Weekly Technical Outlook on Major Stock Indices 02 Oct to 06 Oct 2017

S&P 500 – Further potential upside above 2509/2500 support

Key Levels (1 to 3 weeks)

Intermediate support: 2509

Pivot (key support): 2500

Resistances: 2525/28 & 2540/50

Next supports: 2489 & 2454/50

Medium-term (1 to 3 weeks) Outlook

Since our last weekly outlook report dated on 18 September 2017, the S&P 500 Index (proxy for the S&P 500 futures) had held on the predefined 2489 key medium-term pivotal support before it staged the expected rally to print fresh new all-time high of 2519 on last Friday, 29 September.

In today (02 October) Asian session, the Index has continued to inch higher and printed a fresh current intraday high of 2526 which has met our medium-term resistance/target of 2525/28.  Click here for a recap on our previous weekly technical outlook.

Right now, the key medium-term pivotal support will be shifted up to 2500 which is defined by the lower boundary of a short-term ascending channel from 29 August 2017 low and the 23.6% Fibonacci retracement of the up move from 21 August 20174 to today’s Asian session current intraday high of 2526.

The next significant medium-term resistance stands at the 2540/50 zone which is defined by the upper boundary of the short-term ascending channel from 29 August 2017 low and a Fibonacci cluster (see daily & 4 hour charts).

Overall, technical elements remain constructive for the Index to maintain its current medium-term uptrend from 27 March 2017 low. However, the Index is now approaching a “risk zone” of 2525/28 with the shorter-term (4 hour) Stochastic oscillator that is coming close to an extreme overbought level.

These observations suggest the risk of a short-term pull-back at 2425/28 towards the intermediate support at 2509 with the maximum limit set at the 2500 key medium-term pivotal support before a potential new bullish impulsive upleg materialises to target the next resistance at 2540/50.

On the other hand, failure to hold above 2500 may negate the bullish tone to see a deeper pull-back back to retest the 2489 support and only a break below it is likely to trigger a corrective decline towards the next support at 2454/50 (close to the 61.8% Fibonacci retracement of the on-going rally from 21 Aug 2017 low + former swing high areas of 23/25 Aug 2017).

Nikkei 225 – Medium-term uptrend remains intact

Key Levels (1 to 3 weeks)

Intermediate support: 20300/250

Pivot (key support): 19900

Resistances: 20630 & 21000

Next support: 19240

Medium-term (1 to 3 weeks) Outlook

Since our last weekly outlook report dated on 18 September 2017, the Japan 225 Index (proxy for the Nikkei 225 futures) had continued to push higher as expected and surpassed medium-term resistance/target of 20340 (printed a high of 20510 on 21 Sep). Click here for a recap on our previous weekly technical outlook.

After hitting last week high of 20510, the Japan 225 Index has started to drift sideways while the S&P 500 and Germany’s DAX had printed new marginal higher highs. The primary reason for the recent underperformance of the Nikkei is likely due to the upcoming Japanese national election on 22 October 2017.

From a technical analysis perspective, the Index is not showing any bearish reversal elements at this juncture to jeopardise the on-going medium-term uptrend in place since 29 August 2017 low.

Current key elements as follow;

• The daily RSI oscillator is not showing any bearish divergence signal and it still has room for further potential upside before it reaches an extreme overbought level of 80%. In addition, it is hovering above its corresponding support at the 54%. These observations suggest the medium-term upside momentum of price action remains intact.
• The intermediate support zone rests at 20300/250 which is defined by the former range top of 02 June/27 July 2017. The key medium-term support will be at 19900 that is derived from the former descending range resistance from 20 June 2017 and close to the 50% Fibonacci retracement of the prior swift rally from 08 September 2017 low to 21 September 2017 high (see daily & 4 hour charts).
• Since its 21 September 2017 high of 20510, the Index has started to evolve into an impending “triangle range”/pennant configuration with its upper boundary at 20400 and lower boundary at 20250 (see 4 hour chart).
• Based on intermarket analysis, the medium-term uptrend for the USD/JPY from 08 September 2017 low remains intact above the 111.50 key medium-term support within a longer-term range configuration and it still has room for further potential upside towards the 113.85 range resistance. Give its direct correlation with the Nikkei 225, a further potential up move in the USD/JPY should translate into a similar movement in the Nikkei 255 (see last chart).

Therefore, we are maintaining our bullish bias on the Index. As long as the 19900 medium-term pivotal support holds and a break above 20400 is likely to open up scope for a further potential bullish impulsive upleg target the next resistances at 20600 follow by 21000 next.

However, failure to hold above 19900 should invalidate the medium-term uptrend for a corrective down move to retest the 19240 support (swing low areas of 29 Aug/08 Sep 2017 & the lower boundary of the major ascending channel from 24 Jun 2016 low).

