weekly technical outlook on major stock indices 12 jun to 16 jun 2017 risk of a further pull back be

S&P 500 – Risk of a deeper pull-back, 2403 remains the key support to watch

(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Intermediate support: 2418/15

Pivot (key support): 2403

Resistances: 2446/48 & 2467/76

Next support: 2354

Medium-term (1 to 3 weeks) Outlook

Last week, the S&P 500 Index (proxy for the S&P 500 futures) had rallied as expected and hit the first upside target/resistance at 2446/48 before staged a 1.2% intraday decline on Fri, 09 June due to sell-off of 3% to 4% in key technology stocks (Apple, Amazon, Facebook, Alphabet & Netflix). The highest weightage in the Nasdaq 100 ; Apple recorded a biggest single day decline of 3.9% since April 2016 after a media report cited that iPhones to be launched this year would use modem chips with slower download speeds than others smartphones competitors. Click here for a recap on our previous weekly technical outlook.

Current key elements are as follow:

• Despite last Friday’s sell-off seen in technology stocks, the carnage was not broad based. Interestingly, the previous number one leading Financial sector that saw its outperformance shrink against benchmark since March 2017 had started to roar back to life as it rallied by 1.89% on last Friday, 09 June. The corresponding Financials sector ETF (XLF) return since 09 November 2016 is now at 16.55% versus a return of 12.49%  seen in the S&P 500 ETF (SPY) which allows it to claim a second spot just behind the Technology sector ETF (XLK) (refer to the 3^rd chart).
• The technical chart of the Financials sector ETF (XLF) remains bullish and shows further upside potential above the 22.87 key medium-term support toward the next resistance zone at 25.76/26.47. This observation on sector rotation suggests that a panic corrective decline is not likely to occur for the S&P 500 at this juncture despite last Friday, 09 June carnage seen in key technology stocks (refer to the 4^th chart).
• The significant medium-term support remains at 2403 which is defined by the former range top area of 08 May/16 May 2017 and the 38.2% Fibonacci retracement of the recent rally from 18 May 2017 low to last week’s high (see 4 hour chart).
• The next significant medium-term resistance stands at the 2467/76 zone which is defined by the upper boundary of a short-term bullish ascending in place since 18 May 2017 low and a Fibonacci projection cluster (see daily & 4 hour charts).
• The shorter-term 4 hour Stochastic oscillator of the Index has flashed a prior bearish divergence signal and still has further room to manoeuvre to the downside before it reaches an extreme oversold level. These observations suggest that short-term downside momentum of price action remains intact and the Index may see a deeper pull-back.

Therefore, we are maintaining our bullish bias on the Index but a deeper pull-back below the 2418/15 intermediate support cannot be ruled out at this juncture. As long as the 2403 medium-term pivotal support holds, the Index may see another new upleg to target the next resistance at 2467/76.

However, failure to hold above 2403 is likely to invalidate the preferred bullish bias to trigger a deeper corrective decline to retest the 2354 ascending trendline support from the 17April 2017 low.

Nikkei 225 – 19600 remains the key support to watch for new potential upleg

(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Intermediate support: 19830

Pivot (key support: 19600

Resistances: 20090, 20500 & 20950/21100

Next supports: 19280 & 18860/640

Medium-term (1 to 3 weeks) Outlook

Last week, the Japan 225 Index (proxy for the Nikkei 225 futures) had staged the expected pull-back towards the predefined 20000/19830 intermediate support zone. In today, 12 June Asian session, it inched lower and printed a current intraday low of 19833 that coincided with a lacklustre growth (y/y) seen in machinery orders  for May that came in below expectations (2.7% versus a consensus of 6.3%).  Click here for a recap on our previous weekly technical outlook.

Current key technical elements are as follow:

• The Index has continued to evolve within a short-term bullish ascending channel in place since 17 April 2017. Last week’s slide in price action has led it to hover right at the ascending channel’s lower boundary/support at 19830 (see 4 hour chart).
• Interestingly, the aforementioned slide has formed a bullish “Flag” continuation price action pattern. In addition, the 4 hour Stochastic oscillator is now forming an impending bullish divergence signal. These observations suggest that the downside momentum of last week’s decline has started to wane which suggests that the Index may start to trace out a new upleg to continue its bullish up move in place since 17 April 2017 low (see 4 hour chart).
• The intermediate resistance now stands at 20090 which is defined by the upper boundary of the aforementioned bullish “Flag” (see 4 hour chart).
• The key medium-term support remains at 19600 (former medium-term range top from 04 Jan to 13 Mar 2017 now turns pull-back support).
• The next significant medium-term resistances stands at 20500 follow by 20950/21100 which is defined by major swing high area of 24 June/11 August 2015, the upper boundary of a short-term ascending channel in place since 17 April 2017 and the 1.618 Fibonacci projection of the up move from 17 April 2017 low to 10 May 2017 minor swing high of 20025 projected from 18 May 2017 minor swing low of 19283) (see 4 hour chart).
• Intermarket analysis from USD/JPY, the recent decline of the pair has managed to stall at a significant medium-term support of 109.30/11 which is defined by the “gapped up” seen after the outcome of the 1^st round of the French presidential election and the pull-back support of a former ascending channel’s upper boundary bullish breakout that has stalled a prior decline on 17 April 2017. In addition, the daily RSI oscillator has managed to stage rebound from a significant corresponding support at the 35% level which is also closed to the oversold region. These observations suggest that the USD/JPY may stage at least a short-term recovery at this juncture to retest the 111.70 intermediate resistance. Since the movement of the USD/JPY has a direct correlation with the Nikkei 225, any potential up move in the USD/JPY is likely to support a similar move in the Nikkei 225 (see the last chart).

