weekly technical outlook on major stock indices 08 may to 12 may a potential new all time high looms

S&P 500 – Further potential upside towards a new all-time high

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Key Levels (1 to 3 weeks)

Intermediate support: 2392

Pivot (key support): 2380

Resistances: 2400, 2418 & 2424

Next supports: 2360 (gap)

Medium-term (1 to 3 weeks) Outlook

The U.S. S&P 500 Index (proxy for the S&P 500 futures) had pushed up as expected and made a retest on its current all-time high area of 2400 as seen in last Friday (05 May) U.S. session.

Current key technical elements are as follow:

• The daily RSI oscillator of the Index has remained above its support and still has further room to manoeuvre to the upside before it reaches an extreme overbought level. These observations suggest that medium-term upside momentum of price action remains intact.
• In the shorter-term, the Index has continued to evolve within a bullish ascending channel in place since 17 April 2017 low with its lower boundary coming to act as a support at around  2392 (see 4 hour chart).
• The aforementioned ascending channel support of 2392 also confluences with the former minor range top from 26 April 2017 now turns pull-back support.
• The next significant medium-term resistances stands at 2418 and 2424 as defined by Fibonacci projection levels from different swing low areas (see 4 hour chart).
• From a sector rotation analysis perspective, one of the laggard cyclical sectors, the Industrials has started to show positive technical elements. The S&P 500 Industrial sector ETF (XLI) is now advocating for a further potential up move to target the ascending channel resistance at 69.50, holding above the 65.26 medium-term support (refer to the 3^rd chart). The performance of the Industrials has lagged behind the Technology sector since November 2016 (post U.S. presidential election) and a potential sectorial leadership rotation back into the Industrials can be the much needed catalyst to fuel a rally in the S&P 500 for it to breach above 2400.

Therefore, we are maintaining the bullish bias with a tightened key medium-term pivotal support at 2380 for a potential upleg to target the next resistances at 2418 and 2424 next.

On the other hand, failure to hold above 2380 may jeopardise the preferred bullish tone to open up scope for a deeper slide towards the 2360 gap support seen on 24 April 2017.

Nikkei 225 – Bullish breakout but risk of minor pull-back at 20000 before new upleg

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Key Levels (1 to 3 weeks)

Intermediate support: 19700/600

Pivot (key support): 19480

Resistances: 20000 & 20200

Next support: 19200

Medium-term (1 to 3 weeks) Outlook

Last week, the Japan 225 Index (proxy for the Nikkei 225 futures) had continued to inch upward as it cash market closed from 03 May to 05 May and failed to break below 19160 in order to trigger the corrective setback.

In today’s Asian session (08 May), the Index had staged the bullish breakout from the former 19700 medium-term range top and invalidated setback scenario. Please click here for a recap on our previous weekly technical outlook report. 

Current key technical elements are as follow:

• The daily RSI oscillator has continued to inch upwards and it still has room left to manoeuvre to the upside before it reaches at extreme level of 84 seen in May 2015 that led the Index to record its recent significant swing high of 20950 in June 2015. These observations suggest that medium-term upside momentum of price action remains intact.
• The intermediate support now rests at 19700/600 which is defined by the former range top from 04 January 2017 and also the former descending trendline resistance from June 2015 high.
• The key medium-term support rests at 19480 which is defined by the lower boundary of an ascending channel in place since 19 April 2017 low and the minor swing low area of 05 May 2017 (see 4 hour chart).
• The intermediate resistance stands at 20000 which is defined by exit potential of the former bullish “basing formation” from 12 February to 24 June 2016 that has been broken out on 14 November 2016 and the swing high area of 23 November 2015 (see daily chart chart).
• The significant medium-term resistance stands at 20200 which is defined by the upper boundary of the ascending channel in place since 19 April 2017 low and the 1.618 Fibonacci projection of the up move from 17 April low to 24 April 2017 high.
• Based on the Elliot Wave Principal and fractal analysis, the Index is likely shaping an extended impulsive/bullish minor degree wave 1 in place since 17 April 2017 low with a potential end target set at 20200 (the aforementioned 1.618 Fibonacci projection).
• Intermarket analysis from USD/JPY also supports a further potential up move in the Nikkei 225 as the USD/JPY remains bullish above 112.25 key short-term support and may see a bullish breakout from its descending channel resistance (click here for a recap).
• The shorter-term (4 hour) Stochastic oscillator of the Index has reached an extreme overbought level. Thus, the Index may soon shape a minor pull-back in price action (see 4 hour chart).

We turn bullish due to the aforementioned positive technical elements. The Index may first see a minor pull-back at the 20000 intermediate resistance towards the 19700/600 pull-back support with a maximum limit set at the 19480 medium-term pivotal support. Thereafter, it is likely to shape another potential upleg to target the next resistance at 20200.

On the other hand, failure to hold above 19480 may invalidate the preferred bullish scenario to open up scope for a deeper setback towards the next support at 19200 (former congestion/swing high area of 24 March/31 March 2017).

