Weekly Technical Outlook on Stock Indices: Potential multi-week corrective decline in progress

Your weekly dose of key technical charts on S&P 500, Nikkei 225, Hang Seng, ASX 200 & DAX.

S&P 500 – Medium-term top in place




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Key Levels (1 to 3 weeks)

Intermediate resistance: 3000

Pivot (key resistance): 3020

Supports: 2910/04 & 2875

Next resistance: 3055 & 3088 (Fibonacci expansions)

Medium-term (1 to 3 weeks) Outlook

Last week, the SP 500 Index (proxy for the S&P 500 futures) has shed -1.2% and broke its prior two weeks of positive closes. Also, it has failed to stage the residual push up towards 3045/55 to complete the primary degree impulsive up move sequence in place since Dec 2018 low (Elliot Wave/fractal analysis).

In our previous weekly outlook report (click here for a recap), we have highlighted the risk of a medium-term top in the making and the Index has indeed shaped the expected bearish breakdown from the “Ascending Wedge” range configuration support, retested its pull-back resistance of 3006 on last Fri, 19 Jul before it tumbled to retest its weekly low of 2971.  Key elements remain negative;

  • Last week’s losses in price action of the Index has occurred right on the upper boundary of a major “Expanding Wedge” configuration in place since Jan 2018.
  • The daily RSI oscillator has traced out a bearish divergence signal at an extreme overbought level of 73 which indicates a slow-down in medium-term upside momentum of price action.
  • From a contrarian opinion perspective, the VIX futures has dropped and reached a “complacency zone” of 12.80/10.10 where the risk of a multi-week corrective decline in the S&P 500 increases at this juncture.

Therefore, we maintain the bearish bias in any bounces below an adjusted key medium-term pivotal at 3020 for a further potential corrective down move to target the 2910/04 support follow by 2875 next (also the 50% Fibonacci retracement of the recent up move from 03 Jun low to 15 Jul 2019 high).

However, a clearance with a daily close above 3020 invalidates the bearish scenario for a squeeze up towards 3055 and even 3088.

Nikkei 225 – Corrective down move in progress within range configuration



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Key Levels (1 to 3 weeks)

Pivot (key resistance): 21540

Support: 20900/800

Next resistance: 21900/22000

Medium-term (1 to 3 weeks) Outlook

Last week, the Japan 225 Index (proxy for the Nikkei 225 futures) has broken below the 21500 key medium-term pivotal support and the bearish Ascending Wedge” range support where the residual push up scenario towards 219000/22000 has been invalidated.

Right now, the Index is likely to be undergoing a corrective decline within a major complex range configuration in place since Oct 2018 high of 24478. We flip to a bearish bias below the 21540 key medium-term pivotal resistance for a further potential push down to retest the 20900/800 support in the first step.

However, a daily close above 21540 invalidates the push down scenario to revive the bulls for a squeeze up towards the 21900/22000 resistance (also Fibonacci retracement/projection cluster).

Hang Seng – Mix elements, turn neutral



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Key Levels (1 to 3 weeks)

Resistances: 29000 & 29500/700

Supports: 28300, 27800 & 26700

Medium-term (1 to 3 weeks) Outlook

Even though, the Hong Kong 50 Index (proxy for Hang Seng Index futures) has managed to hold the 28000 key medium-term pivotal support in the prior week but low conviction to stage the residual push up towards the 29500/700 resistance zone due to the bearish configuration seen in the S&P 500.

Therefore, we prefer to turn neutral now between 29000 and 28300. Only a daily close above 29000 revives the residual push up scenario to target 29500/700 next. On the flipside, a break with a daily close below 28300 opens up scope for a corrective decline towards the next support at 27800 follow by a further potential drop to retest 26700 (04 Jun 2019 swing low).

ASX 200 – Residual push up in progress



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Key Levels (1 to 3 weeks)

Pivot (key support): 6600

Resistance: 6815/6850

Next support: 6380

Medium-term (1 to 3 weeks) Outlook

Last week, the Australia 200 Index (proxy for the ASX 200 futures) has traded sideways above the 6590 key medium-term pivotal support.

No change on its key elements, we maintain the bullish bias with the adjusted key medium-term pivotal support now at 6600 for a potential residual push up to target the next resistance zone at 6815/50 (all-time high & Fibonacci expansion cluster) before a multi-week corrective decline materialises.

However, a break with a daily close below 6600 invalidates the bullish scenario to kick start the multi-week corrective down move sequence towards the next support at 6380.

DAX – Corrective down move in progress


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Key Levels (1 to 3 weeks)

Intermediate resistance

Pivot (key resistance): 12500

Supports: 12200 (trigger) & 11900/800

Next resistance: 12800 (Fibonacci expansion/retracement cluster)

Medium-term (1 to 3 weeks) Outlook

Last week, the Germany 30 Index (proxy for the DAX futures) has inched lower as expected and right now, it is hovering just above the 12200 downside trigger level.An hourly close below 12200 is likely to reinforce a potential multi-week corrective down move sequence to target the major support zone of 11900/800 in the first step.

However, a clearance with a daily close above the 12500 medium-term pivotal resistance invalidates the bearish scenario for a revival of bulls to set sight on the next resistance at 12800.

Charts are from City Index Advantage TraderPro & eSignal


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