the week ahead for major stock indices 11 july to 15 july 2016 further upside movement in progress 1

S&P 500 – Eyeing a new potential all-time high

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Key Levels (1 to 3 weeks)

Intermediate support: 2120

Pivot (key support): 2100

Resistances: 2194 & 2268/94

Next support: 2056

Medium-term (1 to 3 weeks) Outlook

Maintain bullish bias and eying a potential new all-time high.  Last week, the U.S. SP 500 Index (proxy for the S&P 500 futures) has performed much better than expected as it only shaped a shallow pull-back of 1.8% to print a low of 2073 on 06 July from Monday, 04 July (Asian session) high of 2112. A clear outperformance of the U.S.  stock market versus the rest of the world.  On Friday, 08 July 2016 reinforced by a stronger than expected U.S. nonfarm payrolls data for June (287K versus consensus of 175K), the Index has pushed higher and hit our target at 2138 (printed a current intraday high of 2139 in today’s Asian session, 11 July 2016).

Most importantly from a technical analysis/intermarket/flows positioning perspective, we have identified right on 24/27 June 2016  as per highlighted in our prior technical outlook/strategies that the zone around the post Brexit 1991 level is the potential capitulation point for the S&P 500 to head higher (click these link & link to recap the details).

Please click on this link for a recap on our previous weekly technical outlook/strategy. New elements as follow:

• From an Elliot Wave Principal and fractal analysis, the S&P 500 is the strongest among the major stock indices as it may have completed the corrective cycle wave IV low at 1807 on 11 February 2016 which also held above the lower boundary (support) of the long-term ascending channel in place since the start of the primary bullish cycle on March 2009. Current price action of the Index is likely undergoing a potential cycle degree (multi-months) bullish impulsive wave V.  Thus on a longer-term perspective, this on-going rally (wave V) is a “melt-up” phase rather than a “genuine recovery” where a significant correction may occur to retrace the current 7 year of bull cycle from the March 2009 low when wave V ends.
• On the medium-term, the Index is now challenging its current all-time high level at 2138 but elements are positive as it has broken above the former range resistance from May 2015 high now turns pull-back support at 2120/2100 (see daily chart).
• In addition, the daily RSI oscillator has broken above its conjunction descending trendline and still has room to manoeuvre to the upside before reaching the extreme overbought level. These observations suggest that upside momentum of price action remains intact.
• From the February 2016 low, the Index has now evolved into a bullish ascending channel with the upper boundary/resistance now at around 2268/94 which also confluences with a Fibonacci projection cluster (see daily chart).
• Below 2268/94, there will be a potential resistance at 2194 which is defined by the 1.00 Fibonacci projection (the min. wave 3/ target)  of the recent rally from the post Brexit low of 1991 printed on 28 June 2016 to 04 July 2016 high of 2112 projected from last week low (see 4 hour chart).
• The 4 hour (short-term) Stochastic oscillator has almost reached its extreme overbought level which suggests that the Index may see a minor pull-back before resuming its uopward climb.

Therefore, any potential pull-back in price action of the Index is likely to be held by the intermediate support at 2120 with a maximum limit set at the new 2100 medium-term pivotal support before another potential upleg materialises to target 2194 in the first step.

On the other hand, failure to hold above the 2100 medium-term pivotal support may negate the preferred bullish tone to see a deeper slide towards the next support at 2056 (prior minor swing lows/highs that has tested thrice).

Nikkei 225 –  Potential further push up towards descending range top

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Key Levels (1 to 3 weeks)

Intermediate support: 15390

Pivot (key support): 15103

Resistances: 15865, 16670 & 17240

Next supports: 14835 & 13900 (long-term pivot)

Medium-term (1 to 3 weeks) Outlook

Further potential push up towards descending range top. . Last week, the Japan 225 (proxy for the Nikkei 225 futures) has stage a decline of 4.5% from Monday, 04 July high of 15825 to a low of 15103 printed on 08 July. Most importantly, it does not break below the 14835 predefined medium-term pivotal support and staged a push up in the later part of the week (+1.8% seen in last Friday, 08 July).

Please click on this link for a recap on our previous weekly technical outlook/strategy. Key elements as follow:

• The Index now has shaped a medium-term higher low as supported by an ascending trendline support from 24 June 2016 low (see 4 hour chart).
• In today’s Asian session, 11 July, the Index has recaptured (traded above) its former intermediate support at 15390 which is a congestion level that tested several swing highs and lows since 16 June 2016 low. These observations represent upside momentum of price action has resurfaced (see 4 hour chart)
• The near-term resistance remains at 15865 which is defined by the minor swing high areas of 30 June/04 June 2016.
• The medium-term significant resistances stands at 16670 which is defined by the descending range top in place since 23 April 2016 and a Fibonacci cluster (0.76% retracement + 1.616 projection) follow by 17240 which is the minor swing high of 31 May 2016 that has been tested twice in the past (see 4 hour chart).
• Based on the Elliot Wave Principal, fractal analysis and intermarket relationship with the USD/JPY, the Index may have completed the multi-month corrective cycle wave IV low of 14835 on 24 June 2016 (Brexit) and it is in the midst of undergoing a primary degree (multi-weeks to months) bullish impulsive wave  (1) that can be typically broken down into a lower degree 5 waves structure (intermediate degree -multi-days to weeks) labelled as 1/, 2/, 3/, 4/, 5/. Last week’s  4.5% decline from Mon, 04 July high to 08 July low of 15825 may have completed the intermediate degree corrective (pull-back/consolidation) wave 2/ and the Index is now in the midst of undergoing the intermediate degree bullish impulsive wave 3/ with its potential end target (based on Fibonacci clustering techniques) at 16670.
•  We have tightening the medium-term pivotal support to 15103 which is defined by the ascending trendline support from 24 June 2016 low and close to the 61.8%/76.4% Fibonacci retracement from 24 June 2016 low to 04 July 2016 high of 15825.

