weekly technical outlook on major stock indices 17 apr to 21 apr further potential decline in sp 500

 S&P 500 – Risk of a corrective rebound before new drop

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Key Levels (1 to 3 weeks)

Intermediate resistance: 2342

Pivot (key resistance): 2364

Supports: 2321, 2300 & 2290/80

Next resistances: 2400 & 2425

Medium-term (1 to 3 weeks) Outlook

Last week, the U.S. S&P 500 Index (proxy for the S&P 500 futures) had tumbled as expected and almost hit the first downside target/support of 2321 (printed a low of 2327 on Thursday, 13 April). Please click here for a recap on our previous weekly technical outlook report.

Current key technical elements are as follow;

• We have mentioned earlier in past three weeks since 27 March 2017 that the high-beta sectors to watch are the Financials and Technological that has reinforced and allowed us to anticipate the on-going corrective down move in the S&P 500.  Current technical elements remains bearish on these sectors respective ETFs (XLF – Financials & XLK-Technology). The XLF (Financials) has almost reached the first downside target at 22.85/56 and showing further downside potential towards the significant medium-term support at 22.25. In addition, the XLK (Technology) is also exhibiting bearish technical elements that advocates for further potential drop to target its significant medium-term support at 50.85/49.85. Therefore, further potential decline expected in XLF and XLK can contribute to further weakness in the S&P 500 (refer to the first two charts).
• Since its current all-time high of 2400 seen in 02 March 2017, the Index has been trading within an “Expanding Wedge/Triangle” consolidation pattern with its upper boundary (resistance) now at 2364.
• The significant medium-term resistance now stands at 2364 which is defined by the aforementioned upper boundary of the “Expanding Wedge”, minor swing high area of 07/10 April 2017 and close to the 76.4% Fibonacci retracement of the recent decline from 06 April 2017 high to current 17 April 2017 intraday low.
• The daily RSI oscillator of the Index remains bearish and still has room for further downside before it reaches an extreme oversold level at 25. This observation suggests that medium-term downside momentum of price action remains intact.
• On the contrary, the shorter-term (4 hour) Stochastic oscillator has reached an extreme oversold level which highlights the risk of a minor rebound in price action of the Index at this juncture.
• The significant medium-term supports rest at 2300 and 2290/80 (the lower boundary of the ‘Expanding Wedge”, the lower boundary of a medium-term bullish ascending channel in place since 11 February 2016 and the 38.2% Fibonacci retracement of the up move from 04 November 2016 low to the current all-time high of 2400) (see daily & 4 hour charts)

The Index is now fast approaching the intermediate support of 2321 where we may see a risk of a minor rebound towards the intermediate resistance of 2342 before a new potential downleg materialises to target the next support at 2300 with a maximum limit set at 2290/80.

Only the other hand, a clearance above the revised 2364 medium-term pivotal resistance may invalidate the preferred bearish tone to see the return of the bulls to retest the current all-time high area of 2400 and even open up scope for a further rally towards 2425 next.

Nikkei 225 – Risk of a corrective rebound before new drop

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Key Levels (1 to 3 weeks)

Intermediate resistance: 18580/640

Pivot (key resistance): 18850

Supports: 18200, 18060 & 17860

Next resistances: 19350 & 19700/735

Medium-term (1 to 3 weeks) Outlook

Last week, the Japan 225 Index (proxy for the Nikkei 225 futures) had decline as expected and hit the downside target/support of 18360/320 (printed a low of 18306 on 13 April). Please click here for a recap on our previous weekly technical outlook report.

The horrendous fall on the Index which saw it plunged to a near five-month low was triggered by a similar expected sell-off in the USD/JPY where the movement of the Nikkei 225 has a high direct correlation with it. In turn, the fall in the USD/JPY was caused by rising risk-aversion from geopolitical risks (upcoming French presidential election and recent U.S. “active” military involvement in the Middle East as well as rising tensions with North Korea).

Current key technical elements are as follow;

• Medium-term downside momentum of price action remains intact on the Index. The daily RSI oscillators remains bearish and still has some “room” left to manoeuvre before it reaches an extreme oversold level at around 20. In addition, it has not flashed any bullish divergence signal (see daily chart).
• The next significant support rests at 17860 which is defined by the pull-back support area of the former bullish breakout from its “base” seen on 14 November 2016, the 38.2% Fibonacci retracement of the recent multi-month rally from 24 June 2016 low to March 2017 high and the exit potential of the recent bearish breakdown from 18700/640 (see daily chart).
• Prices do not drop in a vertical fashion and at this juncture (above 18200), the Index now faces the risk of a corrective rebound.
• Based on the intermarket analysis from USD/JPY, the pair has also tumbled towards a parallel support of 108.40 with excess at 108.00. Short-term technical elements are now advocating for a  potential corrective rebound at the 108.40/108.00 support     zone (defined by a confluence of elements such as the lower boundary of a descending channel in place since January 2017 high) towards 109.70 with a maximum limit set the 110.63 medium-term pivotal support before a new potential drop materialises. Given its high direct correlation with Nikkei 225, a potential rebound in the USD/JPY is likely to translate into a similar rebound in the Nikkei 225 (see 3^rd chart).
• Based on the Elliot Wave Principal and fractal analysis, the recent steep decline seen on the Index from its 29 March 2017 minor swing high at 19353 is likely a minor degree wave 3 with potential end target at 18360/200.  Current price action is now advocating for a potential start of a corrective minor degree wave 4 rebound with end target at 18580/640.
• Shorter-term Stochastic oscillator (4 hour) has started to flash a bullish divergence signal at its oversold region which suggests that the recent downside momentum of price action has started to abate. These observations suggest that the recent decline is now at risk of a short-term mean reversion rebound/consolidation.
• The significant medium-term resistances stands at 18580/640 and 18850 (61.8% Fibonacci retracement of the recent steep decline from 29 March 2017 minor swing high to today’s current intraday low of 18205 & the descending trendline from 14 March 2017 high) (see 4 hour chart).

