the week ahead for major stock indices 31 oct to 04 nov holding above medium term supports ahead of

S&P 500 – Choppy movement prevails unless 2155 is taken out

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Key Levels (1 to 3 weeks)

Pivot (key support): 2124

Resistances: 2155 (upside trigger), 2174/80 & 2194

Next support: 2110/100 (downside trigger) & 1990

Medium-term (1 to 3 weeks) Outlook

Last week, the U.S. SP 500 Index (proxy for the S&P 500 futures) has continued to trade directionless in its 2-month old range configuration in place since the all-time high of 2194 printed on 23 August 2016. In addition, it declined by 1.7% towards the range bottom which included last Friday’s 28 October U.S. mid-session 0.9% shock decline within 45 minutes after the FBI announced that they reopened a probe into U.S. presidential candidate Hilary Clinton’s private e-mail case.

From a technical analysis perspective, this “shock decline” tested but managed to hold above the predefined medium-term pivotal support of 2124 (printed an intraday low of 2119 but no daily close below it) which is positive. Please click here for a recap on our previous weekly technical outlook.

Latest technical elements as follow:

• Since the 2190 swing high seen on 08 September 2016, the Index has traded sideways within a “Symmetrical Triangle” range configuration with its range bottom/support at 2124 and range top/resistance at 2155.
• The shorter-term 4 hour Stochastic oscillator has flashed a bullish divergence signal at its oversold region which indicates that the downside momentum of the recent price action decline has started to abate.

Therefore, as long as the 2124 medium-term pivotal support holds, the Index is likely to see a push up towards the ‘Symmetrical Triangle” range top at 2155. Only a break above (daily close) 2155 may ignite a bullish breakout from the 2-month old range configuration for a further potential up move to target 2174/80 before a test on the current all-time high of 2194.

On the other hand, failure to hold above 2124 may invalidate the bullish bias to see another round of choppy decline towards the 2110/2100 significant pull-back support.

Nikkei 225 – Impending potential bullish breakout

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Key Levels (1 to 3 weeks)

Intermediate support: 17165

Pivot (key support): 16960

Resistances: 17500/700 & 18000

Next support: 16340

Medium-term (1 to 3 weeks) Outlook

Last week, the Japan 225 Index (proxy for the Nikkei 225 futures) has continued to push upwards as expected and almost hit our first target/resistance at 17500. Please click here for a recap on our previous weekly technical outlook.

Medium-term upside momentum remains intact as indicated by the daily RSI oscillator where it has not display any bearish divergence signal at the overbought region. In addition, the medium-term uptrend of USD/JPY remains intact with further potential upside above key medium-term pivotal support at 104.16.

Therefore, technical elements of the Index and intermarket analysis from USD/JPY are still advocating a positive outlook on the Nikkei 225. We have tightened the medium-term pivotal support for the Index to 16960 and anticipate a potential bullish breakout above 17500/700 (descending trendline from 21 June 2015 & range top in place since 24 January 2016) to target the next resistance at 18000 in the first step.

On the other hand, failure to hold above the medium-term pivotal support at 16960 is likely to invalidate the preferred bullish scenario for a deeper decline to test the next support at 16340 (the congestion swing low areas of 26 August to 30 September 2016).

Hang Seng Index – Tolerate medium-term support to 22700 (excess) 

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Key Levels (1 to 3 weeks)

Pivot (key support): 23000/22700 (excess)

Resistances: 23850, 24500 & 25400

Next support: 21650/380

Medium-term (1 to 3 weeks) Outlook

The Hong Kong 50 Index (proxy for Hang Seng Index futures) has challenged our medium-term pivotal support at 23000 but current technical elements are not strong enough to validate a bearish case for the Index.

Firstly, the longer-term weekly RSI oscillator is now right above its support and the 50% level. Secondly, the Index is still holding above a significant graphical pull-back support in place since 18 August 2016 minor high (depicted in light green on the 4 hour chart). Thirdly, the shorter-term 4 hour Stochastic oscillator has just flashed a bullish divergence signal at its oversold region which suggests that downside momentum of last week’s price action decline has started to wane.

After a close examination of the current price action of the Index and fractal analysis, the Index is appearing to be evolving in a medium-term “Descending Wedge” range consolidation formation in place since the 09 September 2016 with its upper boundary now acting as a resistance at 23850.

Therefore, we are still maintaining our bullish bias and tolerate the excess to 22700 for a potential push up towards the “Descending Wedge” upper boundary at 23850. Only a break above 23850 is likely to trigger a further rally to target the next resistance at 24500.

However, failure to hold above 22700 is likely to open up scope for a deeper decline towards the next support at 21650/380 (the pull-back support zone of the former “symmetrical triangle range” bullish breakout, 61.8% Fibonacci retracement of the up move from 24 June 2016 low to 09 September 2016 high & the ascending trendline in place since 11 February 2016 low).

ASX 200 – Holding above medium-term bullish ascending channel support at 5300/260

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Key Levels (1 to 3 weeks)

Pivot (key support): 5260

Resistances: 5380 & 5460

Next supports: 5155 & 5040

Medium-term (1 to 3 weeks) Outlook

Last week, the Australia 200 Index (proxy for the ASX 200 futures) has performed worse than expected and broke below the 5380 medium-term support reinforced by a stronger than expected Q3 Australia CPI (1.3% y/y & 0.7% q/q versus 1.1% y/y & 0.4% q/q) where the odds for RBA to ease further on its next policy interest rate cut has been reduced.

The Index has hit our alternate target at 5300 (printed a low of 5261 on 28 October 2016) which is defined by the lower boundary of the medium-term bullish ascending channel in place since 10 February 2016 low and a Fibonacci cluster. Interestingly, technical elements are now indicating that the downside momentum of the recent decline has started to wane at this juncture (lower boundary of the medium-term bullish ascending channel).

Firstly, the daily RSI oscillator has started to reverse up from its support and oversold region. Secondly, the shorter-term 4 hour Stochastic oscillator has flashed a bullish divergence signal at its oversold region. Therefore, as long as the 5260 medium-term pivotal support holds, the Index is likely to shape a potential recovery at this juncture towards 5380 before targeting 5460 (the descending trendline resistance in place since 01 August 2016 high).

On the other hand, failure to hold above 5260 is likely to invalidate the preferred recovery scenario for a deeper decline towards next supports at 5155 and 5040.

DAX- Holding above 10700/600 pull-back support of “Expanding Wedge” bullish breakout

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Key Levels (1 to 3 weeks)

Intermediate support: 10700/600

Pivot (key support): 10450

Resistances: 10990 & 11190

Next supports: 10230 (downside trigger) & 9760

Medium-term (1 to 3 weeks) Outlook

Last week, the Germany 30 Index (proxy for the DAX futures) has declined by 2.3% but it has managed to hold at the 10700/600 pull-back support of the recent “Expanding Wedge” range bullish breakout (see daily chart).

No major changes in technical elements. Therefore, we are maintaining our bullish bias and as long as the 10450 medium-term pivotal support holds, the Index is likely to shape a further potential push up to target the next resistance at 10990.

However, failure to hold above 10450 may invalidate the preferred bullish bias to see a choppy decline to retest the significant range support at 10230. Only a clear break below 10230 (daily close) is likely to trigger a deeper decline towards the next support at 9760.

Charts are from City Index Advantage TraderPro

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