Weekly Technical Outlook on Major Stock Indices 25 Jun to 29 June 2018

Coming to the tail-end of the melt-up phase.

S&P 500 – Holding at the 2740 key medium-term support

Key Levels (1 to 3 weeks)

Pivot (key support): 2740

Resistances: 2767, 2800/2815 & 2824

Next support: 2680

Medium-term (1 to 3 weeks) Outlook

The SP 500 Index (proxy for the S&P 500 futures) had pull-backed as expected to test the 2740 key medium-term pivotal support (printed an intraday low of 2732 on 19 Jun 2018 European session with a daily close back above 2740 later in the U.S session). Click here for a recap on our previous weekly technical outlook.

We maintain the bullish bias with a cautious stance due to the on-going heightened trade tensions between U.S. & China where the U.S. administration has proposed to implement a 25% tariff on $50 billion worth of China imports on 06 July 2018. Therefore, as long as the 2740 key medium-term pivotal support holds (no daily close below it) and a break above the 2767 intermediate resistance (minor descending trendline in place since 13 Jun 2018 high) is required to increase the odds for another round of upleg to target the next resistances at 2800/2815 (swing high areas of 12/13 Mar 2018) follow by 2824 next (Fibonacci projection cluster).

However, failure to hold at 2740 invalidates the bullish scenario for a choppy corrective decline towards the next support at 2680 (the minor swing low of 30 May 2018 that coincides with the pull-back support of the former “Symmetrical Triangle” range resistance from 29 Jan 2018 high.

Nikkei 225 – Watch the 22000 range support

Key Levels (1 to 3 weeks)

Supports: 22000, 21360 & 21000

Resistances: 23020 & 23600/700

Supports: 22000, 21360 & 21000

Medium-term (1 to 3 weeks) Outlook

The Japan 225 Index (proxy for the Nikkei 225 futures) had managed to hold above the 22000 key medium-term pivotal support but elements have turned mix at this juncture with the daily RSI oscillator that is attempting to break below its key corresponding significant support at the 44 level.

Therefore, we turn neutral first between 22000 and 23020. Only a break above 23020 (minor swing high areas of 21 May/12 Jun 2018) is likely to reinstate the bullish tone for a further rally to target the next resistance at 23600/700. On the flipside, failure to hold at 22000 (a daily close below it) shall kick start a multi-week corrective down move towards the next supports at 21360 and even 21000 next (61.8%/76.4% Fibonacci retracement of the up move from 23 Mar low to 21 May 2018 high & the primary major ascending channel support from Jun 2016 low).

Hang Seng – Watch the 29070 range support

Key Levels (1 to 3 weeks)

Supports: 29070 & 28000

Resistances: 31800 & 33430/530

Medium-term (1 to 3 weeks) Outlook

Last week, the Hong Kong 50 Index (proxy for Hang Seng Index futures) had continued to slide from its recent 3-week high of 31550 printed on 07 Jun 2018 to retest its significant medium-term range support at 29070 as trade tensions between U.S. and China continue heat up.  The U.S. administration has proposed to implement a 25% tariff on $50 billion worth of China imports on 06 July 2018.

Given that the Hang Seng Index is a direct “China proxy” play from offshore traders and on-going domestic liquidity tightening as the HK central bank, HKMA needs to take the direction of the U.S Fed because of the fixed currency peg system with USD. Therefore, the two fundamental factors explain the HSI’ lacklustre performance since the start of 2018.

Technical factors remain unchanged where it is still trapped within its 5-month range configuration of 31800 and 29070 since 10 Feb 2018. However, a daily close below 29070 shall see a bearish breakdown to test the major support at 28000 (the swing low areas of 19 Oct/07 Dec 2017 & the primary ascending trendline in place since Feb 2016 low).

ASX 200 – Medium-term uptrend remains intact

Key Levels (1 to 3 weeks)

Intermediate support: 6140

Pivot (key support): 6085

Resistances: 6270/80 & 6350/80

Next support: 5980

Medium-term (1 to 3 weeks) Outlook

Last week, the Australia 200 Index (proxy for the ASX 200 futures) had continued to surge higher as expected and almost hit the medium-term resistance of 6270/80 (printed a high of 6258 in last Fri, 22 Jun U.S. session).

Key elements remain positive to advocate for a further potential upleg in the current medium-term uptrend phase since the bullish breakout from a multi-week “Symmetrical Triangle” range configuration on 02 May 2018.

In the short-term (1 to 3 days), the Index may start to shape a minor pull-back first towards the 6140 intermediate support (former range resistance from 10 Jan/10 May 2018) as the daily RSI oscillator has reached its overbought region (without bearish divergence) coupled with the shorter-term 4 hour Stochastic oscillator that still has room to manoeuvre to the downside before it reaches an extreme oversold level of 4.

Therefore as long as the adjusted key medium-term pivotal support at 6085 holds (the minor swing low area of 19 Jun 2018, the lower boundary of a medium-term ascending channel from 04 Apr 2018 & close to 50% Fibonacci retracement of the on-going up move from 30 May 2018 low to 22 Jun 2018 high of 6258), the Index is likely to shape another potential upleg to target 6270/80 before the next resistance at 6350/80 (Fibonacci projection cluster & upper boundary of the medium-term ascending channel from 04 Apr 2018).  

On the other hand, failure to hold at 6085 negates the bullish tone for a deeper pull-back to retest 5980 pull-back support of the former “Symmetrical Triangle” range resistance (see 4 hour chart).

DAX – The weakest link

Key Levels (1 to 3 weeks)

Intermediate resistance: 12630

Pivot (key resistance): 12810

Supports: 12300/200 & 11900/800

Next resistance: 13190

Medium-term (1 to 3 weeks) Outlook

After its failure to break above the 13190 swing high area of 22 May 2018, Germany 30 Index (proxy for the DAX futures) has started to reverse all its gains induced by ECB’s “dovish rhetoric” to keep its key policy interest rates at record low levels till 2019 as per highlighted in its recent monetary policy meeting held on 14 June 2018.

Last Thurs, 21 Jun, the Index has broken below the 12630 lower limit of medium-term neutrality range that has validated a potential multi-week corrective decline. In addition, longer-term elements have turned negative such as the emergence of a major bearish Head & Shoulders” reversal chart pattern/configuration since its current all-time high area of 13560 printed on 23 Jan 2018.

This observation coupled with Elliot Wave/fractal analysis suggests that Index may have formed a major cycle degree top at 13560 and a potential multi-year corrective down move structure may occur to retrace the 9-year of uptrend since Mar 2009.

From a medium-term horizon (1 to 3 weeks), we turn bearish in any bounces below the 12810 key medium-term pivotal resistance (the pull-back resistance of the former ascending channel support from 26 Mar 2018 low & 50% Fibonacci retracement of the on-going decline from 15 Jun 2018 high to 22 Jun 2018 low of 12447) for a further potential downleg to target the next support at 12300/200 (swing low area of 25 Apr 2018, 61.8% Fibonacci retracement of the up move from 26 Mar low to 22 May 2018 high & the primary ascending trendline in place since Feb 2016 low) and a break below 12200 opens up scope for a further slide towards the major key support of 11900/800 (the neckline of the bearish “Head & Shoulders”).

However, a clearance above 12810 negates the bearish tone for another round of choppy up move to retest the recent range resistance of 13190.

Charts are from City Index Advantage TraderPro & eSignal

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