Weekly Technical Outlook on Major Stock Indices 14 Aug to 18 Aug 2017

S&P 500 – Broke below 2445, further potential corrective decline

Key Levels (1 to 3 weeks)

Intermediate resistance: 2462

Pivot (key resistance): 2490

Supports: 2432 & 2408/2403

Next resistance: 2524

Medium-term (1 to 3 weeks) Outlook

Last week, the S&P 500 Index (proxy for the S&P 500 futures) had staged a bearish breakdown below 2445 which validated a potential multi-week corrective decline to retrace the multi-month up move in place since 09 November 2016 low. For a recap, we had turned cautious earlier on this multi-week up move from 13 April 2017 low after it hit our significant medium-term resistance/upside target of 2476/80 on 25/26 July 2017.  

Please click here for a recap on our previous weekly technical outlook.  Current key technical elements are as follow;

• The daily RSI oscillator is now right below a former ascending trendline now turned pull-back resistance at the 50% level. These observations suggest the medium-term downside momentum of price action remains intact.
• The intermediate resistance stands at 2462 which is defined by the former minor range support of 28 July/09 August 2017 and close to the 61.8% Fibonacci retracement of the steep decline from 10 August 2017 minor swing high to last Friday, 11 August 2017 low.
• The key medium-term resistance stands at 2490.
• The next significant medium-term support rests at the 2408/2403 zone which is defined by the swing low areas of 30 June/07 July 2017 (see 4 hour chart).

Therefore, as long as the 2490 medium-term pivotal resistance holds, the Index is likely to shape another downleg to retest last Friday, 11 August low of 2432 before target the next support at 2408/2403.

However, a clearance above 2490 should invalidate the preferred corrective decline phase to open up scope for another round of bullish impulsive up move towards the next resistance 2524 (upper boundary of the long-term primary ascending channel from Mar 2009 low & a Fibonacci projection cluster)

Nikkei 225 – Bearish breakdown, further potential downside

Key Levels (1 to 3 weeks)

Intermediate resistance: 19690/740

Pivot (key resistance): 19920

Supports: 19280 & 18860

Next resistance: 20300

Medium-term (1 to 3 weeks) Outlook

Last week, the Japan 225 Index (proxy for the Nikkei 225 futures) had staged a bearish breakdown below the 19740 key medium-term pivotal support reinforced by an increase in geopolitical risk triggered by a “war of words” between U.S. and North Korean administration.

Therefore, our preferred bullish bias has been invalidated. Current key technical elements are as follow;

• The Index has broken below a major ascending trendline support from 24 Jun 2016 (Brexit) low now turns pull-back resistance at the 19740/920 zone (see daily chart).
• The aforementioned resistance zone of 19740/920 also confluences with the 50%/76.4% Fibonacci retracement of the recent steep decline from 07 August 2017 minor high of 20104 to last Friday, 11 August 2017 low of 19310.
• The daily RSI oscillator remains below its resistances at the 37%/ 50% zone and still has room for further potential downside (depicted by the pink box) before it reaches its extreme oversold level. These observations suggest the medium-term downside momentum of price action remains intact (see daily chart).
• The next medium-term supports rest at 19280 (the swing low of 17 May 2017 & the pull-back support of the former range resistance from 04 Jan 2017) follow by 18860/670 (gap support of 21Apr/23 Apr 2017) (see daily chart).
• Based on intermarket analysis, a technical element of USD/JPY are still negative and still shows the risk of a further decline to tests its major range support of 106.85/30 below the 111.20 key medium-term resistance. Given its direct correlation with the Nikkei 225, a potential further decline in USD/JPY should lead to a similar down move in the Nikkei 225 (see the last chart).

However, a clearance above 19920 should invalidate the bearish tone to see a squeeze back up to retest the 20300 range top in place since 20 June 2017.

