Weekly Technical Outlook on Major Stock Indices 28 May to 01 June 2018

S&P 500 – Remains in a bullish configuration

Key Levels (1 to 3 weeks)

Intermediate support: 2700

Pivot (key support): 2680

Resistances: 2760/65 & 2800

Next support: 2585

Medium-term (1 to 3 weeks) Outlook

Last week, the markets had been bombarded with “risk off” related news flows that comprised of geopolitical events to rising international trade tensions. Firstly, U.S. President Trump’s U-turned on White House’s stand with North Korea where he announced that U.S. will opt out of the 12 June U.S./North Korea Summit and blasted the North Korean government was not “sincere” on its denuclearization programme. Secondly, the new populist Italian government that continued to push for Eurosceptic policies had threated the financial stability of the Eurozone. Thirdly, U.S. President announced that he may considered imposing tariffs on imported automobiles and automotive parts where Canada and Mexico are the first and third largest exporters of auto products to U.S. Thus, the om-going negations with partners in NAFTA, the North American trade pact may be in jeopardy.

Overall, the medium-term technical picture on the SP 500 Index (proxy for the S&P 500 futures) does not see any major changes inflicted by the aforementioned “risk off” news flow as it continued to trade within a 1.5% range, holding above its intermediate range support at 2700 (the lower limit of a minor sideways range configuration in place since 14 May 2018).  Click here for a recap on our previous weekly technical outlook.

Another positive technical element is the performance of higher beta/ risk sensitive stocks/sectors against the S&P 500. The relative strength charts of Nasdaq 100 (technology oriented), U.S. semiconductor sector, NYSE FANG+ (momentum play) and Russell 2000 (small caps) have continued to exhibit elements of outperformance against the S&P 500. These observations translate to a positive risk environment. (refer to the 3^rd chart).

Therefore, the medium-term uptrend of the SP 500 Index in place since 03 May 2018 low remains intact. We maintain our bullish stance with 2680 remains as the key medium-term pivotal support for a further potential upleg to target the next resistances at 2760/65 (minor swing high areas of 15/16 Mar 2018) follow by 2800 next (the minor swing high area of 12/13 Mar 2018 & 1.618 Fibonacci projection of the up move from 03 May 2018 low).

On the other hand, failure to hold at 2680 invalidates the previous medium-term bullish breakout scenario seen on 10 May 2018 for another round of the choppy decline to retest the support of the 4-month range configuration in place since early Feb 2018 at 2585.

Nikkei 225 – Medium-term uptrend intact above 22000 support

Key Levels (1 to 3 weeks)

Pivot (key support): 22000

Resistances: 22730 (upside trigger), 23020 & 230280

Next supports: 21360 & 21000

Medium-term (1 to 3 weeks) Outlook

Last week, the Japan 225 Index (proxy for the Nikkei 225 futures) had undergone a deeper pull-back of 4% from its 21 May swing high area of 23020 and broke below the 22550 adjusted key medium-term pivotal support that invalidated the preferred direct rise scenario. It tumbled close to the alternate downside target/support at 22000 (printed a low of 22079 on 24 May 2018).

Overall, the medium-term uptrend in place since 23 Mar 2018 low remains intact and from its 24 May low of 22079, momentum indicators have started to show positive readings. The daily RSI oscillator has staged a rebound from its correspond ascending trendline now acting as a support at the 44% level. In addition, the shorter-term 4 hour Stochastic oscillator has flashed a bullish divergence signal at its oversold region. These observations suggest that the recent downside momentum pf price action from last week has started to abate.

Therefore, as long as the 22000 key medium-term pivotal support (38.2% Fibonacci retracement of the up move from 23 Mar to 21 May 2018 high &former congestion range resistance from 13 Mar/16 Apr 2018) holds and a break above the intermediate resistance at 22730 is likely to see a potential recovery to retest the 21 May 2018 swing high area of 23020 follow by 23280 ((76.4% Fibonacci retracement of the recent decline from 23 Jan high to 24 Mar 2018 low).

