Weekly Technical Outlook on Major Stock Indices 22 Jan to 26 Jan 2018

Holding above respective supports with German DAX (laggard) playing a catch-up

S&P 500 – 2766 is the key support to watch for the bulls




Key Levels (1 to 3 weeks)

Intermediate support: 2794

Pivot (key support): 2766

Resistances: 2820 & 2860/80

Next supports: 2736 & 2668

Medium-term (1 to 3 weeks) Outlook

The U.S. SP 500 Index (proxy for the S&P 500 futures) had managed to hold above the 2766 intermediate support (printed a low of 2738 on Tues, 16 Jan U.S. session) and surged to a new all-time high of 2812 on last Fri, 19 Jan U.S. session (close to the first medium-term resistance/target of 2820). Click here for a recap on our previous weekly technical outlook.

The market has shrugged off the negative sentiment that could arise from the current U.S. government shutdown triggered by infighting between U.S. politicians that may put future expansionary fiscal policies such as the President Trump’s proposed infrastructure spending plan in the backburner.  From a technical analysis perspective, there are still no clear signs of bullish exhaustion signs where medium-term elements remain positive as follow;

  • The daily RSI oscillator has hit an extreme overbought level of 87% which was last seen in May 1996 but no bearish divergence signal yet. This observation suggests that medium-term upside momentum of price action remains intact.
  • Based on the Elliot Wave Principal/fractal analysis, the primary degree (multi-month/year) bullish impulsive wave (3) in place since 27 Jun 2016 low is now likely undergoing an extension phase (beyond the 1.618 Fibonacci projection of the wave (1) up move from 11 Feb 2016 low to 20 Apr 2016 high projected from  27 Jun 2016 low) to a potential end targets at 2820 and 2860/80 (Fibonacci projection cluster (see daily chart).
  • Sector rotation analysis suggests that the Consumer Discretionary, Financials , Industrials and Energy sectors can still outperform the benchmark S&P 500 where their respective ETFs relative strength analysis charts are still holding above supports. These on-going positive observations should be above to offset the underperformance of the “momentum play” Technology sector in place since 04 Dec 2017 (see last chart).
  • The key medium-term support is now tightened to 2766 which is defined by confluence elements. The pull-back support of the former ascending channel upper boundaries from 11 Feb 2016/21 Aug 2017 and the 23.6% Fibonacci retracement of the up move from 06 Dec 2017 low to last Fri, 19 Jan 2018 high.

Therefore, as long as the 2766 key medium-term pivotal support holds, the Index may see a further potential push up to test 2820 and above it opens scope for a rally to target the next resistance zone at 2860/80.

However, failure to hold above 2766 should invalidate the bullish scenario to kick-start a potential multi-week corrective decline towards the next supports at 2736 and 2668 next.

Nikkei 225 – Still holding above 23325 key support



Key Levels (1 to 3 weeks)

Intermediate support: 23650

Pivot (key support): 23325

Resistances: 23900, 24200 & 24540

Next supports: 22970 & 21990/890

Medium-term (1 to 3 weeks) Outlook

Last week, the Japan 225 Index (proxy for the Nikkei 225 futures) had traded sideways again as the markets awaits for the upcoming Japanese central bank, BOJ monetary policy decision outcome  on Tues, 23 Jan 2018.

Overall, there are no major changes on its technical elements. Therefore, we maintain the bullish bias above the 23325 key medium-term pivotal support for another round of potential upleg towards 24200 and above it opens up scope for a further up move to target the 24540 resistance next. 

On the other hand, failure to hold above 23325 should negate the preferred bullish scenario to see a deeper pull-back to retest the former “triangle range” resistance now turns pull-back support at 22970. Only a clear break below (daily close) 22970 implies a failure bullish breakout to trigger the start of a multi-week corrective down move towards the next support at 21990/890 in the first step.