Therefore, we are maintaining our bullish bias for the Index to see the start of a new potential upleg above the 19600 medium-term pivotal support. A break above 20090 intermediate resistance is likely to reinforce a potential up move to target the next resistances at 20500 follow by 20950/21100 next.

However, failure to hold above the 19600 is likely to indicate a failure bullish breakout and revive the bears for a corrective decline towards the next supports at 19280 and 18660/640 (gap that was formed after the outcome of the 1^st round of the French presidential election).

Hang Seng Index -  Potential deeper pull-back below 26120/170

(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Intermediate support: 25060

Pivot (key support): 24670

Resistances: 26120/170 & 26335/400

Next support: 23400/1100

Medium-term (1 to 3 weeks) Outlook

Last week, the Hong Kong 50 Index (proxy for Hang Seng Index futures) has continued to inch higher to print a new marginal high of 26114 but failed to surpass the intermediate resistance/risk level of 26120/170.

Current key technical elements are as follow:

• Today, 12 June price action has staged a gapped down and broke below a short-term ascending trendline support in place since 19 April 2017 minor swing low (see 4 hour chart).
• The daily RSI oscillator has exited from its overbought region and still shows room for further potential downside before it reaches its corresponding support at the 38% level. In  addition, the  shorter-term 4 hour Stochastic oscillator has also stage an exit from its overbought region and still has further room to manoeuvre to the downside before it reaches an extreme oversold region. These observations suggest that price action of the Index may see a further pull-back in price action at this juncture as short-term downside momentum starts to build-up.
• The medium-term uptrend of the Index remains intact as it continues to evolve within an ascending channel in place since 28 December 2016 low with its lower boundary/support at 24670 (see 4 hour chart).
• The aforementioned ascending channel support also confluences with the former minor swing high areas of 21 March/27 April 2017 and the 61.8% Fibonacci retracement of the recent rally seen in the past 8 weeks from 19 April 2017 low to last week’s high of 26114 (see 4 hour chart).

Therefore, the Index now may shape a deeper pull-back at this juncture (below 26120/170)  towards the intermediate support at 25060 with a maximum limit set at the adjusted medium-term pivotal support of 24670 before a new potential upleg materialises to target the next resistance at 26335/400.

On the other hand, failure to hold above 24670 is likely to damage the medium-term uptrend from 28 December 2016 and open up scope for a corrective decline towards the next support at 243400/110 (the lower boundary of longer-term ascending channel in place since 24 June 2016 low & close to the 61.8% Fibonacci retracement of up move from 28 December 2016 low).

ASX 200 – Minor rebound before new potential dowleg

(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Intermediate resistance: 5715/30

Pivot (key resistance): 5805

Support: 5615/5580

Next resistances: 5904 & 5960/6000 (long-term key resistance)

Medium-term (1 to 3 weeks) Outlook

Last week, the Australia 200 Index (proxy for the ASX 200 futures) had staged the expected bearish breakout below the 5676 downside trigger level and tumbled towards the upper limit of the downside target/support zone of 5615/558 (printed a low of 5625 on 08 June).  Click here for a recap on our previous weekly technical outlook.

Current key technical elements are as follow:

• Since its 08 June 2017 low of 5625, the Index had started to shape a 1.3% rebound to print a high of 5701 on Fri, 09 June. The shorter-term 4 hour Stochastic oscillator continues to inch upwards and still has some room left to manoeuvre to the upside before it reaches an extreme overbought level. These observations suggest that short-term upside momentum remains intact which can sustain the on-going rebound (see 4 hour chart).
• The intermediate resistance that may stall the rebound stands at the 5715/5730 zone which is defined by the former broken minor ascending range support from 18 May 2017 low now turns pull-back resistance, the 61.8% Fibonacci retracement of the recent down move from 02 June 2017 high to last week low of 5625 and the descending trendline from 02 May 2017 high that has capped previous rebound since 11 May 2017 (see 4 hour chart).

Therefore, the Index now may see a further “residual” push up towards the 5715/30 intermediate resistance before another potential downleg materialises to target the 5615/5580 support.

However, a clearance above the 5805 medium-term pivotal resistance is likely to invalidate the preferred bearish scenario to see a squeeze up towards the next resistance at 5904 (swing high area of 04 May/11 May 2017).

DAX – 12500 remains the key support to watch

(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Intermediate support: 12690

Pivot (key support): 12500

Resistances: 12880 & 13130/255

Next support: 12250/12090

Medium-term (1 to 3 weeks) Outlook

Last week, the Germany 30 Index (proxy for the DAX futures) had staged the expected pull-back towards the 12690 intermediate support and traded sideways thereafter.

No major changes in key technical elements and we maintain our bullish bias. As long as the 12500 medium-term pivotal support holds and a break above the intermediate range top of 12880 is likely to reinforce a further potential up move to target the next resistance of 13130/255.

On the other hand, failure to hold above 12500 is likely to invalidate the preferred bullish bias to open up scope for a corrective decline towards the 12250/12090 gap support seen after the outcome of the 1^st round of French presidential election.

Charts are from City Index Advantage TraderPro & eSignal

Disclaimer

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs. While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments. City Index recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets. It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com.au, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. GAIN Capital Australia Pty Ltd (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.