weekly technical outlook on major stock indices 20 mar to 24 mar mixed bag with dax approaching sign

S&P 500 – Uptrend remains intact above tightened support at 2354

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Key Levels (1 to 3 weeks)

Intermediate support: 2372

Pivot (key support): 2354

Resistances: 2411 & 2425

Next supports: 2338 & 2260

Medium-term (1 to 3 weeks) Outlook

Last week, the U.S. S&P 500 Index (proxy for the S&P 500 futures) had managed to hold the 2354 support and staged the expected rally to print a high of 2390 on 15 March 2017 U.S .session (post FOMC). Thereafter, it started to retrace some of the gains from the up  move that started on 14 March 2017 low of 2357 towards the end of last week.

No change in key technical elements as per highlighted in our previous weekly report, still positive (click here for a recap).  Current interesting elements are as follow;

• Today’s slide seen in the Asian session (20 March 2017) has managed to stall at the 2372 intermediate support which is defined by the 61.8% Fibonacci retracement of the recent up move from 14 March 2017 minor swing low of 2357 to last week high of 2390. In addition, it is also closed to the lower boundary of the medium-term ascending channel in place since 04 November 2016 low.
• The 4 hour Stochastic oscillator has started to turn up from an extreme oversold level which indicates a potential short-term revival in upside momentum of price action is round the corner.

Therefore, we remain bullish and tightened the medium-term pivotal support to 2354 from 2338 for a potential up move to target the next resistances at 2411 with a maximum limit set at 2425 within the on-going “melt-up” phase.

However, failure to hold above 2354 is likely to negate the preferred bullish scenario for a slide to retest 2338 and only a daily close below 2338 will open up scope for a potential decline towards the next support at 2260 in the first step.

Nikkei 225 – Potential last push down before upswing towards range top

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Key Levels (1 to 3 weeks)

Intermediate support: 19260/190

Pivot (key support): 19090

Resistances: 19530 & 19700/735

Next support: 18700/640

Medium-term (1 to 3 weeks) Outlook

Last week, the Japan 225 Index (proxy for the Nikkei 225 futures) had undergone the expected bearish reaction right at the 19700/735 medium-term pivotal resistance (printed a high of 19708 on 14 Mar 2017) and declined by 1.5% to almost hit our expected first downside target (support) at 19400 (printed a low of 19403 in 17 Mar 2017, U.S.  session).

Please click here for a recap on our previous weekly technical outlook report.

Current technical elements are as follow;

• The daily RSI oscillator is still capped below its resistance since 26 January 2017 but remains above a significant support in place since 12 February 2016. This observation suggests that the Index lacks upside momentum to break above its medium-term range configuration in place since 26 January 2017.
• Based on the Elliot Wave Principal and fractal analysis, the Index is still in the midst of undergoing a potential bearish “Ascending Wedge” (a trend reversal configuration) in place since 18 January 2017 low. A typical bearish “Ascending Wedge” seen within a larger degree corrective structure tends to take a minimum form of five sets of 3 wave movement (a-up, b-down, c-up, d-down & e-up).
• Last week’s decline from 19708 high of 14 March 2017 to 19424 low of 16 March 2017 is likely the minute (lower degree) wave a** and the subsequent rebound to 19626 high (Post FOMC & BOJ) is the minute degree corrective rebound wave b**. Last Friday, 17 March 2017 decline is likely the start of the impulsive minute degree down move wave c** to complete the minor degree impulsive down move wave d* that is in place since 02 March 2017 high. The potential downside target of the wave d* rests at 19260/190 (the 61.8%/76.4% Fibonacci retracement of the up move from 27 Feb 2017 low of 18993 to 14 Mar 2017 high of 19708) (see 4 hour chart)
• The lower boundary of the bearish “Ascending Wedge” also confluences within the aforementioned Elliot Wave’s potential price target of 19260/190 (see 4 chart).
• The shorter-term 4 hour Stochastic oscillator is now hovering just above the oversold region but it has not flash a bullish divergence signal yet. Interestingly, the previous two rebound seen in the price action of the Index that occurred at the “Ascending Wedge” support had been accompanied by bullish divergence signals from the 4 hour Stochastic oscillator at the oversold region. Therefore, current observation from the 4 hour Stochastic oscillator suggests that downside momentum of price action remains intact to reinforce a potential “last push” down to test the “Ascending Wedge “ support at 19260/190.
• Based on intermarket analysis, the recent decline seen in the USD/JPY is now coming close to retest is medium-term range support of 111.60 which may offer a potential rebound at around the 111.60 level. These observations suggest limited downside potential in the USD/JPY at this juncture which can translate to a potential recovery in the Nikkei 225 at around its “Ascending Wedge” range support region.

Therefore, the Index may see a further push down first towards the 19260/190 intermediate support (lower boundary of the “Ascending Wedge” before a recovery takes place for a potential push back up towards the “Ascending Wedge” top/resistance at 19700/735.

However, failure to hold above the 19090 medium-term pivotal support may invalidate the preferred bullish swing move scenario for a bearish range breakout to target the next support at 18700/640 in the first step.

