Weekly Technical Outlook on Major Stock Indices 25 Feb to 01 Mar 2019

S&P 500 – Right below key long-term resistance

Key Levels (1 to 3 weeks)

Resistances: 2815 (long-term pivot) & 2875

Supports: 2680, 2600 & 2520/2495

Medium-term (1 to 3 weeks) Outlook

Another impressive run for the SP 500 Index (proxy for the S&P 500 futures), it has fully recovered last Thurs, 21 Feb loss and ended last week with a positive close, notched a 9^th consecutive week of positive gains as it recorded a gain of 19 % from its 24 Dec 2018 low.

Last week’s gains are attributed on a heightened optimism that a U.S/China trade deal is on the horizon to prevent a further escalation of the trade war (President Trump has just tweeted in today, 25 Feb Asian session that he is willing to extend the 01 Mar deadline on additional tariffs on China goods after the extended rounds of trade talks between officials that has stretched over the weekend) and a “patient” U.S. central bank (Fed) on its interest rate hiking cycle. Click here for previous report.

However, from a technical analysis perspective, the on-going rally has reached an inflection point where caution is warranted;

• The 19% rally recorded so far is now hovering right below the 2815 key long-term pivotal resistance as per highlighted in our Q1 2019 Global Markets Outlook; it gapped up in today, 25 Feb Asian session to print a current intraday high of 2803 after Trump’s tweet on the extension of the 01 Mar deadline for additional tariffs on China goods.
• The 9-week of consecutive rally is getting “overstretched” without any meaningful pull-back or retracement where the behavioural mindset of market participants on the aggregate is on a “buy the dip & fear of missing out” mode with a consensus view that the Fed will be a “rescuer” of last resort to prevent further decline in the similar magnitude seen in last Nov/Dec 2018 sell-off.  From a chart pattern perspective, the Index has continued to trace a out a bearish reversal “Ascending Wedge” range configuration in motion since 29 Jan 2019 low with the top of the “Ascending Wedge” that coincides closely with the 2815 key long-term pivotal resistance. These observations represent complacency where the on-going bulls can be caught off guard.
• The on-going rally has been led by two sectors; the Industrials and Semiconductors where their respective sector ETFs (XLI) and (SOXX) has recorded a rally of 28% (outperformed the S&P 500 by 9%). The XLI and SOXX has also reached major resistances at 76.80 and 186.08/190.90 and interestingly, the push up in price action from their respective Dec 2018 swing lows have been accompanied by decreasing volume. This is a stark contrast with the previous similar fractal sell-off seen from Feb/Jun 2015 to Feb 2016 for both ETFs where the rebound in price action from Feb 2016 swing low has been accompanied by increasing volume before the sectors stage the bullish breakout from their respective descending trendline resistances.

We maintain the neutral stance. Only a weekly close above the 2815 long-term pivotal resistance shall see the return of a melt-up phase to target 2875 follow by the 2940 all-time high area in the first step.

On the flipside, a break below 2680 is likely to reinforce a potential deep pull-back towards 2600 (the former swing low areas of Oct/Dec 2018) and even 2520/2495 next (61.8% Fibonacci retracement of the on-going rebound from 26 Dec 2018 low).

Nikkei 225 – Mix elements

Key Levels (1 to 3 weeks)

Resistances: 21880/22175 & 23050

Next supports: 20900, 20200 & 18970

Medium-term (1 to 3 weeks) Outlook

The Japan 225 Index (proxy for the Nikkei 225 futures) has inched higher as expected and it is now coming close to the lower limit target/resistance at 21880 as per highlighted in the previous weekly outlook report. It printed a current intraday high of 21598 in today, 25 Feb Asian session.

Mix elements, prefer to turn neutral now between 21880/22175 and 20900. A break below 20900 is likely to see pull-back to retest the 20200 support that has held previous dips in price action since the start the on-going rebound from 26 Dec 2018 low.

On the flipside, a clearance above 22175 sees an extension of the rebound towards the 23050 key long-term pivotal resistance.

