the week ahead for major stock indices 18 july to 22 july 2016 view unchanged maintain bullish bias

S&P 500 – Bullish uptrend remains intact for new potential highs

(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Intermediate support: 2148

Pivot (key support): 2120

Resistances: 2194/222 & 2268/94

Next supports:  2100 & 1995/90

Medium-term (1 to 3 weeks) Outlook

Continues to evolve within a medium-term bullish uptrend. Last week, the U.S. SP 500 Index (proxy for the S&P 500 futures) has shaped the expected rally to print a new all-time high towards our medium-term target/resistance at 2194 (printed a high of 2174 on last Thursday, 14 July). Please click on this link for a recap on our previous weekly technical outlook/strategy. Current key elements as follow:

• The Index has started to evolve within a shorter-term bullish ascending channel in place since 28 June 2016 low (post Brexit) with the lower boundary (support) coming close to 2148.
• The key medium-term support now rests at 2120 which is defined by the upper limit of the former long-term range top that has capped previous advances since May 2015, the former minor swing high areas of 09 June/24 June 2016 and close to the 50% Fibonacci retracement of the recent advance from 06 July 2016 low of 2073 to 14 July 2016 high.
• Based on the Elliot Wave Principal and fractal analysis, the Index is likely to be evolving in an extended bullish impulsive wave 3/ in place since the 06 July 2016 low of 2073 with potential target at 2268/94.
• The aforementioned 2268/94 zone also confluences with both the upper boundaries of the shorter-term ascending channel (depicted in brown) and longer-term ascending channel (depicted in blue) in place since 11 February 2016.
• The daily RSI oscillator remains bullish towards its extreme overbought level and has not shape any bearish divergence signal. These observations suggest that upside momentum of price action remains intact.
• Market breadth remains positive as the percentage of stocks that hit new 52-week highs (smoothed by a 5-period moving average) seen on the broader based NYSE Composite index has continued to increase steadily above its 5-year average as per recorded end of last week. In addition, it is the highest level reached since the start of 2015 and still below the +2 standard deviation of 13.20 (refer to the 3r chart).

Maintain bullish bias for potential new highs. As long as the 2120 medium-term pivotal support holds, the Index is likely to shape a further potential rally towards 2194/222 before 2268/94.

However, failure to hold above the 2120 medium-term pivotal support may negate the bullish tone to see a retest on the 2100 level (lower limit of the former long-term range top that has capped previous advances since May 2015). Only a break below 2100 is likely to trigger a choppy decline to target the 28 June 2016 swing low area at 1995/90.

Nikkei 225 – Potential bullish breakout above descending range top

(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Intermediate support: 16200

Pivot (key support): 15825

Resistances: 16670, 17240 & 17700/900

Next supports: 15103 & 14835

Medium-term (1 to 3 weeks) Outlook

Potential bullish breakout above descending range top at 16670. Last week, the Japan 225 (proxy for the Nikkei 225 futures) has rallied as expected and hit our expected medium-term target at 16670 in today’s early morning Asian session, 18 July (printed a high of 16673).  Please click on this link for a recap on our previous weekly technical outlook/strategy. Current key elements as follow:

• The Index is still capped by a significant descending trendline in place since 21 June 2015 now acting as a resistance at 17700/900 (see weekly chart).
• The aforementioned 17700/900 resistance also confluences with a Fibonacci cluster, therefore it is considered as a potential trigger level for a significant recovery.
• Interestingly, the weekly RSI oscillator is now breaking above its conjunction descending trendline resistance after it has flashed a prior bullish divergence signal. These observations are considered as a bullish pre-signal that indicates a potential corresponding bullish breakout in price action of the Index is imminent.
• Based on the Elliot Wave Principal and fractal analysis, the Index is likely to be evolving in an extended bullish impulsive wave 3/ in place since the 08 July 2016 low of 15103 with potential targets at 17240 and 17700/900.
• Intermediate support rests at 16200 which is defined by  the pull-back support (depicted in dotted green) of the bullish breakout from the former ascending range in place in place since 24 June 2016 low (see 4 hour chart).
• The new key medium-term pivotal support will be now at 15825 which is defined by the former minor swing high areas of 30 June/04 July 2016 that has been tested several times in the past and the 50% Fibonacci retracement of the current rally seen from 08 July 2016 low to the current intraday high of 16673 (see 4 hour chart).
• The shorter-term 4 hour Stochastic oscillator has dipped down and it is now fast approaching its extreme oversold region which suggests a potential price reversal to the upside for the Index is imminent.

Therefore, we are maintaining our medium-term (multi-week) bullish bias for the Nikkei even though the last week’s target/resistance of 16670 has been met.  The Index is now poised for a potential bullish breakout above 16670 to open up scope for a further potential upside movement to target the next resistance at 17240 and even the key 17700/900 zone.

