Weekly Technical Outlook on Major Stock Indices 29 Jan to 02 Feb 2018

Key Levels (1 to 3 weeks)

Pivot (key resistance): 2880

Supports: 2845 (downside trigger), 2805 & 2768/66

Next resistance: 2930

Medium-term (1 to 3 weeks) Outlook

Last week, the U.S. SP 500 Index (proxy for the S&P 500 futures) had continued its relentless rally as expected and it almost reached the upper limit of the key medium-term resistance zone at 2880 (printed a high of 2874 on last Fri, 26 Jan U.S. session) Click here for a recap on our previous weekly technical outlook.

Time to be cautious on this relentless bullish movement since the start of the 2018 as key elements are now flashing signs of a potential multi-week corrective decline/consolidation within a primary degree uptrend (melt-up phase).

• Based on the Elliot Wave Principal/fractal analysis, the primary degree (multi-month/year) bullish impulsive wave (3) in place since 27 Jun 2016 low has reached its potential extension end target at the 2860/80 zone coupled with the daily RSI oscillator at an extreme overbought level that is closed to 87% last seen on May 1996. These observations suggest that the Index may see an imminent multi-week corrective decline phase, wave (4).
• Based on sector rotation analysis, another key sector (on top of the Technology), the Industrials has started to underperform the benchmark S&P 500. As seen from its relative strength analysis charted on the respective ETFs (XLI against SPY) where it has broken below its medium-term supports (see last chart).
• The intermediate support rests at 2845 which is defined by the former minor swing high areas of 24/25 Jan 2018 & the lower boundary of the medium-term ascending channel from 30 Dec 2017 low).  

Therefore, as long as the 2880 key medium-term pivotal resistance is not surpassed and a break below 2845 is likely to trigger the start of potential multi-week corrective down move to target the next supports at 2805 follow by 2768/66 next (the pull-back support of the former major ascending channel resistance from 11 Feb 2016 – depicted in green on the daily chart) & Fibonacci retracement cluster).

However, clearance above the 2880 should see a further squeeze up towards the next resistance at 2930.

Nikkei 225 – Mix elements, watch 23325 key support

Key Levels (1 to 3 weeks)

Resistances: 23900, 24200 & 24540

Supports: 23325, 22970 & 21990/890

Medium-term (1 to 3 weeks) Outlook

The Japan 225 Index (proxy for the Nikkei 225 futures) had started inch down from the median line of a medium-term ascending channel in place since 06 Dec 2017 low (see 4 hour chart).

Mix element at this juncture, thus prefer to turn neutral between 23900 and 23325. Bulls need to stage a breakout fast above 23900 to reinstate the bullish impulsive upleg to target the next resistances at 24200 follow by 24540.

On the other hand, a break below 23325 (medium-term ascending channel support) is likely to kick-start a potential corrective down move to towards the next support at 22970 follow by 21990/890 next.

Hang Seng – 33330430 resistance met, risk of mean reversion corrective decline

Key Levels (1 to 3 weeks)

Pivot (key resistance): 33430/530

Supports: 32615 (downside trigger) & 31445/300

Next resistance: 34200

Medium-term (1 to 3 weeks) Outlook

The Hong Kong 50 Index (proxy for Hang Seng Index futures) had rallied straight to the expected medium-term resistance/target zone of 33330/420.  Click here for a recap on our previous weekly technical outlook.

Current technical elements are now advocating the risk of a multi-week mean reversion corrective decline to retrace the steep up move from 07 Dec 2017 low. 

As long as the 33430/530 key medium-term pivotal resistance is not surpassed and a break below 32615, the Index is likely to shape a potential corrective decline towards the next support at 31445/300 (the ascending trendline from 07 Dec 2017 low, the pull-back support of the former major ascending channel resistance from 28 Dec 2016 & the 38.2% Fibonacci retracement of the up move from 07 Dec 2017 low to today, 29 Jan current intraday high at 33530).

However, a clearance above 33530 should invalidate the mean reversion decline scenario to continue its upside extension to target the next resistance at 34200 (Fibonacci projection cluster).

ASX 200 – Bulls need to break above 6109

Key Levels (1 to 3 weeks)

Supports: 5986 & 5920/5900

Resistances: 6109, 6190 & 6240/60

Medium-term (1 to 3 weeks) Outlook

We maintain the neutrality stance on the Australia 200 Index (proxy for the ASX 200 futures) between 6109 and 5986. Only a clear break above 6109 (daily close) is likely to reinstate the bullish tone for a potential impulsive upleg to target the next resistances at 6190 follow by 6240/60 next.

DAX – Mix elements, watch the 13130 support

Key Levels (1 to 3 weeks)

Supports: 13130 & 12820/740

Resistances: 13450, 13760/820 & 13950

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) had traded lower and broke below its minor ascending trendline support (depicted in dotted pink on the 4 hour chart) from its key reversal low of 02 Jan 2018. Overall, it still managed to hold above the key 13130 medium-term pivotal supports.

Mix elements at this juncture, thus we prefer to turn neutral between 13130 and 13450.  A clearance (daily close) above 13450 is likely to revive the potential bullish impulsive upleg to target the next resistance at 13760/820.

One the other hand, a break below 13130 may see a deeper corrective decline to retest the major support of 12820/740 (lower boundary of the ascending channel from 24 Jun 2016 low - see daily chart).

Charts are from City Index Advantage TraderPro  & eSignal