the week ahead for major stock indices 30 may to 03 june 2016 corrective rallies extend but coming c

S&P 500 –Mixed elements, turn neutral for now

(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Resistances: 2100/110 & 2138

Supports: 2085 & 2058

Medium-term (1 to 3 weeks) Outlook

Mixed elements, turn neutral for now.  Last week, the U.S. SP 500 Index (proxy for the S&P 500 futures) has continued to stage a squeeze higher and broke above the 2068/73 medium-term weekly pivotal resistance. Thus, our preferred bearish scenario has been invalidated.

Current technical elements as follow:

• The Index is now challenging the significant resistance at 2100/110 which is the descending trendline resistance in place since 17 May 2016 high that capped the prior rallies from 24 August 2016 low and 11 February 2016 low respectively (see weekly chart).
• In conjunction, the long-term weekly RSI oscillator has not broken above its trendline resistance in place is place since 17 November 2013.
• On the shorter-term, the Index has started to evolve in an ascending channel from the start of the current rally from 11 February 2016 low. The upper (resistance) and lower (support) boundaries of the ascending channel are now at 2212 and 2058 respectively.
• The current all-time and 52- week high stands at 2138.

Therefore, we are seeing mixed elements at the moment and prefer to adopt a neutral stance between 2110 & 2085 in the medium-term. Only a break above 2110 is likely to trigger a further potential up thrust to target 2138 (The current all-time and 52- week high).

On the other hand, failure to hold above the 2085 support may open up scope for a deeper retracement towards the next support at 2058.

Nikkei 225 – Corrective rally extends above 16740 support

(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Pivot (key support): 16740

Resistances: 17300 & 17710/900

Next support: 15820

Medium-term (1 to 3 weeks) Outlook

Turn bullish for a potential push up within range. Last week, the Japan 225 (proxy for the Nikkei 225 futures) has broken above the 16720/820 medium-term pivotal resistance and invalidated the expected bearish scenario. Please click on this link for a recap on our previous weekly technical outlook/strategy. New technical elements as follow:

• Since 12 February 2016 low, price actions of the Index have been developing into an ascending range configuration with the upper boundary (resistance) coming in at the 17900/18400 zone (see daily chart).
• The aforementioned ascending range resistance of 17900/18400 is defined by a confluence of elements (the descending trendline in place since 11 August 2015 high + a Fibonacci cluster).
• The daily (medium-term) RSI oscillator remains bullish above its steeper trendline support and the 50% neutrality level. In addition, it still has to manoeuvre to the upside before reaching an extreme overbought level. These observations suggest that medium-term upside momentum of price action remains intact (see daily chart).
• The medium-term key support to watch will be at 16740 which is defined by the former short-term range top in place from 11 May to 24 May 2016 now turns pull-back support and the lower boundary of a short-term ascending channel in place since 04 May 2016 low@8pm (see 4 hour chart).

Therefore, the Index is still undergoing an extension of the corrective rally in place since 12 February 2016 low.  As long as the 16740 medium-term pivotal support holds, the Index is likely to see a further upside movement to target the resistances of 17300 and 17710/900 next.

However, failure to hold above the 16740 medium-term pivotal support may negate the bullish tone to see a slide towards the lower boundary of the range support and the 29 April 2016 swing low area at 15820.

Hang Seng Index – Limited potential upside below 20840/21100 resistance

(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Intermediate resistance: 20840

Pivot (key resistance): 21100

Supports: 20100 & 19560

Next resistances:  21650 & 23500

Medium-term (1 to 3 weeks) Outlook

Last week, the Hong Kong 50 Index (proxy for the Hang Seng Index futures) has staged a steeper snap-back rally and broke above the 20600 medium-term pivotal resistance. Even though, our prior medium-term bearish scenario has been invalidated but there are still not enough technical elements to justify a further potential upside movement to break above the 21/28 April 2016 swing high at this juncture.

• Price action is now coming close to the descending trendline (in dotted red) in place since 26 October 2015 high now resistance at 20840 which also confluences with the 61.8% Fibonacci retracement of the decline from 21 April 2016 high to 19 May 2016 low of 19557  (see daily & 4 hour charts).
• Right above the 20840 descending trendline resistance stands another resistance at 21100 which is defined by the former minor swing low areas of 21/24 April 2016 and the 76.4% Fibonacci retracement of the decline from 21 April 2016 high to 19 May 2016 low of 19557 (see 4 hour chart).
• The daily (medium-term) RSI oscillator is coming close to its resistances and the shorter term 4 hour Stochastic oscillator has flashed a bearish divergence signal at its overbought region. These observation suggests that the upside momentum of the current rally from 19 May 2016 low is waning.
• Significant medium-term supports rests at 20100 follow by 19560

Therefore as long as the 21100 medium-term pivotal resistance is not supposed, the Index is likely to see at least a potential bearish reaction to retest  20100 follow by the next support at 19560 (recent 19 May swing low area that has tested the former minor swing high areas of 22/26 February 2016).

Only a break above the 21/28 April 2016 swing high area of 21650 is likely to trigger a further corrective rally towards the next resistance at 23500.

FTSE China A50

(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Intermediate resistance: 9430

Pivot (key resistance): 9700/840

Supports: 9180/080 & 8630/560

Next resistances: 10310

Medium-term (1 to 3 weeks) Outlook

Last week, the China A50 has continued to trade below the 9430 intermediate pull-back resistance and staged a retest on it today, 30 May 2016.  No change in technical elements and we remain our medium-term bearish bias.

As long as the 9700/840 medium-term pivotal resistance is not surpassed, the Index is likely to see a slide to retest the first support area at 9180/080 and a break below it may trigger a further decline to target the key February 2016 swing low area of 8630.

However, 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 push up before another downleg occurs

(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Intermediate resistance: 10530/650

Pivot (key resistance): 10780/880

Supports: 10080 & 9780/30

Next resistance: 11640

Medium-term (1 to 3 weeks) Outlook

Last week, the German 30 Index (proxy for the DAX futures) has staged a bullish breakout above the 10165 medium-term pivotal resistance and invalidated our preferred bearish scenario. Current price action suggests that we are likely seeing an extension of the corrective rally in place since the 11 February 2016 low within a long-term descending channel from April 2015 high. Key technical elements as follow:

• The upper boundary of the descending channel in place since April 2015 is now at 10780/880 which also confluences with the swing high area of 30 December 2015, the upper boundary of a shorter-term ascending channel from 11 February 2016 low and a Fibonacci cluster (see daily chart).
• The daily (medium-term) RSI is still hovering above its 50% neutrality level and still has room to manoeuvre to the upside before reaching an extreme overbought level. These observations suggest a further residual push up in price action.
• The key medium-term supports now rests at 10080 (the pull-back support area of the short-term symmetrical triangle range bullish breakout) follow by 9780/30 (swing low area of 06/24 May 2016).

Therefore, we may see a further residual push up towards the intermediate resistance at 10530/650 with the maximum limit set at the 10780/880 medium-term pivotal resistance before a potential downleg materials for a downward swing move to retest the supports at 10080 follow by 9780/30 next.

On the other hand, a break above the 10780/880 medium-term pivotal resistance is likely to invalidated the bearish scenario to see the a further rally to target  the next resistance at 11640 in the first step.

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.