Weekly Technical Outlook on Major Stock Indices 16 Jul to 20 Jul 2018

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By :  ,  Financial Analyst

S&P 500 – Potential residual push up in progress

Key Levels (1 to 3 weeks)

Intermediate support: 2790

Pivot (key support): 2763

Resistances: 2840 & 2877/80

Next support: 2710/2690

Medium-term (1 to 3 weeks) Outlook

Last week, The SP 500 Index (proxy for the S&P 500 futures) had managed to shrug off the negative impact from the on-going trade tensions between U.S. and China to trade higher as expected and met the intermediate resistance/target of 2790 (it printed a high of 2805 on last Fri, 13 Jul. Click here for a recap on our previous weekly technical outlook. Current key elements as follow;

  • The on-going recovery seen in the U.S. stock markets since the Jan/Feb 2018 sell-off of close to 12% has been led by the Nasdaq 100 and Russell 2000. The Nasdaq 100 recorded a fresh new all-time high level seen last Fri, 13 Jul at 7387 with the Russell 2000 retested its current all-time high level of 1708.
  • The on-going recovery is not broad based and relative strength analysis of the major sectors versus the S&P 500 still shows outperformance being concentrated into Technology and Consumer Discretionary sectors while the other risk sensitive sectors; Industrials and Financials with a combined weightage of 23% continue to underperform. These observations continue to support the “tail end” scenario of the melt-up phase that started in Feb 2016 before a major cycle top is made to kickstart a potential multi-year corrective down move (refer to the 3r chart).
  • Even though the S&P 500 has continued to recover from its Feb 2018 swing low, its price action has continued to evolve in an impending bearish reversal “Ascending Wedge” configuration which tends to precede sharp downside reversal in price action after its completion (see daily chart).
  • The key resistances to watch will be at 2840 and 2877/80 which are defined by the upper limit of the aforementioned “Ascending Wedge”, the current all-time high area and the 0.618/0.764 Fibonacci projection of the up move from 03 Apr 2018 low to 13 Jun 2018 high projected from 28 Jun 2018 low (see daily & 4 hour charts).
  • The medium-term key support to watch for this week will be at 2763 which is defined by the 11 Jul 2018 swing low and the 38.2% Fibonacci retracement of the on-going up move from 28 Jun 2018 low to last Fri, 13 Jul high of 2805 (see 4 hour chart).

Therefore, as long as the 2763 medium-term pivotal support holds, the Index is likely to shape the potential residua push up to target the 2840 resistance and above it sees 2877/80 next.

On the other hand, failure to hold at 2763 opens up scope for a deeper pull-back to retest the “Ascending Wedge” support at 2710/2690.

Nikkei 225 – Watch the range resistance at 23020

Key Levels (1 to 3 weeks)

Resistances: 23020 & 24200

Supports: 22200, 21460 & 21100

Medium-term (1 to 3 weeks) Outlook

The Japan 225 Index (proxy for the Nikkei 225 futures) had broken above the 22350 key medium-term resistance which invalidated the bearish scenario.

Right now, the Index shows potential for an extension of the mean reversion rebound from its 5 Jul 2018 low of 21460 to retest the range top/resistance of 23024 in place since 21 May 2018. In addition, the shorter-term 4 hour Stochastic oscillator continues to inch upwards and still has room to manoeuvre to the upside before it reaches an extreme overbought level of 97.

Therefore, prefer to turn neutral between 23020 and 22200. Only a break below 222000 reinstates the bears for a potential  downleg to target the supports of 21460 follow by 21100 next (the lower boundary of the major ascending channel from Jun 2016 low.

A daily close above 23020 opens up scope for an impulsive upleg to target the next resistance at 24200 (the medium-term swing high of 23 Jan 2018, a 27-year high).

Hang Seng – Mean reversion rebound scenario remains in progress

Key Levels (1 to 3 weeks)

Intermediate support: 28400

Pivot (key support): 28000

Resistances: 29400 & 30070/260

Next support: 25500

Medium-term (1 to 3 weeks) Outlook

The Hong Kong 50 Index (proxy for Hang Seng Index futures) has continued to hold above the 28000 major support (the swing low areas of 19 Oct/07 Dec 2017 & the primary ascending trendline in place since Feb 2016 low). No change, maintain bullish bias for a potential mean reversion rebound to target 29400 (former swing low area of 04 Apr 2018) and even 30070/260 next (pull-back resistance of the former 5-month range support & 61.8% Fibonacci retracement of the on-going decline from 07 Jun 2018 high to 05 Jul 2018 low of 27800).

On the other hand, a break (daily close) below 28000 shall trigger a multi-month corrective decline to target the 25500 support in the first step (the swing low of 6 Jul 2017 & close to the 50% Fibonacci retracement of the primary uptrend in place since 11 Feb 2016 low to 29 Jan 2018 high).

ASX 200 – 6150 remains the key medium-term support to watch

Key Levels (1 to 3 weeks)

Intermediate support: 6205

Pivot (key support): 6150

Resistances: 6350/380 & 6455/490

Next supports: 5980

Medium-term (1 to 3 weeks) Outlook

The Australia 200 Index (proxy for the ASX 200 futures) had traded sideways last week since its bullish breakout from its minor “Symmetrical Triangle” range configuration on 05 Jul 2018.

No major changes on its key elements with the former minor Symmetrical Triangle” range resistance now acting as a pull-back support at 6205. Therefore as long as the 6150 key medium-term pivotal support holds (lower boundary of the medium-term ascending channel from 04 Apr 2018 low), the Index is likely to stage another potential upleg to target the next resistance at 6350/380 (Fibonacci projection cluster & upper boundary of the medium-term ascending channel from 04 Apr 2018).  

However, a break below 6150 negates the bullish tone for a deeper pull-back towards the next support at 5980.

DAX – 12630 remains the key range resistance to watch

Key Levels (1 to 3 weeks)

Supports: 12100 & 11900/800

Resistances: 12630 & 13190

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) is now coming close to the 12630 medium-term range resistance (the former swing low areas of 29/31 May/08 Jun 2018 & the 50% Fibonacci retracement of the recent decline from 15 June 2018 high to 28 Jun 2018 low).

In addition, the daily RSI oscillator has started to inch down right below its corresponding resistance at the 50 level. These observations suggest that the recent upside momentum of the mean reversion rebound in place since 28 Jun 2018 low has started to wane.

No change, maintain neutrality stance between 12630 and 12100. Only a break above 12630 opens up scope for a further mean reversion towards the next resistance at 13190. On the flipside, failure to hold at 12100 is likely to see a further slide towards the key major support at 11900/800 (neckline of a multi-month “Head & Shoulders” bearish reversal chart configuration in the making since Jun 2017). On the flipside, a clearance above 12630 sees an extension of the mean reversion rebound to retest the 13190 resistance (swing high areas of 22 May/15 Jun 2018).

Charts are from City Index Advantage TraderPro & eSignal

Related tags: Indices

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