S&P 500 – Further potential downside below 2066/2083 resistance
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Key Levels (1 to 3 weeks)
Intermediate resistance: 2066
Pivot (key resistance): 2080/83
Supports: 2036 & 2005/1995
Next resistances: 2100 & 2138
Medium-term (1 to 3 weeks) Outlook
Maintain bearish bias. Last week, the U.S. SP 500 Index (proxy for the S&P 500 futures) has indeed shaped the expected decline and hit our first target (support) at 2036 on Friday, 06 May 2016 before the expected rebound occurred in the late U.S. session. Please click on this link for a recap on our previous weekly technical outlook/strategy. Technical elements remain bearish.
- The daily (medium-term) RSI oscillator remains bearish below its pull-back resistance (in dotted red) and the 50% neutrality level. In addition, it still has ample room for further downside before reaching its oversold region. These observations suggest that downside momentum of price action remains intact (see daily chart).
- The key medium-term resistance stands at 2080/83 which is defined by the descending trendline from 21 April 2016 high, swing high area of 03 May 2016 that failed to break above the former swing lows area of 25/28 April 2016 and the 61.8% Fibonacci retracement of current down move from 21 April 2016 high to last Friday low of 2036.
- The shorter-term (4 hour) Stochastic oscillator has reached its extreme overbought level which suggests that last Friday’s rebound in price action may have reached a tipping point where the short-term upside momentum is being overstretched. These observations suggest limited upside potential in price action of the Index.
- Based on contrary opinion/sentiment analysis (inverse relationship) between the VIX futures (tradable product of the VIX) and the S&P 500, the VIX futures has formed a bullish “Hammer” candlestick pattern right at the “complacency zone”/support of 12.80/10.10 and in the past occasion on 13 July 2015, this is where the S&P 500 is at a significant resistance/inflection level where it staged a corresponding significant decline (refer to the green arrows on the VIX & the corresponding red arrows of the S&P 500). Given that the VIX futures still has ample room to manoeuvre to the upside before reaching the “fear zone”/resistance of 26.40/28.25, this observation translates into a risk of further potential downside on the S&P 500 (refer to the 4th chart). *VIX is a measure of the implied volatility of the S&P 500 index options where it gives a gauge of the market’s expectation of the S&P 500’s volatility over the next 30-day period.
- The next significant support on the medium-term rests at 2005/1995 which is defined by the former swing high areas of 28 August/17 September 2015 which has been tested thrice and the 38.2% Fibonacci retracement of the whole up move from 11 February 2016 to 20 April 2016 high of 2111 (see daily & 4 hour charts).
Intermediate resistance stands 2066 and as long as the 2080/83 weekly medium-term resistance pivotal resistance is not surpassed, the Index is likely to shape another potential down leg to target the 2005/1995 support zone.
However, a clearance above the 2080/83 medium-term pivotal resistance is likely to negate the bearish tone to see a further push up to retest the key resistance at 2100 (descending trendline from 17 May 2015 high). Only a clear break above 2100 may see a further rally to target the 52-week high /current all-time high at 2138.
Nikkei 225 – Potential last push down below 16330/720
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Key Levels (1 to 3 weeks)
Intermediate resistance: 16260/330
Pivot (key resistance): 16720
Supports: 15840 & 15480/330
Next resistance: 17710/900
Medium-term (1 to 3 weeks) Outlook
Remain bearish for a potential last push down. . Last week, the Japan 225 (proxy for the Nikkei 225 futures) has traded sideways below the predefined 16260/330 intermediate resistance where it tested but failed to make any breakthrough in light of Japan’s Golden Week where the cash market is closed for three days from 3 May to 5 May 2016. New bearish technical elements as follow:
- Based on the Elliot Wave Principal and fractal analysis, the Index is now shaping a corrective minor degree wave 4/ (rectangle range configuration) within a typical impulsive bearish 5 waves structure that started from 23 April 2016 high of 17772 of an intermediate degree. The potential resistance/end target of the minor degree corrective wave 4/ stands at 16260/300 which is defined by the 23.6% Fibonacci retracement from wave 2/ high of 17575 to wave 3/ low at 15832 + close to the 1.00 Fibonacci projection of the distance of the up move from 15832 low to 16185 high projected from 04 May 2016 low of 15820 (see 4 hour chart).
- The expected end target of the wave 5/ of (a) stands at 15723 (one time of the length of wave 1/ projected from the current intraday high of 16295 which confluences closely with the graphical support of 15480/330 (07 April 2016 swing low area & an ascending trendline from 12 February 2016 low) (see 4 hour chart).
- The shorter-term (4 hour) Stochastic oscillator is coming close to an extreme overbought level which suggests limited upside potential in terms of price action at this juncture.
Therefore any potential rebound is likely to be capped by the intermediate resistance of 16260/330 with a maximum limit set at the 16720 weekly medium-term pivotal resistance for a potential final push down to target the 15480/330 support (to complete the implusive five waves bearish structure/cycle of an intermediate degree) before a likely significant mean reversion rally occurs.
On the other hand, a clearance above the 16720 medium-term pivotal resistance may damage the medium-term bearish trend for a squeeze back up towards the next resistance at 17710/900 (major swing high formed at end of January 2016 + 23 April 2016 swing high).