However, failure to hold at 22000 shall invalidate the medium-term uptrend to 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 – 31800 remains the key upside trigger level

Key Levels (1 to 3 weeks)

Supports: 29070, 28100 & 26000/25750

Resistances: 31800 & 33430/530

Medium-term (1 to 3 weeks) Outlook

No major changes on its key technical elements as the Hong Kong 50 Index (proxy for Hang Seng Index futures) had continued to trade in a sideways configuration below the key 31800 medium-term range resistance. Since its all-time high area of 33530 printed on 29 Jan 2018, the on-going sideways movement is now in its 5^th month, the longest consolidation since the primary uptrend started in Feb 2016.

Only a clear break above 31800 (a daily close above it is preferred due to a previous failure intraday breakout seen on 21 Mar) shall kick start a potential impulsive upleg to retest its current all-time high area of 33430/530 in the first step.

ASX 200 – Medium-term uptrend remains intact above 5980 support

Key Levels (1 to 3 weeks)

Pivot (key support): 5980

Resistances: 6087 (upside trigger), 6150 & 6210

Next support: 5850

Medium-term (1 to 3 weeks) Outlook

Despite a break below last week’s key medium-term pivotal support at 6054/40, the medium-term uptrend of the Australia 200 Index (proxy for the ASX 200 futures) in place since 04 Apr 2018 low remains intact.

The 2.6% pull-back seen in the Index from its 10 May high to last Thurs, 24 May low of 5983 had led it to rest just above the 5980 pull-back support of the former “Symmetrical Triangle” resistance from 09 Jan 2018 and which also coincides with the 38.2% Fibonacci retracement of the up move from 04 Apr low to 10 May 2018 high. In addition, it has formed a daily “Long-legged Doji” candlestick on 24 May 2018 which suggests that the recent downside momentum of price action has started to abate.

Therefore, if the 5980 key medium-term pivotal support set this week holds and a break above 6087 (minor descending trendline from 15 May 2018 high & 61.8% Fibonacci retracement of the decline from 10 May high to 24 May 2018 low) is likely to reinforce a potential recovery to retest 6150 before targeting the next resistance at 6210.

However, failure to hold at 5980 shall invalidate the medium-term uptrend to kick start a multi-week corrective down move towards the next support at 5980 (the former minor swing high areas of 27 Mar/10 Apr 2018 & 61.8% Fibonacci retracement of the up move from 04 Apr low to 10 May 2018 high).

DAX –  Medium-term uptrend remains intact above 12850/800 support

Key Levels (1 to 3 weeks)

Pivot (key support): 12850/800

Resistances: 13050 (upside trigger), 13245/75 & 13560

Next support: 12630 (downside trigger) & 12300/200

Medium-term (1 to 3 weeks) Outlook

Last week’s pull-back of 3% seen in the Germany 30 Index (proxy for the DAX futures) from its 13206 minor swing high of 22 May to last Thurs, 24 May low of 12800 had stalled right at the 12850 key medium-term pivotal support as per highlighted in last week report.

Thereafter, it did a minor recovery of 1.5% to print a high of 13000 on last Fri, 25 May.

No change, we maintain the bullish bias if the 12850/800 key medium-term pivotal support holds and added an upside trigger level at 13050 (the former minor swing low areas of 18/22 May 2018 & the 61.8% Fibonacci retracement of the recent decline from 22 May high to 24 May 2018 low). A break above 13050 is likely to reinforce a potential recovery to target the next resistance at 13245/75 (Fibonacci projection cluster & minor swing high area of 01 Feb 208).

However, failure to hold at 12850/800 negates the bullish tone for a deeper pull-back to retest 12630 (former 3-month range resistance of the “Bottoming” configuration from 07 Feb/24 Apr 2018 & 38.2% Fibonacci retracement of the up move from 26 Mar low to 22 May 2018 high). Only a clear break below 12630 (a daily close below it) shall invalidate the medium-term uptrend for a choppy down move towards 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).

Charts are from City Index Advantage TraderPro & eSignal