Hang Seng Index – Further potential upside above 24450/150 support

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Key Levels (1 to 3 weeks)

Intermediate support: 24450

Pivot (key support): 24150

Resistances: 25135 & 25480

Next supports: 23720 & 23100/22820

Medium-term (1 to 3 weeks) Outlook

The Hong Kong 50 Index (proxy for Hang Seng Index futures) had shaped the minor pull-back as expected towards the 24450 intermediate support (printed a low of 24350 on Fri, 05 May) before it staged the subsequent rebound. Please click here for a recap on our previous weekly technical outlook report. 

Technical elements remain unchanged; maintain bullish bias above the 24150 medium-term pivotal support for another potential upleg to target the next resistances at 25135 and 25480.

However, failure to hold above 24150 may negate the preferred bullish tone to see a deeper slide towards the next support at 23720 (the lower boundary of the minor ascending channel & the minor swing low area of 19 April 2017).

ASX 200 – Risk of a corrective setback looms below 5960

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Key Levels (1 to 3 weeks)

Intermediate resistance: 5906

Pivot (key resistance): 5960

Supports: 5800 (downside trigger) & 5674

Medium-term (1 to 3 weeks) Outlook

Last week, the Australia 200 Index (proxy for the ASX 200 futures) had tumbled in line with weakness see in WTI crude oil and industrial metals such as copper and iron ore.  The Index broke below the 5893 lower limit the neutrality range.

For a recap, we turn neutral last week after the Index probed higher and came close to the key long-term resistance of 6000 (printed a high of 5962 on 02 May 2017).  Please click here for a recap on our previous weekly technical outlook report. 

Current key technical elements are as follow:

• Recent decline seen in the Index is now coming close to a critical medium-term term support of support which is defined by the pull-back support of the former descending trendline bullish breakout and the lower boundary of an ascending channel in place since 06 February 2017 low (see daily chart).
• The daily RSI oscillator is now testing a corresponding significant ascending trendline support with a prior bearish divergence signal. These observations suggest that recent upside momentum of price action has started to wane and highlights the risk of a break below the aforementioned 5800 support.
• Intermediate resistance stands at 5906 (the minor descending trendline from 02 May 2017 high & the former swing high area of 04 May 2017) follow by the significant medium-term resistance of 5960.

Thus, we turn bearish at this juncture with 5800 as downside trigger level and a break below it is likely to reinforce a further potential decline to target the next support at 5674 (range support from 01 March/22 March 2017).

On the other hand, a break above 5960 medium-term pivotal resistance may invalidate the preferred bearish setback scenario for a squeeze up to test the 6000 key long-term resistance. Only a clearance above 6000 is likely to open up scope for a further rally towards 6260/80 next.

DAX – Risk of a corrective decline below 12900

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Key Levels (1 to 3 weeks)

Pivot (key resistance): 12900

Supports: 12660, 12400 & 12250

Next resistance: 13130

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) had shaped the expected rally towards the upside target/resistance of 12650. It scaled a new all-time high of 12832 in last Friday (05 May) U.S. session as market anticipated a pro-business centrist Macron victory in the final round of the French presidential election.

Interestingly, last Friday high of 12832 is very close to the predefined maximum medium-term upside target/resistance of 12900.  Please click here for a recap on our previous weekly technical outlook report. 

Current key technical elements are as follow:

• The daily RSI oscillator has already hit an extreme overbought level at around 80% seen in March 2015. In addition, it has started to inch down and exited the overbought region which suggests that the recent upside momentum of price action is being overstretched and it faces the risk of a pull-back at this juncture.
• The 12820/900 level also corresponds to a Fibonacci projection cluster (see daily chart)
• Based on the Elliot Wave Principal and fractal analysis, the Index is likely to have completed the minor degree bullish impulsive wave 3 below 12900 and it is now in the midst of undergoing the minor degree corrective wave 4 to retrace some of the gains seen from the wave 3 up move. The potential minimum end target of the corrective wave 4  wave 4 rests at 12250 (23.6% Fibonacci retracement of the wave 3 rally from 04 November 2016 low to today’s current intraday high of 12877).
• The aforementioned 12250 potential corrective wave 4 target also confluences with the ascending channel support from 04 December 2016 low and the upper limit of the gap support formed on 24 April 2017 after the outcome of the 1^st round of the French presidential election (see daily chart).

After a steep up move in place since 20 April 2017 low, the Index now faces the risk of a corrective setback/decline before a new upleg materialises. Therefore, we turn bearish below 12900 medium-term pivotal resistance with 12660 as the downside trigger level. A break below 12660 is likely to trigger a potential deeper slide to target the next supports at 12400 and 12250 next.

However, a clearance above 12900 may see the continuation of the rally to target the next resistance at 13130 (Fibonacci projection cluster & the upper boundary of the ascending channel.)

Charts are from City Index Advantage TraderPro & eSignal

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