Hang Seng Index – Push up before another potential downleg
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Key Levels (1 to 3 weeks)
Intermediate resistance: 20500/600
Pivot (key resistance): 21060
Supports: 19680/500 & 18540
Next resistance: 21650
Medium-term (1 to 3 weeks) Outlook
Maintain bearish bias. Last week, the Hong Kong 50 Index (proxy for the Hang Seng Index futures) has tumbled as expected and almost hit the upper limit of our medium-term expected downside target at 19850 (printed a low of 19993). Please click on this link for a recap on our previous weekly technical outlook/strategy. Technical elements remain bearish as follow:
- Last week, the Index has recorded its worst weekly performance of – 4.5% since its 2-month old recovery from 11 February 2016 low.
- The Index has reintegrated back below the former support of 20600/500 level which indicates that the recent bullish breakout is a failure (bull trap) from the pull-back resistance of a former long-term ascending channel’s lower boundary from 02 October 2011 low (as per highlighted by the dotted blue line in the weekly chart) and the ascending trendline from 23 October 2016 high (as per highlighted by the dotted pink line in the daily chart).
- The significant medium-term resistance now stands at 2106 which is neckline resistance of the Toppish configuration bearish breakout (see 4 hour chart).
- The significant medium-term support rests at 19680/500 which is the former swing high areas of 29 January/22 & 26 February 2016 and the 61.8% Fibonacci retracement of rally from 11 February 2016 low to 21 April 2016.
- The shorter-term Stochastic oscillator (4 hour) has rebounded off from its extreme oversold level and still has room for further upside before reaching an extreme overbought level. These observations highlight the risk of a minor rebound in price action of the Index .
We maintain our bearish bias and any potential minor rebound is likely to be capped by the 20500/600 intermediate resistance with a maximum limit set at the 21060 weekly medium-term pivotal resistance before another downleg materialises to target the 19680/500 support in the first step.
However, a break above the 21060 medium-term pivotal resistance is likely to negate the bearish tone to see a push up to retest the recent range top at 21650.
FTSE China A50 – Bearish breakout, further potential downside ahead
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Key Levels (1 to 3 weeks)
Intermediate resistance: 9430
Pivot (key resistance): 9700
Supports: 9180/080 & 8630
Next resistances: 9840 & 10310
Medium-term (1 to 3 weeks) Outlook
Remain bearish as 9400 has been broken to the downside. The China A50 has tumbled within our expectation as the 9400 downside trigger level has been taken out and it is now fast approaching our medium-term downside target at 9180/080 (current intraday low at 9262). Please click on this link for a recap on our previous weekly technical outlook/strategy. Technical elements remain bearish as follow:
- Price action has staged a bearish breakout from a mini “Double Top” configuration in place since the 21 March 2016 high of 9840 which is similar in terms of fractals from the earlier “larger” Double Top bearish breakout on 07 January 2016.
- The neckline resistance of the mini “Double Top” bearish breakout stands at 9430.
- The daily (medium-term) RSI oscillator has just broken below its trendline support and still has room for further downside before reaching its oversold region. These observations suggest that downside momentum of price action remains intact.
- The shorter-term (4 hour) Stochastic oscillator is coming close to its extreme oversold level which highlights the risk of a minor rebound.
- The significant medium-term resistance now stands at 9700 which is defined by the minor swing high areas of 19 April to 03 May 2015 and the trendline resistance from 21 March 2016 high.
Therefore, the Index now faces the risk of a further decline but do expect a potential minor rebound at the 9180/080 support. The 9430 intermediate resistance should cap the expected rebound for another round of potential downleg to retest the earlier February 2016 swing low area at 8630.
Only a break above the 9700 medium-term pivotal resistance is likely to damage the bearish tone to see a retest on the 9840 range top of March/April 2016 before targeting the next resistance at 10310.
DAX – Potential final push down below 10165
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Key Levels (1 to 3 weeks)
Intermediate resistance: 9970/10026
Pivot (key resistance): 10165
Support: 9530/430
Next resistance: 10530
Medium-term (1 to 3 weeks) Outlook
Maintain bearish bias for potential last push down. The German 30 Index (proxy for the DAX futures) has declined as expected and hit the downside target (support) at 9750 (printed a low of 9733 last Friday). ). Please click on this link for a recap on our previous weekly technical outlook/strategy. New bearish technical elements as follow:
- Based on the Elliot Wave Principal and fractal analysis, the Index is now shaping a corrective minor degree wave 4 within a typical impulsive bearish 5 waves structure that started from 21 April 2016 high of 10530 of an intermediate degree. The potential resistance/end target of the minor degree corrective wave 4 stands at 9970/10026 which is defined by a Fibonacci retracement cluster (38.2% retracement of the whole decline from 21 April 2016 high to last Friday low of 9733 + 50% retracement of the decline from the start of wave 2 to last Friday low of 9733 ).
- The next significant medium-term support rests at 9530/430 which is defined by the swing lows area of 11 March/08 April 2016 and close to the 61.8% Fibonacci retracement of the rally from 11 February 2016 low to 21 April 2016 high of 10530.
- The shorter-term (4 hour) Stochastic oscillator is coming close to an extreme overbought level which suggests limited upside potential in terms of price action at this juncture.
- The significant medium-term resistance now stands at 10165 which is defined by the former swing low area of 28 April 2016 and the descending trendline from 21 April 2016 high.
As long as the 10165 weekly medium-term pivotal resistance is not surpassed, the Index is likely to see a potential final push down to target the 9530/430 support for a completion of a bearish impulsive 5 waves structure of 1/ before a potential significant mean reversion rally occur.
On the flipside, a clearance above the 10165 medium-term pivotal resistance is likely to invalidate the bearish trend to see a push up to retest the 21Aoril 2016 swing high of 10530.
Disclaimer
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