the week ahead for major stock indices 13 to 17 june 2016 further potential weakness ahead 181537201

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Key Levels (1 to 3 weeks)

Pivot (key resistance): 2110/21 (excess)

Supports: 2085, 2058/54 & 2036

Next resistances:  2138/44

Medium-term (1 to 3 weeks) Outlook

Failure breakout (bull trap), risk of decline towards range support. In the first half of last week, the U.S. SP 500 Index (proxy for the S&P 500 futures) has challenged and broke above the 2110 medium-term pivotal resistance. However, on last Friday, 10 June 2016, it has failed to maintain its initial upside momentum and had a weekly close of 2097 which is below the 2110 medium-term pivotal resistance. Please click on this link for a recap on our previous weekly technical outlook/strategy. New technical elements are as follow:

• The U.S. SP 500 Index (proxy for the S&P 500 futures)  has reintegrated back below 2110 after it failed to sustain its initial upside momentum and created a “bull trap”. Interestingly, this “bull trap excess” of 11 points derived from the difference between 09 June 2016 high of 2121 and the 2110 medium-term pivotal resistance is similar in magnitude with the  “short-squeeze, bear trap” seen on 19 May 2016 when the social mood was bearish due to the Head & Shoulders configuration.
• The potential downside trigger for the U.S. SP 500 Index (proxy for the S&P 500 futures) remains at 2085 which is defined by the minor range support formed from 26 May to 03 June 2016 and the 38.2% Fibonacci retracement of the recent rally from 19 May 2016 low to last week high of 2121.
• The S&P 500 has moved in similar “lockstep” with the WTI crude oil since the 11 February 2016 low. As seen from the overlay chart between the S&P E-mini futures and the WTI crude oil futures, their movements are highly positively correlated which implies that a move seen in WTI will have a significant impact on the S&P 500 (see 4^th chart).
• Last week, WTI crude oil futures has shaped a similar movement with the S&P 500 as it failed to break above the upper limit of its key range top at 51.10 and shaped a bearish breakout from a medium-term ascending wedge configuration. The first support to watch now for WTI crude oil futures will be at 47.70 which is in parallel with the 2085 minor range support of the U.S. SP 500 Index. In conjunction, the daily RSI indicator on the WTI crude oil futures has broken its support which highlights further downside pressure on the price action of the WTI (see 5^th & 6^th charts).
• The 4 hour (short-term) Stochastic oscillator on the U.S. SP 500 Index has almost reached an extreme oversold level which suggests that a minor rebound cannot be ruled out at the 2085 minor range support.

Therefore, the Index may see a minor rebound first at the 2085 intermediate support towards the intermediate resistance zone of 2098/2103 before a further potential decline to target the 2058/54 support with a maximum limit set at the 2036 range bottom formed from the lows of 08 April, 12 April, 06 May and 19 May 2016 .

Only a clearance above the 2110/21 medium-term pivotal resistance is likely to invalidate the expected bearish scenario for a further push up to retest the current all-time/52-week high zone at 2138/44.

Nikkei 225 – Minor rebound towards 16500/16860 before potential bearish breakdown

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Key Levels (1 to 3 weeks)

Intermediate resistance: 16500

Pivot (key resistance): 16860

Supports: 16050 & 15480/330

Next resistances: 17700/900

Medium-term (1 to 3 weeks) Outlook

Risk of a bearish breakdown below ascending range support. Last week, the Japan 225 (proxy for the Nikkei 225 futures) has reacted perfectly below the predefined 16920/17015 medium-term pivotal resistance (printed a high of 16854 on 08 June 2016) and tumbled towards the expected medium-term downside target (support) at 16170/16050. Please click on this link for a recap on our previous weekly technical outlook/strategy. New technical elements are as follow:

• The Index is now testing the ascending range support range (depicted in purple) in place since 12 February 2016 low at 16050.
• Based on intermarket analysis, the movement of Nikkei 225 has a highly positive correlation with the USD/JPY. As seen on the daily chart of the USD/JPY, technical elements remain bearish below the medium-term pivotal resistance of 108.00 which increases the probability of a bearish breakout below the 16050 ascending range support for the Japan 225 Index (see 4^th chart).
• The next medium-term supports to watch for the Index rests at 15480/330 (07 April 2016 swing low area + 1.00 Fibonacci projection of the down move from 25 April 2016 high to 04 May 2016 low projected from 31 May 2016 high) and 14780 (12 February 2016 swing low area).
• The 4 hour (short-term) Stochastic oscillator has flashed a bullish divergence signal at its oversold region. These observations suggest the risk of a minor rebound at the 16050 ascending range support.
• The intermediate resistance stands at 16500 which is defined by the 16500 pull-back resistance (depicted in dotted red) of the former ascending trendline from 07 April 2016 swing low (see 4 hour chart).

