 4hr chart).

Key technical elements remain positive and we maintain the bullish bias with an adjusted key medium-term pivotal support now at 12850 (the former medium-term swing low areas from 15 Nov 2017/02 Jan 2018 & close to the 23.6%  Fibonacci retracement of the on-going up move from 26 Mar low to 18 May 2018 high) for another round of potential upleg to target the next resistances at 13245/75 (Fibonacci projection cluster) follow by 13560 (current all-time high area & the upper boundary of an ascending channel from 04 Apr 2018 low – see 4 hour chart).

However, a break below 12850 negates the bullish tone for a deeper pull-back to retest 12630 (the medium-term ascending trendline from 26 Mar 2018 low & former 3-month range resistance of the “Bottoming” configuration from 07 Feb/24 Apr 2018). Only a clear break below 12630 (a daily close below it) shall invalidate the medium-term uptrend for a choppy down move towards the next support at 12300/200 (swing low area of 25 Apr 2018 & 61.8% Fibonacci retracement of the on-going up move from 26 Mar low to 18 May 2018 high).

Charts are from City Index Advantage TraderPro & eSignal