Weekly Technical Outlook on Major Stock Indices 26 Mar to 30 Mar 2018

S&P 500 – Potential push up in progress towards “Symmetrical Triangle “range resistance

Key Levels (1 to 3 weeks)

Intermediate support: 2640

Pivot (key support): 2585

Resistances: 2690 & 2740/50

Support: 2540/30 (long-term pivot)

Medium-term (1 to 3 weeks) Outlook

In our previous weekly technical outlook dated on 19 Mar, we had warned that the prior up move from 09 Feb 2018 low had lose its upside momentum with the risk further downside and the Index was still evolving in a range (“Symmetrical Triangle”) configuration since its test on the 2540/30 major support zone on 06 Feb 2018 rather than the start of an impulsive upleg to print anther new all-time high.

Indeed, the Index tumbled by 4%  and hit the lower limit/support  of “Symmetrical Triangle” range configuration at 2600 at the closing hours of last Friday, 23 Feb U.S. session (printed a low of 2585) reinforced by potential “tit for tat” retaliatory  measures from China after the latest proposed  U.S$60 billion tariffs against Chinese imports to U.S and the drag on technology stocks due to Facebook’s alleged sharing of its users’ private data to political consulting firm, Cambridge Analytica. Click here for a recap on our previous weekly technical outlook.

Current key technical elements suggest that last week’s decline is “overstretched” and the Index is likely to show a further rebound.

• Last week’s decline of the Index has led to test the lower boundary/support of an on-going “Symmetrical Triangle” range configuration in place since 06 Feb 2018 (current range duration is 7 weeks).  In addition, the test on the aforementioned “Symmetrical Triangle” range support also coincides with the major ascending channel support from 11 Feb 2016 low (see daily chart).
• The daily RSI oscillator of the Index has dipped down to a level of 28% seen on last Fri, 23 Mar which is closed to an extreme oversold level of 25% last since in Nov 2016. These observations suggest that the recent price decline is “overstretched” and the chances of a mean reversion rebound increases at this juncture.
• Despite broad based sell-off in technology stocks led by Facebook weekly decline of 10%, the relative strength chart of the high beta S&P Technology sector versus the S&P 500 according to their respective ETFs (XLK versus SPY) is still displaying outperformance over the S&P 500. In addition, the relative strength charts of other high weightage sectors; Consumer Discretionary (XLY; 12.8% weightage in S&P 500) and Financials (XLF; 14.6%) have continued to show elements of outperformance against the S&P 500.  Therefore from a sector rotation analysis perspective, the recent decline is more likely to be a part of a bullish range consolidation phase rather than the start of a primary downtrend (refer to the 3rd chart).
• The next significant resistance stands at 2740/50 which is defined by the upper boundary of the aforementioned “Symmetrical Triangle” range and a Fibonacci cluster (76.4% Fibonacci retracement of the recent decline from 2802 high of 13 Mar 2018 to last Fri, 23 Mar 2018 U.S. session low + 0.618 Fibonacci projection of the up move from 09 Feb 2018 low to 13 Mar 2018 projected from 23 Mar 2018 low).
• The shorter-term 4 hour Stochastic oscillator is now coming close to an extreme overbought level of 98% which indicates that the yesterday, 26 Mar rebound may see a minor pull-back/consolidation soon. The intermediate resistance stands at 2690 (see 4 hour chart).

Therefore, the Index is likely to continue its rebound from its “Symmetrical Triangle” range support which is this week’s key medium-term pivotal support at 2585.

In the short-term (1 to 3 days range), the Index faces the risk of a minor pull-back at the 2690 intermediate resistance (former minor swing low areas of 07/20 Mar 2018) and as long as the 2585 medium-term pivotal support holds, the Index is likely to stage another round of potential push up to target the “Symmetrical Triangle” range resistance at 2740/50 before another round of potential choppy decline materialises within the range.

However, a break below 2585 should see a further decline to retest the 2540/30 major support zone.

Nikkei 225 – Still evolving within a bullish range configuration

Key Levels (1 to 3 weeks)

Intermediate support: 20800

Pivot (key support): 20330 (excess)

Resistances: 21600 & 22510

Next support: 19300

Medium-term (1 to 3 weeks) Outlook

Last week, the Japan 225 Index (proxy for the Nikkei 225 futures) had declined in line with the major U.S. stock indices and staged a challenge on the key major support zone of 20800/600 which also confluences with the major ascending channel support from 24 Jun 2016 low.

It printed a low of 20330 on last Fri, 23 Mar 2018 before it reversed up for a daily close above the 20800/600 major support zone on Mon, 26 Mar.