Hang Seng Index – Broke above 24070, further potential upside

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Key Levels (1 to 3 weeks)

Intermediate support: 24200

Pivot (key support): 23850

Resistances: 24580, 25135 & 25480

Next support: 23100/22820

Medium-term (1 to 3 weeks) Outlook

The Hong Kong 50 Index (proxy for Hang Seng Index futures) had stage a bullish breakout above the 24070 medium-term pivotal resistance which invalidated the preferred bearish setback scenario.

Current technical elements are as follow;

• The daily RSI oscillator has continued to inch upwards from around the 50% level since 10 March 2017 and still has room manoeuvre to the upside before it reaches an extreme overbought level. These observations suggests that medium-term upside momentum of price action remains intact.
• The key medium-term pivotal support now rests at 23850 which is defined by a confluence of elements. The recent gap support seen on 15/16 March 2017 and the lower boundary of a shorter-term ascending channel from 28 December 2016 low (depicted in green).
• The medium-term resistances stands at 25135 and 25480 which are defined by both the upper boundaries of the longer (in blue) and short-term (in green) ascending channels and 0.618/0.764 Fibonacci projection from different swing lows (see daily & 4 hour charts).

Therefore, we have turned bullish at this juncture and as long as the 23850 medium-term pivotal support holds, the Index is likely to see a further potential push up to break above 24580 (61.8% Fibonacci retracement of the multi-month decline from 27 April 2015 high to 11 February 2016 low to target the next resistances at 25135 and even 25480 next.

On the other hand, failure to hold above 23850 may invalidate the bullish scenario to see a deeper decline towards the next support at 23100/22820.

ASX 200 – Maintain bearish bias below 5830/50 resistance

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Key Levels (1 to 3 weeks)

Intermediate resistance: 5780

Pivot (key resistance): 5830/50

Supports: 5740 (trigger), 5674 & 5580/70

Next resistance: 6000 (key long-term resistance)

Medium-term (1 to 3 weeks) Outlook

Last week, the Australia 200 Index (proxy for the ASX 200 futures) had continued to trade sideways below the 5830/50 medium-term pivotal resistance that had managed to stall the post FOMC rally (printed a high of 5818 on 16 March 2017).

No change in the key technical elements except that there is a minor ascending trendline from 01 March 2017 low now acting as a support at 5740 that needs to be broken down to open up scope for further potential downside.

Therefore, we are maintaining our bearish bias and a break below 5740 is likely to see a further potential decline towards the next supports at 5674 and 5580/70 (neckline support of the potential bearish “Double Top” configuration).

On the other hand, a clearance above 5850 is likely to invalidate the preferred bearish scenario to see a squeeze up towards the 6000 key long-term resistance.

DAX – Potential push up towards “Ascending Wedge” top before decline

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Key Levels (1 to 3 weeks)

Intermediate resistance: 12200

Pivot (key resistance): 12280

Supports: 11900 (trigger), 11720 & 11465/30

Next resistance:  12410

Medium-term (1 to 3 weeks) Outlook

Last week, the Germany 30 Index (proxy for the DAX futures) has managed to test and stage a rebound from the lower boundary of its potential bearish “Ascending Wedge” configuration at 12014.

Current technical elements are as follow;

• Since its intermediate swing low of 11465 printed on 07 February 2017, the Index has been evolving in a potential bearish “Ascending Wedge” configuration which is typically seen at the tail-end of a pronounced uptrend before a change in trend.
• The daily RSI oscillator has continue display a bearish divergence signal in place since 22 February 2017 which suggests that price action continues to inches upwards with a weakening upside momentum. These observations reinforce the aforementioned bearish “Ascending Wedge” configuration.
• Based on the Elliot Wave Principal and fractal analysis, a typical bearish “Ascending Wedge” seen within a larger degree bullish impulsive structure tends to take a minimum form of five sets of 5 wave movement (1-up, 2-down, 3-up, 4-down & 5-up) of a minor degree.  Last week’s decline from 12179 high of 16 March 2017 (post FOMC rally) to 12019 low of 17 March 2017 is likely the corrective minor degree wave 4 down move.  Right now, the Index is likely to stage the potential final 5^th wave (minor degree impulsive wave 5 up move) to complete the bearish “Ascending Wedge” before a potential bearish reversal occurs. The potential upside target of this minor degree impulsive wave 5 stands at 12200/280 which also confluences with the upper boundary of the “Ascending Wedge”
• The shorter-term 4 hour Stochastic oscillator has inched up from its oversold region and still has room to manoeuvre to the upside before it reaches an extreme overbought level. These observations suggest that in the short-term horizon (1 to 3 days), the Index still has upside momentum to support a potential push up in price action.

Therefore, the Index may see an initial push up towards the intermediate resistance at 12200 with a maximum limit set at 12280 medium-term pivotal resistance before a potential bearish reaction occurs to spark a decline to retest the 11900 support. Only a break below 11900 is likely to open up scope for a further decline towards 11720 before the significant medium-term support of 11465/30 (recent congestion swing lows seen from 17 January 2017 to 07 February 2017 that confluences with the swing high area of 30 November 2015).

On the other hand, a break above 12280 is likely to invalidate the preferred bearish setback scenario for a further squeeze up to retest the current all-time  high area of 12410.

Charts are from City Index Advantage TraderPro & eSignal

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