weekly technical outlook on major stock indices 06 mar to 10 mar mixed bag with sp 500 leading 18456

S&P 500 – Melt-up leg remains intact

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Key Levels (1 to 3 weeks)

Intermediate support: 2371/70

Pivot (key support): 2338

Resistances: 2411 & 2425

Next support: 2260

Medium-term (1 to 3 weeks) Outlook

Last week, the U.S. S&P 500 Index (proxy for the S&P 500 futures) has broken above the 2385 excess major resistance level and invalidated our preferred bearish scenario in order to trigger the start of a significant correction (click here for a recap on our update).

Key technical elements are as follow;

• Since 04 November 2016 low, the Index has been evolving in a bullish ascending channel (depicted in green) with its lower boundary acting as a support at 2338 (see daily chart).
• The aforementioned 2338 ascending channel support also coincides closely with the 23.6% Fibonacci retracement of the up move from 04 November 2016 low to last week high of 2400.
• The weekly RSI oscillator is now coming close to an extreme level of 76.17 seen in February 2011 (before a 21% correction triggered by the European sovereign debt crisis) but both the weekly and daily RSI oscillators have not flash a bearish divergence signal. In addition, the daily RSI remains bullish above its supports.
• Based on the Elliot Wave Principal and fractal analysis, the Index is likely undergoing an intermediate degree bullish impulsive wave 3/ in place since 04 November 2016 low with potential end targets at 2411/2425 (sees daily & 4 charts).

Therefore, we have turned bullish as the market is still evolving in its “melt-up leg” and integrated technical analysis is advocating for a further upside potential with the next major resistance now at 2467/78 (see weekly chart).

As long as the 2338 medium-term pivotal support holds, the Index may still see a further push up to target the next resistances at 2411 and 2425 within a medium-term horizon (1 to 3 weeks).

However, failure to hold above 2338 is likely to put the bulls on hold for a deeper slide towards the next support at 2260.

Nikkei 225 – Mixed elements, turn neutral for now

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Key Levels (1 to 3 weeks)

Resistances: 19700 & 19860/20000

Supports: 19250, 18990 & 18700

Last week, the Japan 225 Index (proxy for the Nikkei 225 futures) has staged a bullish breakout above the 19575 medium-term pivotal resistance and the upper boundary of the “symmetrical triangle” in place since 26 January 2017 after U.S. President Trump’s State of The Union speech to U.S. Congress on 01 March 2017.

Our preferred bearish bias for a break below the 18990 range support of the “symmetrical triangle” has been invalidated.

Medium-term (1 to 3 weeks) Outlook

Despite last week’s rally “inspired” by U.S President Trump’s State of The Union speech that lacked details and clarity over his administration proposed fiscal policies, we are still not convince to turn outright bullish at this juncture over a medium-term horizon as technical elements are mixed;

• In today’s (06 March) Asian session, price action of the Index has reintegrated back below upper boundary of the “symmetrical triangle” which highlights the risk of a “bull trap” where last week’s rally is considered as a failure bullish breakout (see 4 hour chart).
• Despite the rebound seen in the USD/JPY at the 111.60 support, it is still below its range resistance of 115.35. In conjunction, the daily RSI oscillator is still below its pull-back resistance which suggests a lack of upside momentum. From an intermarket analysis perspective, technical elements seen in the USD/JPY are not convincing at this juncture to justify a potential medium-week bullish movement on the Nikkei 225.

Therefore, we have decided to turn neutral for the Index and expect it to trade within a range of 19700 and 19040 (the ascending trendline support in place since 18 January 2017 low) in the coming 1 to 3 weeks.

Hang Seng Index – Further potential downside through the break of 23750

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Key Levels (1 to 3 weeks)

Intermediate resistance: 23750

Pivot (key resistance): 24070

Supports: 23100/22820 & 22650/550

Next resistance: 24580 & 25480

Medium-term (1 to 3 weeks) Outlook

Last week, the Hong Kong 50 Index (proxy for Hang Seng Index futures) has traded lower and broke below the 23750 downside trigger level which reinforces the bearish bias. Click here for a recap on our previous weekly technical outlook.