Hang Seng – Approaching key long-term resistance

Key Levels (1 to 3 weeks)

Intermediate resistance: 29100

Pivot (key resistance): 29500 (long-term pivot)

Supports: 28460 (trigger) & 27350/290

Next resistances: 30450 & 31630

Medium-term (1 to 3 weeks) Outlook

The Hong Kong 50 Index (proxy for Hang Seng Index futures) has breached above the 28560 upper neutrality range as per highlighted in our previous weekly technical report. It is now hovering below the 29100/500 key long-term pivotal resistance, printed a current intraday high of 28993 in today, 25 Feb Asian session (see weekly chart).

In addition, the Index has started to trace out a bearish reversal “Ascending Wedge” range configuration as seen on a shorter time frame chart (4-hour) since its 08 Feb 2019 minor swing low with its lower boundary now acting as a support at 28460. Its upper boundary stands at 29100 which coincides with the lower limit of the long-term pivotal resistance (close to 61.8% Fibonacci retracement of the entire decline from 29 Jan 2018 high to

Flip to a bearish bias below 29500 key long-term pivotal resistance and a break below 28460 is likely to trigger at least a significant pull-back to retest the 27350/290 support in the first step (the former swing high area of 03 Dec 2018 & close to 38.2% Fibonacci retracement of the on-going rebound from 03 Jan 2019 low).

However, a weekly close above 29500 invalidates the bearish scenario for another round of impulsive up move to target the next resistances at 30450 and 31630 (close to 61.8% Fibonacci retracement of the primary down move from 29 Jan 2018 all-time high to 26 Oct 2018 low & range top from Feb/May 2018 high).  

ASX 200 – Pushed up towards 6150/200 key long-term resistance

Key Levels (1 to 3 weeks)

Pivot (key resistance): 6150/200 (long-term pivot)

Supports: 6080 (trigger), 5920 & 5800/700

Next resistance: 6380

Medium-term (1 to 3 weeks) Outlook

The Australia 200 Index (proxy for the ASX 200 futures) has pushed higher to test the upper limit of the key long-term pivotal resistance at 6200, also the pull-back resistance of the former major ascending channel support from 10 Feb 2016 low.

No change, 6200 will be the key pivotal resistance to watch and a break below 6080 downside trigger (the ascending trendline from 23 Dec 2018 low) is likely to open ups scope for at least a pull-back towards the 5920 support in the first step (38.2% Fibonacci retracement of the on-going rally from 23 Dec 2018 low & the former swing high areas of 07 Nov 2018/18 Jan 2019 high).

However, a weekly close above 6200 invalidates the bearish scenario for an extension of the rebound to retest the 17 Aug 2018 swing high area of 6380, also the 52-week high.

DAX – Watch the 11540 key resistance

Key Levels (1 to 3 weeks)

Pivot (key resistance): 11540

Supports: 11250 (trigger), 10860 & 10690/640

Next resistance: 11800 (lower limit of long-term pivot)

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) has continued to push higher and in today, 25 Feb Europe opening session, the Index has probed the upper limit of the key medium-term pivotal resistance at 11540 (the major descending trendline from 14 Jun 2018 high.

Momentum indicators have shown signs of an “overstretched” rally in price action where the daily RSI oscillator has reached a significant corresponding resistance at the 66 level coupled with a bearish divergence signal seen in the 4-hour Stochastic oscillator at its overbought region.

No change, maintain bearish bias below the 11540 key medium-term pivotal resistance and adjusted the downside trigger level to 11250 (the minor swing low areas of 18/19 Feb 2018 & the ascending trendline from the 26 Dec 2018 low). A break below 11250 is likely to reinforce at least a pull-back to target the 10860 support in the first step (minor swing low of 09 Feb 2019 & 50% Fibonacci retracement of the on-going rebound from 26 Dec 2018 low).

However, a daily close above 11540 put the bears on hold for an extension of the corrective rebound towards the 11800 major resistance (the former neckline support of the major “Head & Shoulders” bearish breakdown).