the week ahead for major stock indices 25 july to 29 july 2016 bullish trend remains intact ahead of

S&P 500 – Medium-term bullish trend remains intact for potential new highs

(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Intermediate support: 2158

Pivot (key support): 2148

Resistances: 2194/2222 & 2258/68

Next supports:  2110 & 1995/90

Medium-term (1 to 3 weeks) Outlook

Still evolving within a medium-term bullish trend. Last week, the U.S. SP 500 Index (proxy for the S&P 500 futures) has continued to advance as expected and it printed a new weekly closing all-time high at 2175.  However, it has not hit our medium-term targets/resistances of 2194/22 and 2268.

Please click on this link for a recap on our previous weekly technical outlook/strategy.  We are now in the midst of the Q2 2016 earnings reporting session for the U.S. stock market and as at 22 June 2016, 25% of the companies in the S&P 500 have reported their respective earnings results which 68% of them have managed to beat their earnings mean estimate. For this coming week, key companies earnings reporting dates will as follow:

• Gilead Sciences (GILD) (3.01 EPS consensus) on Mon,25 July
• Kimberly-Clark (KMB) (1.47 EPS consensus) on Mon, 25 July
• 3M (MMM) (2.07 EPS consensus) on Tues, 26 July
• Caterpillar (CAT) (0.96 EPS consensus on Tues, 26 July
• Eli Lilly (LLY) (0.85 EPS consensus) on Tues, 26 July
• MacDonald’s (MCD) (1.39 EPS consensus) on Tues, 26 July
• Apple (AAPL) (1.39 EPS consensus) on Tues, 26 July – biggest component weightage in S&P 500 & Nasdaq 100
• Amgen (AMGN) (2.74 EPS consensus) on Wed, 27 July
• Facebook (FB) (0.81 EPS consensus) on Wed, 27 July
• Celgene (CELG) (1.39 EPS consensus) on Thurs, 28 July
• Ford Motor (F) (0.60 EPS consensus) on Thurs, 28 July
• MasterCard (MA) (0.90 EPS consensus) on Thurs, 28 July
• Exxon Mobil (XOM) (0.64 EPS consensus) on Fri, 29 July

On the economic front, we will have two key central banks meetings, U.S. Fed on Wed, 27 July and BOJ on Friday, 29 July. A lot of attention is now on the Japanese central bank (BOJ) as market participants are expecting further monetary easing in line with an increase in fiscal spending after PM Abe has vowed to implement a yet to be announced bold fiscal spending package with a rumour that citied to be ball parked at JPY 20 trillion after winning the upper house election earlier this month. Current key elements on the S&P 500 as follow:

• The key medium-term support now rests at 2148 which is defined by minor swing low of 13 July 2016 and the 23.6% Fibonacci retracement of the recent rally from 6 July 2016 high to last week high of 2178 (see 4 hour chart).
• Based on the Elliot Wave Principal and fractal analysis, the Index is likely to be still evolving in an extended bullish impulsive wave 3/ in place since the 06 July 2016 low of 2073 with potential targets at 2258/68 and 2294.
• The aforementioned 2258/68 resistance zone also confluences with the upper boundary of a medium-term ascending channel (depicted in blue) in place since 11 February 2016.
• Based on intermarket analysis, the small-caps benchmark index, Russell 2000 (the worst performer among the benchmark indices as it declined by 27% from its June 2015 high to the February 2016 low) has started to show positive signs as it reintegrated back into its long-term ascending channel. These observations reinforces the current strength seen on the S&P 500 to make new potential highs as the laggard (worst performer among the U.S. benchmark indices) has started to show strength based on its technical elements (refer to the last chart).

Maintain bullish bias for potential new highs. As long as the 2148 weekly medium-term pivotal support holds, the Index is likely to see another round of potential upleg to target 2194/2222 before 2258/68.

