Weekly Technical Outlook on Major Stock Indices 29 Oct to 02 Nov 2018

S&P 500 – Minor corrective rebound before potential fresh downleg

Key Levels (1 to 3 weeks)

Intermediate resistance: 2708/10

Pivot (key resistance): 2745

Supports: 2590/85 & 2540/30 (LT downside trigger)

Next resistance: 2822

Medium-term (1 to 3 weeks) Outlook

Last week, the SP 500 Index (proxy for the S&P 500 futures) had staged the expected impulsive down move and met the intermediate support/target of 2674 (printed low of 2626 on last Fri, 26 Oct). Click here for a recap of our previous weekly technical outlook.

No major change on its key elements where the medium-term (1-3 weeks) impulsive down move structure in place since 21 Sep 2018 all-time high remains intact. Elliot wave/fractal analysis suggest that the Index may stage a minor corrective rebound first at this juncture to retest the 2708/10 intermediate resistance (the former long-term ascending channel pull-back support from Mar 2009 low; depicted in dotted blue in the daily chart & the former swing low areas of 12/23 Oct 2018) with a maximum limit set at the 2745 key medium-term pivotal resistance (upper boundary of the minor descending channel from 03 Oct 2018 high & Fibonacci retracement cluster) before another potential fresh downleg materialises to target the next support at 2590/85 in the first step (swing low area of 03 May 2018 & Fibonacci projection cluster).

On the other hand, a clearance above 2745 negates the bearish tone for an extension of the corrective rebound to retest the 2822 resistance (17 Oct 2018 swing high).

Nikkei 225 – Minor corrective rebound before potential fresh downleg

Key Levels (1 to 3 weeks)

Intermediate resistance: 21770

Pivot (key resistance): 22030

Supports: 20550/330 & 19950/750

Next resistance: 23000

Medium-term (1 to 3 weeks) Outlook

Last week, the Japan 225 Index (proxy for the Nikkei 225 futures) tumbled within our expectations and broke below the support/target of 21600 (the major ascending channel support from Jun 2016 low).

Key elements are still advocating further potential downside ahead for the Index from multi-week perspective where the daily RSI oscillator (a momentum indicator) is not shaping any bullish divergence signal and still has further room to manoeuvre to downside before it reaches an extreme oversold level of 20. Elliot Wave/fractal analysis is supporting the current medium-term downside momentum as the Index has yet to complete the intermediate degree bearish impulsive down move wave structure 3/ in place since 17 Oct 2018 high (where the Index reintegrated back after the failure bullish breakout on 01 Oct 2018 into its multi-month range structure that took shaped since 21 May 2018).

In the shorter-term (1 to 3 days), the Index shows the risk of a corrective rebound from its recent low 20795 printed on 26 Oct 2018 where the 4-hour Stochastic oscillator has inched up (yet to reach an extreme overbought level) after a prior bullish divergence signal. Therefore, the Index may see a bounce first to test the 21770 intermediate resistance with a maximum limit set at the 22030 medium-term pivotal resistance (the upper boundary of the descending channel from 01 Oct 2018 high, pull-back resistance of the former major ascending channel support from Jun 2016 low & Fibonacci retracement/projection cluster) before another potential down leg materialises to retest 20795 before targeting the next support at 20550/330 in the first step.

On the other hand, a clearance above 22030 invalidates the bearish scenario for an extension of the corrective rebound towards the 23000 multi-month range resistance in place since 21 May 2018.  

Hang Seng – Minor corrective rebound before potential fresh downleg

Key Levels (1 to 3 weeks)

Intermediate resistance: 25580/26070

Pivot (key resistance): 26700

Supports: 24360 & 23450

Next resistance: 28000

Medium-term (1 to 3 weeks) Outlook

Last week, the Hong Kong 50 Index (proxy for Hang Seng Index futures) had declined as expected and met the upper limit of the 24740/360 support/target zone.

Right now, the Index has exhibited the risk of shaping a minor corrective rebound to retest the 25580/26070 intermediate resistance before another downleg materialises. The shorter-term 4-hour Stochastic oscillator has flashed a bullish divergence signal after it hit an extreme oversold level but medium-term downside momentum remains intact as the daily RSI oscillator has not sign any clear signs of bearish exhaustion.

Therefore, if the 26700 key medium-term pivotal resistance (upper boundary of the medium-term descending channel from 07 Jun 2018 high & a Fibonacci retracement cluster) is not surpassed, the Index is likely to shape another potential downleg to target the next support at 23450 (the lower boundary of a minor descending channel that is taking shape since 26 Sep 2018 high & a Fibonacci projection cluster).

On the other hand, a clearance above 26700 negates the bearish tone for a retest on the 28000 major resistance (pull-back resistance of the former major ascending trendline support from Feb 2016 low & 21 Sep 2018 swing high).

ASX 200 – Mix elements

Key Levels (1 to 3 weeks)

Supports: 5560, 5470 & 5310

Resistances: 5785 & 5950/990

Medium-term (1 to 3 weeks) Outlook

The Australia 200 Index (proxy for the ASX 200 futures) had plummeted as expected and met the target/support of 5635 (printed a low of 5611 on 26 Oct 2018).

Mix elements for now. The daily RSI oscillator has started to flash a bullish divergence signal at its oversold region. In addition, Elliot Wave/fractal analysis has indicated a potential 5-wave completion of an intermediate degree down move structure from 29 Aug 2018 high. These observations suggest that the medium-term downside momentum of on-going down move from 29 Aug 2019 high has started to ease and the Index faces to risk of a multi-week corrective rebound to retrace the on-going impulsive down move from 29 Aug 2018 high.

Therefore, prefer to turn neutral first between 5785 and 5560. A clearance above 5785 kick starts the corrective rebound towards the 5950/990 resistance. On the flipside, failure to hold at 5560 sees an extension of the impulsive down move to target the next support at 5470 and even 5310 next (the lower boundary of a minor descending channel from 05 Oct 2018 high & Fibonacci projection cluster) (refer to daily chart).   

DAX – Impulsive down move structure remains intact

Key Levels (1 to 3 weeks)

Intermediate resistance: 11400/500

Pivot (key resistance): 11600

Supports: 11050 & 11800/700

Next resistance: 11800/900

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) had continued to drop lower as expected (printed a low of 11048 on last Fri, 26 Oct). No major changes on its key elements except on the reading on 4-hour Stochastic oscillator (bullish divergence signal after it hit an extreme oversold level) which highlights the risk of a minor corrective rebound to retest the 11400/500 intermediate resistance (the pull-back resistance of the medium-term descending channel support bearish breakdown, the upper boundary of the minor descending channel from 04 Oct 2018) in the first step.

Therefore, if the 11600 key medium-term pivotal resistance is not surpassed, the Index is likely to shape another potential downleg to target the next support at 11800/700.

On the other hand, a clearance above 11600 negate the bearish tone for an extension of the corrective rebound towards 11800/900 (the neckline resistance of major Head & Shoulders bearish reversal breakdown).

Charts are from City Index Advantage TraderPro