Therefore, the Index may see a risk of a minor rebound first towards the intermediate resistance at 16500 with a maximum limit set at the 16860 medium-term pivotal resistance before a potential bearish breakdown occurs to target the next support at 15480/330 in the first step.

On the other hand, a break above the 16860 medium-term pivotal resistance may invalidate the preferred bearish breakdown scenario for a further squeeze up towards the next resistance at 17700/900.

Hang Seng Index – Minor rebound towards 20820 before another potential downleg

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Key Levels (1 to 3 weeks)

Intermediate resistance: 20820

Pivot (key resistance): 21650

Supports: 20100 & 19560

Next resistance: 23500

Medium-term (1 to 3 weeks) Outlook

Maintain bearish bias. Last week, the Hong Kong 50 Index (proxy for the Hang Seng Index futures) had a failure bullish breakout again as it reintegrated back into the descending trendline resistance in place since 26 October 2015 and recorded a daily close below it on Friday, 13 June 2016. Key elements as follow;

• Before last Friday’s failure bullish breakout (bull trap), the Index has printed a high of 21407 which is just below the 21/28 April 2016 swing high area of 21650.
• The daily (medium-term) RSI oscillator has reacted again on a similar resistance that capped is prior advances since 17 March 2016 which suggests the revival of medium-term downside momentum of price action.
• The intermediate resistance to watch stands at 20820 which is defined by the opening gapped down of Monday, 13 June 2016 and the pull-back resistance of a former long-term ascending range’s support from 02 October 2011 low (see weekly & daily charts).
• The 4 hour (short-term) Stochastic oscillator has reached an extreme oversold level which highlights the risk of a minor rebound at this juncture.

Therefore, the Index may see a short-term rebound first towards the intermediate resistance at 20820 before another potential downleg occurs to target the supports at 20100 and 19560.

Only a clearance above the 21650 medium-term pivotal resistance is likely to invalidate the medium-term bearish bias for a further push up towards the next resistance at 23500 (26 October 2015 swing high).

FTSE China A50 – Further potential downside within range

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Key Levels (1 to 3 weeks)

Intermediate resistance: 9430

Pivot (key resistance): 9700/840

Supports: 9180/080 & 8630

Next resistances: 10310

Medium-term (1 to 3 weeks) Outlook

Maintain bearish bias within range configuration. Last week, the China A50 has continued to push lower as expected and today, 13 June 2016, it has broken below the expected first downside target (support) at 9430 despite the latest data on China’s retails sales (10% y/y) and industrial production (6% y/y) for May that have managed to meet expectations. Please click on this link for a recap on our previous weekly technical outlook/strategy.

No major changes in technical elements as the Index continues to evolve within  a range configuration in place since the low of August 2015. The next support to watch will be at 9180/080 and a break below it is likely to open up scope for a further potential decline to retest the February 2016 swing low area of 8630.

On the other hand, a clearance above the 9700/840 medium-term pivotal resistance is likely to damage the bearish scenario to see a further upside movement towards the next resistance at 10310 in the first step.

DAX – Further potential weakness after bearish breakdown from range configuration

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Key Levels (1 to 3 weeks)

Intermediate resistance: 9934

Pivot (key resistance): 10080

Supports: 9530/430 & 9120

Next resistances: 10350 & 10530/650

Medium-term (1 to 3 weeks) Outlook

Further potential downside after bearish breakdown from ascending range.  Last week, the German 30 Index (proxy for the DAX futures) has pushed lower and broke below the lower boundary of a short-term triangle range support in place since 06 May 2016 low. New technical elements are as follow:

• The former lower boundary of the short-term triangle range support (depicted in dotted purple) is now acting as a pull-back resistance at 9934 (see 4 hour chart).
• The medium-term pivotal resistance stands at 10080 which is defined by a confluence of elements (the pull-back resistance of the former ascending range’s support from 11 February 2016 low, the former minor swing low of 03 June 2016 that has been tested thrice in May and the 61.8% Fibonacci retracement of the recent decline from 07 June 2016 high of 10316.
• The medium-term support rest at 9530/9430 which is defined by the swing low areas of 11 March/08 April 2016 and a Fibonacci cluster.
• The 4 hour (short-term) Stochastic oscillator is now attempting to stage an exit from its oversold region which highlights the risk of a short-term rebound at this juncture after last Friday’s waterfall decline.

The medium-term bias is bearish but we cannot rule the risk of a potential short-term rebound to occur first towards the intermediate resistance at 9934 with a maximum limit set at the 10080 medium-term pivotal resistance before another potential downleg occurs to target the next support at 9530/9430 in the first step.

On the other hand, a clearance above the 10080 medium-term pivotal resistance is likely to invalidate the bearish bias for a further push up back towards the descending trendline resistance in place since 21 April 2016 high at 10350 and even the long-term descending channel’s upper boundary at 10530/650.

Charts are from Advantage TraderPro & eSignal

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