Hang Seng – Further potential upside above 31300 key support



Key Levels (1 to 3 weeks)

Intermediate support: 32000

Pivot (key support): 31300

Resistances: 32840 & 33330/420

Next support: 30140

Medium-term (1 to 3 weeks) Outlook

Last week, the Hong Kong 50 Index (proxy for Hang Seng Index futures) had maintained its bullish momentum as expected and surged past the Oct 2007 high of 31960. It printed a new all-time high of 32343 on last Fri, 19 Jan 2018.

Technical elements remain positive as follow;

  • The daily RSI oscillator still has room to manoeuvre to the upside before it reaches an extreme overbought level of 86% seen on Apr 2015. In addition, no bearish divergence signal at the moment.
  • The key medium-term support now rests at 31300 which is defined by the pull-back support of the former major ascending channel’s upper boundary from 28 Dec 2016 low, the medium-term ascending trendline from 15 Dec 2017 (depicted in purple) and close to the 23.6% Fibonacci retracement of the on-going up move since 07 Dec 2017 low to today (22 Jan) current intraday high.
  • The next significant medium-term resistance stands at 33330/420 which is defined by a Fibonacci projection cluster.

Therefore, as long as the 31300 key medium-term pivotal support holds, the Index is likely to stage a further potential impulsive upleg to target the next resistances at 32840 follow by 33330/420 next.

On the flipside, failure to hold above 31300 should invalidate the direct rise scenario to see a deeper corrective pull-back towards the next support at 30140.

ASX 200 – Mix elements and still holding above support



Key Levels (1 to 3 weeks)

Supports: 5986 & 5920/5900

Resistances: 6109, 6190 & 6240/60

Medium-term (1 to 3 weeks) Outlook

Last week, the Australia 200 Index (proxy for the ASX 200 futures) had undergone a whipsaw around the 6026 key medium-term support and continued to inch lower.  However, technical elements are giving mix signals at this juncture with some positive ones as follow;

  • The on-going slide in place since 15 Jan 2018 high of 6109 is now testing the pull-back support of the former “triangle range” resistance at 5986.
  • The short-term 4 hour Stochastic oscillator has started to flash a bullish divergence signal at its oversold region which indicates that the downside momentum of the aforementioned slide in price action has abated. A potential short-term bullish reversal scenario.

Therefore, we turn neutral first between 6109 and 5986. Only a clear break above 6109 (daily close) is likely to reinstate the bullish tone for a potential impulsive upleg to target the next resistances at 6190 follow by 6240/60 next.

DAX – 13350 upside trigger surpassed, further potential upside



Key Levels (1 to 3 weeks)

Intermediate support: 13340

Pivot (key support): 13130

Resistances: 13530/560, 13760/820 & 13950

Next support: 12820/740

Medium-term (1 to 3 weeks) Outlook

Last Fri (19 Jan 2018), the Germany 30 Index (proxy for the DAX futures) had finally staged a bullish breakout above the 13350 upside trigger level as expected which had further reinforced our bullish scenario Click here for a recap on our previous weekly technical outlook.

Current key technical elements are as follow;

  • The Index has started to evolve in minor ascending channel (depicted in dark blue) in place since 02 Jan 2018 low (see 4 hour chart).
  • The daily RSI oscillator has started to inch higher from its support at the 50% which indicates that medium-term upside momentum of price action has resurfaced.
  • The key medium-term support now rests at 13130 which is defined by the 17 Jan 2018 swing low and the pull-back support of the former range resistance from 07 Nov 2017 high.

Therefore, we maintain the bullish bias above a tightened key medium-term pivotal support now at 13130 for a potential further push up to retest 13530/560 (current all-time high) before targeting the next resistances at 13760/820 follow by 13950 next.

On the other hand, failure to hold above 13130 should invalidate the bullish scenario to see another round of choppy decline to retest the major support of 12820/740 (lower boundary of the ascending channel from 24 Jun 2016 low & the recent swing low of 02 Jan 2018).

Charts are from City Index Advantage TraderPro  & eSignal






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