Hang Seng –  Further potential mean reversion decline towards ascending channel support

Key Levels (1 to 3 weeks)

Intermediate resistance: 27500

Pivot (key resistance): 27960

Supports: 26830 & 26000

Next resistance: 28570

Medium-term (1 to 3 weeks) Outlook

The Hong Kong 50 Index (proxy for Hang Seng Index futures) had inched lower right below the predefined 27840/930 medium-term resistance and shed 4% to print a low of 26832 as seen on last Friday, 11 August 2017. Click here for a recap on our previous weekly technical outlook. Current key technical elements are as follow;

• The current slide from its 27960 high of 08 August 2017 has appeared to be a mean reversion decline within a medium-term ascending channel in place since 28 December 2016 low. The lower boundary (support) of the aforementioned ascending channel rests at 26000 which also confluences with the former minor swing high areas of 08 June/19 June 2017.
• The daily RSI oscillator has inched downwards and still has room for a further potential decline before it reaches its corresponding pull-back support a the 40% (depicted by the pink box). These observations suggest the downside momentum of price action remains intact.
• The shorter-term 4 hour Stochastic oscillator has inched upwards and still has room for further upside before it reaches an extreme overbought level. These observations suggest that the Index may shaped a minor relief rebound towards the 27500 intermediate resistance (50%/61.8% Fibonacci retracement of the recent decline seen last week).

Therefore, we turn bearish for a potential mean reversion corrective decline within a longer-term uptrend. The Index may shape a further minor relief rebound at this juncture towards 27500 and as long as the 27960 key medium-term pivotal resistance is not surpassed, the Index is likely to shape a further potential decline towards the 26000 ascending support.

On the other hand, a clearance above 27960 should invalidate the preferred bearish tone to see a further up move to test the next resistance at 28570 (April/May 2015 major swing high area).

ASX 200 – Still stuck within range between 5822 & 5680

Key Levels (1 to 3 weeks)

Resistances: 5805/822 & 5904

Supports: 5680, 5625 & 5615/5580

Medium-term (1 to 3 weeks) Outlook

The Australia 200 Index (proxy for the ASX 200 futures) had continued to evolve in a choppy sideways movement within its “Symmetrical Triangle” range configuration in place since 14 June 2017.

No change in major technical elements and we remain neutral between 5805/822 and 5680. Only a clear break (daily close) below the 5680 significant “Symmetrical Triangle” range support is likely to open up scope for a corrective decline towards next supports at 5625 (08 June 2017 swing low area) before the 5615/5580 zone (the major ascending channel support from 10 February 2016 low).

DAX -  Recovery invalidated, further potential corrective decline after minor rebound

Key Levels (1 to 3 weeks)

Intermediate resistance: 12210

Pivot (key resistance):12340

Supports: 11930 & 11800

Next resistance: 12670

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) had staged a bearish breakdown below the 12090 key medium-term support as per defined in our previous weekly outlook report and invalidated our preferred recovery scenario. The negative sentiment triggered by rising geopolitical risks (tensions between the U.S. & North Korea administrations) had outweighed the positive effect from a weaker EUR/USD.

Current key technical elements are as follow;

• The Index has broken below a major ascending channel support from the 24 June 2016 low (Brexit) and now turns pull-back resistance at 12210 (see daily chart).
• The key medium-term resistance stands at 12340 which is defined by the former swing low areas of 30 June/06 July 2017, the upper boundary of the descending channel in place since its current all-time high printed on 20 June 2017 and the 50 % Fibonacci retracement of recent decline from 13 July 2017 high to last Friday, 11 August 2017 low.
• The significant medium-term support rests at 11800 which is defined by the lower boundary of the aforementioned descending channel and the 0.618 Fibonacci projection of the decline from 20 June 2017 high to 01 August 2017 low projected from the minor swing high of 07 August 2017 (see 4 hour chart).
• The daily RSI oscillator remains below a corresponding resistance level of 47%/50% which suggests that the medium-term downside momentum of price action remains intact.

Therefore, we turn bearish and as long as the 12340 medium-term pivotal resistance is not surpassed, the Index is likely to shape another potential downleg to test its next support at 11800.

However, a clearance above 12340 may negate the preferred bearish tone for an extension of the corrective rebound to target the next resistance at 12670 (minor swing high area of 13 July 2017 & close to the 76.4% Fibonacci retracement of the entire decline from 20 Jun 2017 high to 11 Aug 2017 low).

Charts are from City Index Advantage TraderPro & eSignal

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