Weekly Technical Outlook on Major Stock Indices 24 Sep to 28 Sep 2018

S&P 500 outperformed but met key long-term inflection/resistance level at 2940.

S&P 500 – Right below 2940 key long-term pivotal resistance

Key Levels (1 to 3 weeks)

Pivot (key resistance): 2940

Supports: 2860 (trigger) & 2790

Next resistance: 3000/3010

Medium-term (1 to 3 weeks) Outlook

The SP 500 Index (proxy for the S&P 500 futures) has reached a critical inflection level of 2940 which is being defined as the long-term pivotal resistance in our Q3 2018 Global Markets Outlook.

In addition, the 2-heavy weightage “risk on” sensitive S&P sectors as represented by their ETF; Technology (XLK) and Consumer Discretionary (XLY) with a combined weight of 31% have started to show signs of weakness in terms of performance against the S&P 500 after being the leading sectors since the start of 2018.

Therefore, the Index is still showing the risk of a major topping process to end the 9-year plus of bullish trend since Mar 2009. No change, 2940 remains the pivotal resistance and bears need to have a break below 2860 to unleash the potential first impulsive downleg to target the next support at 2790 (the former resistance of the 3-month range configuration from 12 Mar 2018 & ascending trendline from 02 Apr 2018 low).

However, a clearance above 2940 shall see an extension of the blow off move to target the next resistance at 3000/3010 (Fibonacci projection cluster & psychological).

Nikkei 225 – Neutral between 24200 & 23000

Key Levels (1 to 3 weeks)

Resistances: 24200 & 24880

Supports: 23000, 22240 & 21850

Medium-term (1 to 3 weeks) Outlook

The Japan 225 Index (proxy for the Nikkei 225 futures) had continued to surge higher after its bullish breakout from its 3-month plus of range configuration from 21 May 2018. Right now, it is approaching its year to date high of 24200 printed earlier in 23 Jan 2018 which is also a 26-year high since Oct 1991.

In addition, the daily RSI oscillator is now at its overbought region which suggests that the recent up move is getting “overstretched” where it may see a corrective decline/pull-back. Thus, prefer to turn neutral now between 24200 and 23000. A clearance above 24200 is likely to open up scope for a further upmove to target the next resistance at 24880 (Fibonacci projection cluster). On the flipside, a reintegration back below 23000 translates into a failure bullish breakout for a further potential decline to retest the 21850 support (the primary ascending channel support from Jun 2016 low).

Hang Seng – Medium-term downtrend remains intact

Key Levels (1 to 3 weeks)

Pivot (key resistance): 28000

Supports: 27140, 26100 & 25640/500

Next resistances: 29100 & 30100

Medium-term (1 to 3 weeks) Outlook

Last week’s push up seen in the Hong Kong 50 Index (proxy for Hang Seng Index futures) had stalled right at the 28000 key medium-term pivotal resistance before it staged a 2.1% decline to print a low of 27405 in today, 24 Sep Asian session.

No change, maintain bearish bias as long as the 28000 pivotal resistance is not surpassed and break below the intermediate support of 27140 (minor ascending trendline from 11 Sep 2018 low) is likely to reinforce the start of potential impulsive downleg to retest the 11 Sep 2018 swing low area of 26100 before targeting 25640/500 next (Fibonacci projection cluster & swing low area of 05 Jul 2017).

On the other hand, a clearance above 28000 negates the bearish tone for a squeeze up towards the 29100/30100 range resistance in place since 26 Jul 2018.

ASX 200 – Still evolving within a bearish flag configuration

Key Levels (1 to 3 weeks)

Intermediate resistance: 6200/211

Pivot (key resistance): 6250

Supports: 6160, 6100 & 5980

Next resistance: 6350/80

Medium-term (1 to 3 weeks) Outlook

The Australia 200 Index (proxy for the ASX 200 futures) has continued to trade in a choppy fashion within a “bearish flag” configuration in place since 07 Sep 2018 swing low of 6100.

No change, maintain bearish bias below the 6250 key medium-term pivotal resistance (the pull-back resistance of the former “Expanding Wedge” range support & 50% Fibonacci retracement of the recent decline from 30 Aug 2018 high to 07 Sep 2018 low) and a break below 6100 (the lower boundary of the “bearish flag”) is likely to reinforce another potential downleg to retest 6100 before targeting the major support at 5980 (the lower boundary of the ascending channel in place since 10 Feb 2016 low).

However, a clearance above 6250 negates the bearish view for a squeeze up to retest 6350/80 (11/30 Aug 2018 swing high areas).

DAX – 12540 remains the key medium-term to watch

Key Levels (1 to 3 weeks)

Pivot (key resistance): 12540

Supports: 12125 (downside trigger) & 11800

Next resistance: 12890

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) had staged a 3.9% rally last week to print a high of 12461 and remained below the key medium-term pivotal resistance of 12540 (the upper boundary of the medium-term descending channel in place since 14 Jun 2018, the pull-back resistance of the former primary ascending trendline support from Feb 2016 low).

No change, maintain bearish bias below the 12540 key medium-term pivotal resistance and added 12125 as the downside trigger level (minor swing high area of 14 Sep 2018 & minor ascending trendline from 11 Sep 2018) to reinforce the start of a potential downleg to target the 11800 neckline support of the impending major “Head & Shoulders” bearish reversal configuration in place since 20 Jun 2017.

On the other hand, a clearance above 12540 negates the bearish tone for another round of choppy movement to retest the 12890 swing high area of 27 Jul 2018.

Charts are from City Index Advantage TraderPro & eSignal

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.