Technical elements remain negative as follow:

• The Index has traced out a potential “Double Top” bearish reversal configuration which indicates that the up move from 23 December 2016 low to the recent 23 February 2017 high has reached an exhaustion point. The neckline support of the “Double Top” rests at 21480 (see daily chart).
• In conjunction, the daily RSI oscillator has continued to inch downwards and still has room to manoeuvre to the downside before it reaches an extreme oversold level. These observations suggest the downside momentum of price action remains intact.
• The key medium-term resistance stands at 24070 which is defined by the minor swing high areas of 27 Feb/02 March 2017 and the 76.4% Fibonacci retracement of the recent down move from 23 February 2017 high to last Friday, 03 March 2017 low of 23504.

Therefore, we maintain our bearish bias and tightened the key medium-term pivotal resistance to 24070 for a potential decline to target the 23100/22820 support. A break below 22820 is likely to open up scope for a deeper slide towards the next support at 22650/550 (pull-back support of the former descending trendline from 09 September 2016 high & the 61.8% Fibonacci of the up move from 23 December 2016 low to 23 February 2017 high).

On the other hand, a clearance above 24070 may invalidate the preferred bearish scenario for a further squeeze up towards next resistances of 24580 follow by 25480.

ASX 200 – Further potential downside below 5780/5850

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Key Levels (1 to 3 weeks)

Intermediate resistance: 5780

Pivot (key resistance): 5830/50

Supports: 5674 & 5580/70

Next resistance: 6000 (key long-term resistance)

Medium-term (1 to 3 weeks) Outlook

U.S President Trump’s “inspired” risk rally did not translate into a pronounced positive feedback loop into the Australia 200 Index (proxy for the ASX 200 futures). The initial push up stalled right below the intermediate descending trendline resistance of 5785 as per highlighted in our previous weekly technical outlook (click here for a recap).  It printed a high of 5782 on 02 March 2017 in the European session before it reversed down by 1.2% to print a low of 5710 on Friday, 03 March 2017.

Technical elements remain unchanged and we maintain our bearish bias.

The Index may see a push up again to retest the intermediate descending trendline resistance from 16 February 2017 high now at 5780 before another potential downleg materialises to retest last week low of 5674 before targeting the impending “Double Top” neckline support of 5580/70.

However, a clearance above the medium-term pivotal resistance of 5850 is likely to invalidate the preferred bearish scenario to see a squeeze up towards the 6000 key long-term resistance.

DAX – 12200 remains the key resistance to watch

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Key Levels (1 to 3 weeks)

Pivot (key resistance): 12200 (excess)

Supports: 11850 & 11465/30

Next resistance: 12410

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) has continued to inch upwards in line with the benchmark U.S. stock indices but it has not surpassed the 12200 medium-term pivotal resistance.

Key technical elements are as follow:

• Despite the push up in price action of the Index, it is not being matched by a parallel movement in momentum as the daily RSI oscillator has continued to flash a bearish divergence signal. These observations suggest that upside momentum of  price action has waned and it faces a risk of a bearish reversal.
• Over at a shorter-term horizon, the 4 hour Stochastic oscillator has dipped into its oversold region  which suggest the Index may see a short-term rebound above its intermediate support at 11850 (the ascending trendline from 07 February 2017 minor swing low).

Therefore, we are maintaining our bearish bias but the Index may see a short-term rebound first towards 12100 before another potential downleg materialises. A break below 11850 is likely to reinforce the potential bearish move to target the next support at 11465/30.

On the other hand, a clearance above 12200 is likely to invalidate the preferred bearish scenario to see a further squeeze up towards the current all-time high area of 12410 seen in April 2015.

Charts are from City Index Advantage TraderPro & eSignal

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