Therefore, the Index may now see a corrective rebound first towards 18580/640 with a maximum limit set at the revised 18850 medium-term pivotal resistance before a new potential downleg materialises to target the next supports at 18060 and 17860 next.

However, a clearance above 18850 may invalidate the preferred bearish tone to see a further corrective rebound to retest 19350.

Hang Seng Index – Consolidation still in progress above 24000/23850 before new potential upleg

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Key Levels (1 to 3 weeks)

Intermediate support: 24000

Pivot (key support): 23850

Resistances: 24670, 25135 & 25480

Next support: 23100/22820

Medium-term (1 to 3 weeks) Outlook

The Hong Kong 50 Index (proxy for Hang Seng Index futures) has continued to trade sideways above the intermediate support of 24000.

Current key technical elements are as follow;

• The daily RSI oscillator remains above its pull-back support which is around the 50% level.
• The recent multi-week consolidation in place since 21 March 2017 high has taken on a similar fractal geometry consolidation as seen on 23 February 2017 to 09 December 2017 minor swing low ( before a bullish breakout occurred on 13 March 2017.

Maintain bullish bias as long as the 23850 medium-term pivotal support holds and a break above 24450 (current consolidation range top) is likely to reinforce a further potential up move to target next resistances at 25135 and 25480.

However, failure to hold above 23850 may invalidate the bullish scenario to see a deeper decline to test the next support at 23100/22820.

ASX 200 – Still holding above 5830/5800 medium-term support

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Key Levels (1 to 3 weeks)

Intermediate support: 5830

Pivot (key support): 5800

Resistances: 5945 & 6000

Next supports: 5674 & 5580/70

Medium-term (1 to 3 weeks) Outlook

The Australia 200 Index (proxy for the ASX 200 futures) had inched higher as expected and hit the first medium-term upside target/resistance of 5945 on 11 April 2017.

Current key technical elements are as follow;

• The Index has pull-backed due to a drop in iron ore prices and heightened risk aversion towards to the key medium-term support zone of 5830/5800.
• The daily RSI oscillator has remained above its ascending trendline support in place since 04 November 2016 low without any bearish divergence signal. These observation suggest that medium-term upside momentum of price action remains intact.
• The shorter-term 4 hour Stochastic oscillator has reached an extreme oversold level where a potential bullish reversal in price action may occur.

Maintain bullish bias as long as the 5800 medium-term pivotal support holds where the Index is likely to shape a potential recovery to retest 5945 before targeting the key long-term resistance of 6000.

On the other hand, failure to hold above the 5800 may invalidate the preferred bullish scenario for a deeper decline to retest the minor swing low areas of 01 March/22 March 2017 at 5674 and even 5580 next.

DAX – Potential consolidation between 12030 and 12245

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Key Levels (1 to 3 weeks)

Pivot (key support): 12080/30

Resistances: 12220/245 & 12410/480

Next supports: 11900 & 11465/30

Medium-term (1 to 3 weeks) Outlook

Last week, the Germany 30 Index (proxy for the DAX futures) had declined in line with rising risk aversion (mostly from U.S. “active” military involvement in the Middle East as well as rising tensions with North Korea) as expected but managed to hold above the 12080/30 medium-term pivotal support.  Please click here for a recap on our previous weekly technical outlook report.

In this coming week, geopolitical risk will shift to the Europe where France will conduct her first round of presidential election on this Sunday, 23 April.

Current key technical elements are as follow;

• The significant medium-term support remains at 12080/30 which is defined by the lower boundary of the ascending channel in place since 09 November 2016, the former swing high/congestion area of 20 March/25 March 201 and a Fibonacci cluster.
• The daily RSI oscillator is now on its corresponding ascending trendline support in place since 04 December 2016. In addition, the shorter-term (4 hour) Stochastic oscillator has flashed a bullish divergence signal at its oversold region. These observations suggest that recent downside momentum of price action has started to abate.
• Intermediate resistance now stands at 12220/245 which is defined by the minor descending trendline from 05 April 2017 minor swing high and the recent 11/12 April 2017 minor swing high area.
• The significant medium-term resistance stands at 12410/480 which is defined by the current all-time high area seen in April 2015, a Fibonacci projection cluster and the upper boundary of a short-term ascending channel in place since 07 February 2017 low (see daily & 4 hour charts).

The Index may see a period of consolidation between 12220/245 and 12080/30 before a new potential upleg materialises to target the next resistance at 12410/480.

On the other hand, failure to hold above the 12080/30 medium-term pivotal support may jeopardise the bulls to see a deeper pull-back to retest 11900 (congestion area from 08 March to 27 March 2017). Only a break below 11900 is likely to trigger a corrective decline to target the next support at 11465/30.

Charts are from City Index Advantage TraderPro & eSignal

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