Weekly Technical Outlook on Major Stock Indices 23 Jul to 27 Jul 2018

A potential major cyclical top in the making for S&P 500

S&P 500 –  A potential major cyclical top in the making

Key Levels (1 to 3 weeks)

Intermediate support: 2790

Pivot (key support): 2763

Resistances: 2840 & 2877/80

Next support: 2710/2690

Medium-term (1 to 3 weeks) Outlook

The SP 500 Index (proxy for the S&P 500 futures) had shaped a pull-back of 0.8% from its 18 Jul 2018 U.S. session high of 2816 to test the intermediate support at 2790 as per highlighted in our previous weekly outlook (click here for a recap).

No major changes on its technical elements as we still view the on-going up move from its 03 Apr 2018 low of 2552 as the potential tail-end of the melt-up phase in place since Feb 2016 low. Thereafter, a potential cycle top shall form to kick start at least a multi-month corrective decline in the first step (likely to be in a greater magnitude of the recent Jan/Feb 2018 sell-off of 11%).

The key medium-term pivotal support remains at 2763 (11 Jul 2018 swing low & close to the 38.2% Fibonacci retracement of the on-going up move from 28 Jun 2018 low to 18 Jul 2018 high of 2816) for a potential residual push up to target the resistance of 2840 with a maximum limit set at 2877/80 (the upper limit of the medium-term bearish “Ascending Wedge” in place since 03Apr 2018 low & a Fibonacci projection cluster).

However, a break below 2763 negates the bullish tone for a deeper pull-back to retest the “Ascending Wedge” support at 2730/10.

Nikkei 225 – Range bound between 23020 & 22200

Key Levels (1 to 3 weeks)

Resistances: 23020 & 24200

Supports: 22200, 21460 & 21100

Medium-term (1 to 3 weeks) Outlook

Late last week, the Japan 225 Index (proxy for the Nikkei 225 futures) had staged a retreat right below the predefined 23020 upper limit of the medium-term neutrality range as it printed 

No change, maintain neutrality stance between 23020 and 22200. Only a break below 22200 reinstates the bears for a potential downleg to target the supports of 21460 follow by 21100 next (the lower boundary of the major ascending channel from Jun 2016 low.

On the flip side, a daily close above 23020 opens up scope for an impulsive upleg to target the next resistance at 24200 (the medium-term swing high of 23 Jan 2018, a 27-year high).

Hang Seng – 28000 remains the key support to watch

Key Levels (1 to 3 weeks)

Pivot (key support): 28000

Resistances: 29100 & 29400

Next supports: 27000 & 25500

Medium-term (1 to 3 weeks) Outlook

The Hong Kong 50 Index (proxy for Hang Seng Index futures) had continued to hold at the 28000 key major support after another challenge on it last Fri, 25 Jul 2018 (it printed a low of 27743 but did not have a daily close below 28000). The main catalyst was the sell-off in the Chinese Yuan where PBoC set the USD/CNY reference fixing beyond 6.7 that caused the offshore USD/CNH to surge to 6.8366, a 1-year high since July 2017.

Overall the technical picture remains the same for the Index where a potential mean reversion rebound scenario remains intact towards the 29100/400 resistance zone (the pull-back of the former 5-month range support from 10 Feb 2018 & the 38.2% Fibonacci retracement of the recent decline from 07 Jun 2018 high to last Fri, 20 Jul low of 27743) as long as the key major support at 28000 holds (the swing low areas of 19 Oct/07 Dec 2017 & the primary ascending trendline in place since Feb 2016 low).

In addition, the technical elements of USD/CNH (the main catalyst that triggered last Fri’s sell-off) are advocating an “overstretched” medium-term uptrend in place since 27 Mar 2018 below the 6.80/86 key medium-term resistance where it faces the risk of a multi-week setback towards the 6.62/60 support. These observations on the USD/CNH support the mean reversion rebound scenario on the Hong Kong 50 Index.

On the other hand, a break (daily close) below 28000 for the Index shall trigger a multi-month corrective decline to target the next supports at 27000 and 25500 in the first step (the swing low of 6 Jul 2017 & close to the 50% Fibonacci retracement of the primary uptrend in place since 11 Feb 2016 low to 29 Jan 2018 high).

ASX 200 – 6150 remains the key medium-term support to watch

Key Levels (1 to 3 weeks)

Intermediate support: 6205

Pivot (key support): 6150

Resistances: 6310, 6350/380 & 6455/490

Next supports: 5980

Medium-term (1 to 3 weeks) Outlook

The Australia 200 Index (proxy for the ASX 200 futures) has continued to evolve in a sideways configuration for two weeks since its 10 Jul 2018 swing high area of 6310.

Therefore as long as the 6150 key medium-term pivotal support holds, the upleg scenario remains intact for the Index to stage a potential up move to retest 6310 before targeting the next resistance at 6350/380 (Fibonacci projection cluster).

However, a break below 6150 negates the bullish tone for a deeper pull-back towards the next support at 5980.

DAX – Failure bullish break above 12630

Key Levels (1 to 3 weeks)

Intermediate resistance: 12630

Pivot (key resistance): 12780

Supports: 12420 & 12100

Next resistance: 13190

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) had staged a failure bullish breakout above the 12630 upper limit of the medium-term neutrality zone and reintegrated back below it on last Fr, 20 Jul.

Interestingly, the “exhaustion high” of 12779 printed on 18 Jul 2018 coincides with the former swing low areas of 11/13 Jun 2018 and the 61.8% Fibonacci retracement of the decline from 15 Jun 2018 high to 28 Jun 2018 low of 12101.

Therefore, the Index now may see a potential push down to retest the 12100 support (swing low area of 28 Jun 2018 & the primary trendline support from Feb 2016 low) after a minor rebound towards the 12630 intermediate resistance (the failure breakout level & the pull-back resistance of a former minor ascending channel support from 28 Jun 2018 low) with a maximum limit set at the 12780 medium-term pivotal resistance.

However, a clearance above 12780 sees an extension of the mean reversion rebound to retest the 13190 resistance (swing high areas of 22 May/15 Jun 2018).

Charts are from City Index Advantage TraderPro & eSignal

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