Therefore, the breach below 20800/600 on last Fri, 23 Mar can be considered as a whipsaw. No major changes on its key technical elements except that the Index is now consolidating within a “Descending Wedge” range configuration in place since 27 Feb 2018 high of 22510. This type of range configuration tends to occur towards the end of a corrective down move as its range formation takes on a series of lower lows that is lesser in terms of magnitude versus its corresponding series of lower highs which indicates a slowdown in downside momentum. Interestingly, this bullish reversal range configuration is taking shape at the 20800/600 major support zone.

Therefore as long as the 20330 (excess) key medium-term pivotal support holds, the Index is likely to undergo another round of consolidation below 21600 intermediate resistance (the upper boundary of the aforementioned “Descending Wedge”) before a potential push up materialises to target the next significant medium-term resistance at 22510 (the swing high area of 27 Feb 2018 & close to the 61.8% Fibonacci retracement of the decline from 23 Jan high to 23 Mar 2018 U.S. session low).

On the other hand, a break below the 20330 (excess) should damage the primary uptrend in place since Jun 2016 low to kick start of multi-month corrective phase to target the next support at 19300 in the first instance.

Hang Seng – Bullish consolidation remains in progress

Key Levels (1 to 3 weeks)

Intermediate support: 30580

Pivot (key support): 30070

Resistance: 31800 (upside trigger)

Next support: 29070

Medium-term (1 to 3 weeks) Outlook

Last Wed 21 Mar, the Hong Kong 50 Index (proxy for Hang Seng Index futures) did an intraday bullish breakout above the 31800 medium-term upside trigger level (the neckline resistance of the impending “Double Bottom” in shape since 09 Feb 2018 U.S. session low) but did have a daily close above it.

Thereafter, it did a sharp reversal of -6% in the next 2 days and retested the medium-term pivotal support of 30070 (printed a low 29870 on last Fri, 23 Mar but no daily close below 30070.

No major changes on its key technical elements. Therefore as long as the 30070 key medium-term pivotal support holds, the Index is likely to see a potential push up to retest 31800. A daily close above 31800 is required to trigger the start of a potential impulsive upleg motion to target the current all-time high area of 33430/530 in the first step.

On the flipside, a break below 30070 support should negate the bullish tone for a deeper slide to retest the 09 Feb 2018 major swing low area of 29070.

ASX 200 –  Potential push up towards range resistance

Key Levels (1 to 3 weeks)

Pivot (key support): 5750

Resistances: 6030 & 6150

Next support: 5660 (major)

Medium-term (1 to 3 weeks) Outlook

Last week, the Australia 200 Index (proxy for the ASX 200 futures) has tumbled by close to4% to print a low of 5750 which is just above the 5660 major support (major ascending channel support from 10 Feb 2016 low & the medium-term range support from 07 June/03 Oct 2017.

Since its 09 Jan 2018 swing high of 6150, the Index is still undergoing a consolidation phase within a “Symmetrical Triangle” range configuration. Thus as long as the 5750 medium-term pivotal support holds, the Index is likely to stage a further potential push up to test the 5910 intermediate resistance before the 6030 “Symmetrical Triangle” resistance.

Failure to hold above 5750 should see a further slide to retest the 5660 major support and only a daily close below 5660 is likely to open up scope for the start of a multi-month corrective down move to target the next support at 5500 in the first step (the former range resistance of 07 Oct/25 Nov 2016 & close to the 50% Fibonacci retracement of the up move from 10 Feb 2016 low to 09 Jan 2018 high).    

DAX – Still evolving within a bullish configuration

Key Levels (1 to 3 weeks)

Pivot (key support): 11900/800

Resistances: 12130 & 12500

Next support: 10800

Medium-term (1 to 3 weeks) Outlook

Last Fri, 23 Mar 2018, the Germany 30 Index (proxy for the DAX futures) had staged a decline and retested the 11900/800 major support before it reversed up again on Mon, 26 Mar U.S. session. Last week’s test on the 11900/800 major support is the third time since 06 Feb 2018 low as it continues to evolve within an impending bullish “Double Bottom” configuration.

No major changes on its key technical elements. Therefore as long as the 11900/800 key pivotal support holds, the Index is likely to shape a potential push up to target 12130 before the range resistance of 12500 in place since 07 Feb 2018 high.

On the other hand, failure to hold above 11900/800 should invalidate the recovery scenario to open up scope a multi-month corrective down move to test the next support at 10800 in the first step.

Charts are from City Index Advantage TraderPro & eSignal