On the other hand, failure to hold above the 2148 medium-term pivotal support is likely to negate the preferred bullish tone to see a deeper pull-back to retest the 2110 pull-back support of the former long-term range top that has capped previous advances since May 2015. Only a break below 2110 is likely to invalidate the medium-term bullish trend for a choppy decline towards the 28 June 2016 swing low area of 1995/90.

Nikkei 225 – Further potential upside towards key resistance after bullish breakout 

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Key Levels (1 to 3 weeks)

Intermediate support: 16550

Pivot (key support): 16200

Resistances: 17240 & 17700/900

Next supports: 15825 & 15100

Medium-term (1 to 3 weeks) Outlook

Further upside potential after bullish breakout. Last week, the Japan 225 (proxy for the Nikkei 225 futures) has staged the expected bullish breakout from the former medium-term descending range top in place since 22 April 2016 high and rallied towards a high of 16943 on Thursday, 21 July. Our medium-term target/resistance set for last week was at 17240 (a variance of 1.7%). Please click on this link for a recap on our previous weekly technical outlook/strategy.

An important point to note that the current upside movement is not a “corrective/dead cat” rally but in terms of probability, it is likely to be part of potential significant “melt-up” phase (multi-month) as the major low has been formed at 14835 on 24 June 2016.  Please click on these links over here, here and here to recap our rationale on how we anticipate these recent movements based on probability derived from a combination of sentiment, technical analysis and intermarket factors. Current key elements as follow:

• The pull-back support of the former descending range top bullish breakout now stands at 16550 which also confluences with the 23.6% Fibonacci retracement of the recent rally from 08 July 2016 low to 21 July 2016 high of 16943 (see daily & 4 hour charts).
• The medium-term pivotal support for this week will be tightened to 16200 which is defined by the pull-back support of the former short-term ascending range top bullish breakout in place since 24 June 2016 (depicted in dotted green) and the 38.2% Fibonacci retracement of the recent rally from 08 July 2016 low to 21 July 2016 high of 16943 (see 4 hour chart).
• The weekly (long-term) RSI oscillator has started to challenge its significant descending trendline resistance after the prior bullish divergence signal which indicates that upside momentum of price action remains intact (see weekly chart).
• Based on the Elliot Wave Principal and fractal analysis, the Index is still evolving within a potential extended bullish impulsive wave 3/ in place since the 08 July 2016 low of 15103 with potential target set at 17700/900.
• The 17700/900 Elliot Wave projection target also confluences with the significant descending trendline in place since 21 June 2015 high. A clear break above it (weekly close) will increase the probability of a significant (multi-month) “melt-up” movement (see weekly chart).

Even though, the Index fell short of hitting our last week’s medium-term target/resistance by 1.7%, we are still maintaining our bullish bias due to the positive elements as per highlighted above.

As long as the 16200 weekly medium-term pivotal support holds, the Index is likely to see another potential upleg to test 17240 before targeting the significant resistance zone of 17700/900.

However, a break below the 16200 medium-term pivotal support is likely to negate the preferred bullish tone to see a deeper pull-back to retest the 15825 support (former minor swing high areas of 30 June/04 July 2016).  Only a break below 15825 may invalidate the on-going medium-term bullish trend in place in place since 24 June 2016 low to see a choppy decline movement towards the major swing low area of 15100.

Hang Seng Index – Medium-term bullish trend remains intact

(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Intermediate support: 21700/600

Pivot (key support): 21380

Resistances: 22170 & 23200/23500

Next supports: 20280 & 19640/560

Medium-term (1 to 3 weeks) Outlook

Last week, the Hong Kong 50 Index (proxy for Hang Seng Index futures) has continued to push higher as expected after the bullish breakout from the former “Triangle range/consolidation” configuration. The Index has almost hit our first medium-term term target/resistance at 22170 (printed a high of 22111 on last Thursday, 21 July).  %).