On the other hand, failure to hold above the 15825 medium-term pivotal support is likely to invalidate the preferred bullish scenario for another round of choppy decline to retest July low at 15103.

Hang Seng Index – Bullish breakout from “Triangle range”, further potential upside

(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Intermediate support: 21400

Pivot (key support): 21000

Resistance: 22170 & 23200/23500

Next support: 19640/560

Medium-term (1 to 3 weeks) Outlook

The Hong Kong 50 Index (proxy for Hang Seng Index futures) has staged a bullish breakout above its “Triangle range” configuration last Tuesday, 12 July 2016.  Current key elements as follow:

• The pull-back support of the “Triangle –range” bullish breakout is now at 21000 which also confluences with a short-term ascending trendline from 24 June 2016 low and a Fibonacci retracement cluster (see daily & 4 hour charts).
• On the longer-term (weekly) chart, the Index has reintegrated back into former range support from the 02 October 2011 major swing low area. In addition, the weekly RSI oscillator is now breaking above its “stubborn resistance”. These observations support further positive price action for the Index.
• The next significant resistances stand at 22170 (Fibonacci projection cluster) and 23200/23500 (Fibonacci retracement/projection cluster & the minor swing high areas of 21/28 April 2016).

As long as the 21000 medium-term pivotal support holds, the Index is likely to see a further potential upside movement to target the next resistances at 22170 follow by 23200/23500 next.

However, a break below the 21000 medium-term pivotal support is likely to invalidate the bullish breakout and see a further decline to retest the May/June 2016 swing low areas at 19640/560.

FTSE China A50 – Coming close to key range top at 9840

(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Resistances: 9840 & 11100

Supports: 9390 & 9056

Medium-term (1 to 3 weeks) Outlook

Last week, the China A50 has staged the expected push up and hit the lower limit the significant range top of 9700/9840 (printed a high of 9714 on 12 July 2016).  Please click on this link for a recap on our previous weekly technical outlook/strategy.

Due to mixed elements, it will be prudent for us to turn neutral in terms of directional bias at this juncture.  Only a break above the 9840 key range top is likely to open up scope for a further potential rally towards 11100 (the major swing high areas of 09 Nov/23 Dec 2016).

On the flipside, failure to hold above 9390 may see a deeper decline to retest the multi-month range support in place since late March 2016 at 9056.

DAX – Potential bullish breakout from “Expanding Wedge” range top

(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Intermediate support: 9970

Pivot (key support): 9800

Resistances: 10345 & 10530/650

Next support: 9510/430

Medium-term (1 to 3 weeks) Outlook

Potential bullish breakout above “Expanding Wedge” range top at 10180. Last week, the German 30 Index (proxy for the DAX futures) has shaped the expected push up and almost hit our medium-term target/resistance at 10180 (printed a high of 10111 on 14 July). Please click on this link for a recap on our previous weekly technical outlook/strategy. Current key elements as follow:

• The daily RSI oscillator is now breaking above its descending trendline which corresponds with “Expanding Wedge” range top of the Index. These observations are considered as a bullish pre-signal that indicates a potential corresponding bullish breakout in price action of the Index is imminent.
• The intermediate support rests at 9970 which is defined by  the pull-back support (depicted in dotted green) of the bullish breakout from the former ascending range in place in place since 24 June 2016 low (see 4 hour chart).
• The new key medium-term pivotal support will be at 9800 which is defined by the former minor swing high areas of 01 July/04 July 2016 that has been tested several times in the past and close to the 38.2% Fibonacci retracement of the current rally seen from 06 July 2016 low to the current intraday high of 10164 (see 4 hour chart).
• Based on the Elliot Wave Principal and fractal analysis, the Index is likely to be evolving in an extended bullish impulsive wave 3/ in place since the 06 July 2016 low of 9302 with potential targets at 10345 and 10530/650.
• The key medium-term resistance now will be at 10530/650 which is defined by a confluence of elements (the minor swing high area of 21 April 2016, the multi- month descending range top in place since 12 April 2016 high and a Fibonacci cluster). Therefore, a clear bullish breakout (weekly close) above 10530/650 is likely to indicate that a major low has been seen on 07 February 2016 for the Index to stage a significant potential recovery.

Therefore, we are maintaining our medium-term (multi-week) bullish bias for the DAX even though the last week’s target/resistance of 10180 has been almost met.  The Index is now poised for a potential bullish breakout above 10180 to open up scope for a further potential rally to target the 10345 before the key 10530/650 zone.

On the other hand, failure to hold above the 9800 medium-term pivotal support is likely to invalidate the preferred bullish scenario for another round of choppy decline to retest current July 2016 low at 9510/430.

Charts are from City Index Advantage TraderPro & www.indexindicators.com

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this email, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs. All queries regarding the contents of this material are to be directed to City Index, a trading name of GAIN Capital Singapore Pte Ltd.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.