Weekly Technical Outlook on Major Stock Indices 04 Jun to 08 June 2018

S&P 500 – Bullish configuration remains intact

Key Levels (1 to 3 weeks)

Intermediate support: 2725/15

Pivot (key support): 2680

Resistances: 2760/65, 2800 & 2824

Next support: 2585

Medium-term (1 to 3 weeks) Outlook

Last week, the SP 500 Index (proxy for the S&P 500 futures) had managed to stage a bullish reversal right at the 2680 key medium-term pivotal support and right now, it is testing the minor range resistance of 2741 in place since 14 May 2018.  Click here for a recap on our previous weekly technical outlook.

Key technical elements continue to be positive where higher beta key indices/sector have continued to show outperformance against the S&P 500. Lasting readings from the relative strength charting analysis have shown a bullish breakout in the ratios of Nasdaq 100/S&P 500 and NYSE FANG+/S&P 500 (refer to the 3^rd chart). These observations continue to advocate the start of another potential impulsive upleg phase for the S&P 500.  

We maintain our bullish stance with 2680 remains as the key medium-term pivotal support for a further potential upleg to target the next resistances at 2760/65 (minor swing high areas of 15/16 Mar 2018), 2800 (the minor swing high area of 12/13 Mar 2018) and 2830 next (the upper boundary of a minor ascending channel from 03 May 2018 low & 1.00 Fibonacci projection of the up move from 03 May low to 14 May 2018 high projected from last week pull-back low of 2676).

However, failure to hold at 2680 invalidates the previous medium-term bullish breakout scenario seen on 10 May 2018 for another round of the choppy decline to retest the support of the 5-month range configuration in place since early Feb 2018 at 2585.

Nikkei 225 – Rebounded from 22000 key medium-term support

Key Levels (1 to 3 weeks)

Intermediate support: 12260

Pivot (key support): 22000

Resistances: 22730 (upside trigger), 23020 & 23280

Next supports: 21360 & 21000

Medium-term (1 to 3 weeks) Outlook

Last week, the Japan 225 Index (proxy for the Nikkei 225 futures) tested and managed to hold at the 22000 key medium-term support without a daily close below it. Positive momentum readings had also emerged where its daily RSI oscillator rebounded from its corresponding support at the 44 level and inched back up above 50. In addition, the shorter-term Stochastic oscillator has also flashed a bullish divergence signal at its overbought region.

We maintain the bullish bias with 22000 remains as the key medium-term pivotal support and a break above the 22730 intermediate resistance is likely to reinforce the start of another impulsive upleg to retest the 21 May 2018 swing high area of 23020 follow by 23280 (76.4% Fibonacci retracement of the recent decline from 23 Jan high to 24 Mar 2018 low).

However, failure to hold at 22000 shall invalidate the medium-term uptrend to kick start a multi-week corrective down move towards the next supports at 21360 and even 21000 next (61.8%/76.4% Fibonacci retracement of the up move from 23 Mar low to 21 May 2018 high & the primary major ascending channel support from Jun 2016 low).    

Hang Seng – 31800 remains the key upside trigger level

Key Levels (1 to 3 weeks)

Supports: 29070, 28100 & 26000/25750

Resistances: 31800 & 33430/530

Medium-term (1 to 3 weeks) Outlook

No major changes on its key technical elements as the Hong Kong 50 Index (proxy for Hang Seng Index futures) had continued to trade in a sideways configuration below the key 31800 medium-term range resistance. Since its all-time high area of 33530 printed on 29 Jan 2018, the on-going sideways movement is now in its 5^th month, the longest consolidation since the primary uptrend started in Feb 2016.

Only a clear break above 31800 (a daily close above it is preferred due to a previous failure intraday breakout seen on 21 Mar 2018) shall open up scope for a potential impulsive upleg to retest its current all-time high area of 33430/530 in the first step.

ASX 200 – 5980 remains the key support to watch

Key Levels (1 to 3 weeks)

Pivot (key support): 5980

Resistances: 6087 (upside trigger), 6150 & 6210

Next support: 5850

Medium-term (1 to 3 weeks) Outlook

The recent pull-back seen on the Australia 200 Index (proxy for the ASX 200 futures) had managed to hold right at the 5980 key medium-term pivotal support (pull-back support of the former “Symmetrical Triangle” resistance from 09 Jan 2018 and the 38.2% Fibonacci retracement of the up move from 04 Apr low to 10 May 2018 high) without any daily close below it last week.

No major changes on its key technical elements. We maintain the bullish bias with 5980 remains as the key medium-term pivotal support and a break above 6087 (close to the 61.8% Fibonacci retracement of the decline from 10 May high to 29 May 2018 U.S. session low of 5943) is likely to reinforce the start of another impulsive upleg to retest 6150 before targeting the next resistance at 6210.

However, failure to hold at 5980 shall invalidate the medium-term uptrend to kick start a multi-week corrective down move towards the next support at 5850 (the former minor swing high areas of 27 Mar/10 Apr 2018 & close to the 61.8% Fibonacci retracement of the up move from 04 Apr low to 10 May 2018 high).

DAX –  Managed to hold at the 12630 support

Key Levels (1 to 3 weeks)

Pivot (key support): 12630

Resistances: 12850 (upside trigger level) & 13180/275

Next support: 12300/200

Medium-term (1 to 3 weeks) Outlook

Last week, the Germany 30 Index (proxy for the DAX futures) had underperformed against the rest of the world where it shed 2.2% versus a gain of 1.01% seen in the MSCI All Country World Index.

The underperformance of the DAX can be attributed to Eurozone’s political uncertainties from Italy and Spain that drew similarities with the 2011 Greece sovereign debt crisis. In addition, the stock price of Deutsche Bank, a key component stock in the DAX had tumbled by 10.5% last week to print a low of 9.06. The heightened risk of a financial blow-up came back to hunt Deutsche Bank as reports cited last Thurs that the German lender is on a U.S. regulatory watch list for problem banks and on last Fri, S&P Global Ratings cut its credit rating by one level to BBB+, the third lowest investment grade.

Despite the negative headlines, the Index had managed to hold the 12630 support level without a daily close below. Therefore, a deeper multi-week corrective decline has not been validated. The 12630 is considered a significant support level in the medium-term as it is defined by the former 3-month range resistance of the “Bottoming” configuration from 07 Feb/24 Apr 2018 the 38.2% Fibonacci retracement of the up move from 26 Mar low to 22 May 2018 high.

Therefore, as long as the 12630 key medium-term support holds on the Germany 30 Index (no daily close below it) and a clear break back above 12850 (the former minor swing low area of 24 May 2018 & the minor descending trendline from 22 May 2018 high) is likely to open up scope for another round impulsive upleg to retest the next resistance at 13180/275 in the first step (the minor swing high areas of 01 Feb/22 May 2018 & a Fibonacci retracement/projection cluster).

On the other hand, a daily close below 12630 shall trigger a deeper corrective down move towards the next support at 12300/200 (swing low area of 25 Apr 2018, 61.8% Fibonacci retracement of the up move from 26 Mar low to 22 May 2018 high & the primary ascending trendline in place since Feb 2016 low).

Charts are from City Index Advantage TraderPro & eSignal

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.