Therefore, we are maintaining our medium-term (multi-week) bullish bias for the Nikkei 225 and as long as the 15103 medium-term pivotal support holds, the Index is likely to see a potential bullish breakout above the 15865 near-term resistance for a further upside movement to target the next resistance at 16670.

On the other hand, failure to hold above the tightened 15103 medium-term pivotal support is likely to negate the preferred bullish tone for a slide to retest the 24 June 2016 low of 14835. Only a break below 14835 is likely to trigger a deeper slide towards the key long-term support at 13900.

Hang Seng Index – Continues to evolve within “Triangle range”

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Key Levels (1 to 3 weeks)

Resistances: 21280, 21650 & 23500

Supports: 19790/560 & 18200/18060

Medium-term (1 to 3 weeks) Outlook

View unchanged as the Hong Kong 50 Index (proxy for the Hang Seng futures) continues to evolve within a “Triangle range”/sideways configuration in place since 21 April 2016 high with mixed elements. For example, the daily RSI oscillator continues to thread above its support but a longer-term (weekly) RSI has remained below its “stubborn” resistance (depicted in pink boxes).

Therefore, it will be prudent to remain neutral from a medium-term perspective at this juncture as the Index is still expected to trade within the aforementioned ranges of the “Triangle”/sideways configuration.

Only a break above the “triangle range” resistance/top at 21280 is likely to trigger a further upside movement to target the next resistances at 21650 and 23500.

On the flipside, failure to hold above the “triangle range” bottom/support at 19790/560 may see a deeper decline to retest the 11 February 2016 swing low area at 18200/18060.

FTSE China A50 – Further potential push up towards key range top at 9700/840

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Key Levels (1 to 3 weeks)

Intermediate support: 9385

Pivot (key support): 9226

Resistances: 9700 & 9840

Next support: 9056 (range bottom)

Medium-term (1 to 3 weeks) Outlook

Last week, the China A50 has continued to inch higher within the on-going multi-month range configuration in place since 21 March 2016 high.  Key technical elements as follow:

• The daily (medium-term) RSI oscillator has continued to hover above the 50% level and still has some room to manoeuvre to the upside before reaching the extreme overbought level. These observations suggest that there is still residual upside momentum of price action left.
• The key resistance/range top remains at 9700/840 which is also defined by a Fibonacci projection cluster and the 200-day Moving Average.
• The medium-term support now rests at 9226 which is defined by the former minor swing low areas of 09 May/18 May/15 June 2016 and close to the 61.8% Fibonacci retracement of the recent rally from 24 June 2016 low of 8994 to last Monday, 04 July high of 9524.

Therefore as long as the medium-term pivotal support at 9225 holds, the Index is likely to see a further push up to target the key range top/resistances at 9700 and 9840.

However, a break below the 9225 medium-term pivotal support may negate the preferred bullish tone to see a slide to retest the range bottom/support at 9056.

DAX – Maintain bullish bias towards range resistance

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Key Levels (1 to 3 weeks)

Intermediate support: 9580

Pivot (key support): 9510/430

Resistances: 10180 & 10530/650

Next support: 9120

Medium-term (1 to 3 weeks) Outlook

Maintain bullish bias towards range top. Last week, the German 30 Index (proxy for the DAX futures) has shed 5.2% from Monday, 04 July high of 9812 low to 06 July low of 9302. This decline is triggered by news flow that highlighted the renewed concerns on the Italian banking sector that has been at risk of a collapse if it does not receive any bailout from the local government.

The most important aspect is the price action of the Index as it challenged the medium-term pivotal support at 9510/430 and staged a sharp reversal of +3.6% in the later part of last week (positive reaction).

Please click on this link for a recap on our previous weekly technical outlook/strategy. Key elements as follow:

• The Index now has shaped a medium-term higher low as supported by an ascending trendline support from 24 June 2016 low (see 4 hour chart).
• In today’s Asian session, 11 July, the Index has pushed higher and it is now coming close to the “stubborn” near-term resistance at 9780. These observations represent upside momentum of price action has resurfaced (see 4 hour chart).
• In addition, the daily RSI oscillator continues to inch higher and still has some room left to manoeuvre to the upside before reaching its descending trendline (depicted in dotted red) which suggests that the Index still exhibit some residual upside momentum of price action.
•  The key medium-term resistance remains at 10180 which is defined by the upper boundary of the “Expanding Wedge” (depicted in dotted purple) and a Fibonacci cluster (76.4% retracement + 1.382 projection).
• Above 10180 sees 10530/650 next which is the key resistance zone area that is likely to confirm/trigger the start of the cycle degree bullish impulsive wave V from the Elliot Wave Principal/fractal analysis perspective. The 10530/650 resistance zone is defined by the swing high area of 21 April 2016, lower boundary of the long-term descending range in place since 12 April 2015 high and a Fibonacci cluster.
• Since the near-term resistance of 9780 is not taken out yet, the medium-term pivotal support remains at 9510/430.

Therefore, as long as the 9510/430 medium-term pivotal support holds and a break above 9780 is likely to open up scope for a potential rally to target the “Expanding Wedge” top/resistance at 10180 in the first step.

On the other hand, failure to hold above the 9510/9430 medium-term pivotal support may invalidate the preferred bullish scenario for a deeper decline towards the next support at 9120 (minor swing low of 24 February 2016).

Charts are from City Index Advantage TraderPro

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