Hang Seng – Potential push up within bearish “Ascending Wedge”

Key Levels (1 to 3 weeks)

Pivot (key support): 27300

Resistances: 28150 & 28400/570

Next supports: 26830 & 26100

Medium-term (1 to 3 weeks) Outlook

Last week, the Hong Kong 50 Index (proxy for Hang Seng Index futures) had tumbled by 2.2% which in stark contrast versus the other majors such as the S&P 500, Nikkei 225 and DAX.

The primary reason for such underperformance seen in the past two weeks is due to the resurgence of USD strength seen in the USD/CNH as it rallied from a low of 6.4436 seen on 08 September 2017 to print a high of 6.6790 on last Thursday, 28 September 2017 in line with the major currencies. USD/CNH has an indirectly correlation with the Hang Seng since the start of 2017.

Thus, the on-going major uptrend from 28 December 2016 is now at risk of a medium-term correction after a strong performance since the start of 2017 (based on last Fri, 29 Sep close, year to date gain of 24% seen on Hang Seng versus 11.6% for the S&P 500). Current key elements are as follow;

• Since its low of 26832 on 11 August 2017, the Index has started to evolve into a bearish “Ascending Wedge” with its lower boundary/support coming in at 27300. This is a potential bearish reversal pattern that tends to appear at the “tail end” of a significant uptrend (The Index’s on-going major uptrend has started from the low of 28 Dec 2016) (see daily chart)
• The aforementioned “Ascending Wedge” upper boundary/resistance stands at 28400/570 which confluences with the April/May 2015 swing high area and a Fibonacci projection cluster (see 4 hour chart).
• The daily RSI oscillator has flashed out a bearish divergence signal since 30 August 2017 but it has now staged a rebound from a corresponding support at the 40% level. These observations suggest that price action of the Index can see a potential short to medium-term up move at this juncture.
• Based on the Elliot Wave principal/fractal analysis, the price action within the impending bearish “Ascending Wedge” configuration has not completed its “form” which tends to be in five waves (current price structure only has 4 waves). This observation suggests that the Index may see another upleg at this juncture to complete the 5th wave of the “Ascending Wedge” at its upper limit/resistance of 28400/570 (see 4 hour chart).

Therefore, we are now cautious on the current major uptrend in place since 28 December 2017 low as a potential medium-term correction looms.  However from an Elliot Wave/fractal analysis perspective, as long as the 27300 medium-term pivotal support holds, the Index can still stage a potential final push up towards 28150 and 28400/570 resistance before a bearish reversal occurs.

On the other hand, a break below 27300 should see a further slide to test the next support at 26830. A violation below 26830 is likely to open up scope for a potential medium-term corrective down move towards 26100 in the first step.

ASX 200 – 5660 remains the key support to watch

Key Levels (1 to 3 weeks)

Resistances: 5800, 5900 & 5950/6000

Supports: 5680/660, 5580 & 5500

Medium-term (1 to 3 weeks) Outlook

Last week, the Australia 200 Index (proxy for the ASX 200 futures) had staged another attempt to test the significant support of 5680/660 within a range configuration in place since June 2017 but it do not have a daily close below 5660.

Technical elements remain mix at this juncture. The bears need to have a clear break below 5660 (daily close below it) to open up scope for a potential medium-term (multi-week) corrective decline towards the next supports at 5580 and 5500 (the former swing high areas of 04 Oct/25 Nov 2016 & close to the 38.2% Fibonacci retracement of the major uptrend from 10 Feb 2016 low to the 01 May 2017 high of 5962).

DAX – Still evolving within a bullish configuration

Key Levels (1 to 3 weeks)

Intermediate support: 12750

Pivot (key support): 12650

Resistances: 12955/13020 & 13150/240

Next support: 12300

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) had continued to rally as expected. It surpassed the intermediate resistance/target of 12670 and printed a high of 12861 on last Friday, 29 September which is closed to our medium-term resistance/target of 12890/955 as per highlighted in our last weekly technical outlook report dated on 18 September 2017. Click here for a recap.

Technical elements remain positive.  However, the Index is now approaching a “risk zone” of 12955/13022 and the shorter-term (4 hour) Stochastic oscillator is now coming close to an extreme overbought level where it faces the risk of a short-term pull-back in price action at 12955/13022.

As long as the intermediate support of 12750 (lower boundary of the short-term ascending channel from 06 Sep 2017 low) with a maximum limit set at the tightened 12650 medium-term pivotal support holds, the Index is likely to stage another round of potential bullish impulsive upleg to target the next resistance at 13150/240.

However, a break below 12650 may negate the bullish tone to see a further slide towards the next support at 12300 (former range resistance of 26 Jul/08 Aug/16 Aug 2017.

Charts are from City Index Advantage TraderPro & eSignal

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