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

• Since the bullish breakout from the former “Triangle range/consolidation”, the Index has remained in a bullish dynamic configuration as it continues to evolve above an ascending trendline (depicted in green) in place since 24 June 2016 low now acting as a support at 21380 (see 4 hour).
• This week medium-term pivotal support has been tightened to 21380 which are defined by the aforementioned ascending trendline, the former major swing high areas of 21 April/08 June 2016 and the 38.2% Fibonacci retracement of the recent rally from 06 July 2016 low to 21 July 2016 high of 22111 (see 4 hour chart).
• The daily (medium-term) RSI oscillator remains bullish above its 50% level and ascending trendline. In addition, it has not flashed a bearish divergence signal yet versus a prior bullish divergence signal seen on 14 April 2016 that preceded price decline of 9%.  These observations indicate that upside momentum of price action remains intact (see daily chart).
• The significant medium-term resistance remains at the 23200/500 zone which are defined by a confluence of elements (Fibonacci retracement/projection cluster, the minor swing high areas of 21/28 April 2016 & the potential exit target of the “Triangle range” bullish breakout).

Therefore, as long as the 21380 medium-term pivotal support holds, the Index is likely to see a further potential upside movement to target the resistance zone of 23200/500.

However, a break below the 21380 medium-term pivotal support is likely to invalidate the current medium-term bullish trend for a decline towards the next support at 20280.

FTSE China A50 – Within multi-month range with mixed elements

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Key Levels (1 to 3 weeks)

Resistances: 9840 & 11100

Supports: 9390 & 9056

Medium-term (1 to 3 weeks) Outlook

The China A50 has continued its directionless motion within a multi-month range configuration in place since 21 March 2016 high with mixed elements.

We remain neutral and 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, a break below 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 intact, eying 10530/650 key resistance zone next

(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Intermediate support: 10069

Pivot (key support): 9980

Resistances: 10345 & 10530/650

Next supports: 9800 & 9430/334

Medium-term (1 to 3 weeks) Outlook

Impending bullish breakout from “Expanding Wedge” range top at 10180. Last week, the German 30 Index (proxy for the DAX futures) has attempted to stage a bullish breakout above the “Expanding Wedge” range top on two occasions (Thurs, 21 July – printed a high of 10199) and (Fri, 22 July – printed a high of 10183) but it did not have a daily close above 10180.

Please click on this link for a recap on our previous weekly technical outlook/strategy. Even though, the Index has failed to have a bullish breakout last week, we do not alter our initial bullish bias on the Index as current elements are still positive and do not advocate for a pronounced decline at this juncture.

• The key medium-term pivotal support has been tightened to 9980 which is defined by a confluence of elements (the pull-back support of the former short-term ascending range bullish breakout, minor swing low area of 19 July 2016 and the 23.6% Fibonacci retracement of the recent rally from 06 July 2016 low to last week high of 10199.
• The daily (medium-term) RSI oscillator remains bullish as it continues to inch upwards after a retest on the pull-back support of the former descending trendline resistance. This observation indicates that upside momentum of price action remains intact.
• Based on the Elliot Wave Principal and fractal analysis, the Index is likely to be still evolving in an extended bullish impulsive wave 3/ in place since the 06 July 2016 low of 9302 with potential targets set at 10345 and 10530/650.
• The key medium-term resistance remains 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 significant (multi-month) “melt-up” phase is in place as a major low has been seen on 07 February 2016.

Therefore, as long as the 9980 weekly medium-term pivotal support holds, the Index is likely to see a potential bullish breakout above “Expanding Wedge” range top at 10180 for a rally towards 10345 before targeting the key resistance zone of 10530/650.

On the other hand, failure to hold above 9980 medium-term pivotal support is likely to negate the preferred bullish tone to see a deeper pull-back to retest the 9800 support. Only a break below 9800 may invalidate the on-going medium-term bullish trend in place since 24 June 2016 low to see a choppy decline movement towards the June/July 2016 major swing low area of 9430/334.

Charts are from City Index Advantage TraderPro & eSignal

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