weekly technical outlook on major stock indices 24 apr to 28 apr risk on rally may take a breather 1

S&P 500 – Mixed elements, watch 2380 and 2364

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Key Levels (1 to 3 weeks)

Resistances: 2380, 2400 & 2418

Supports: 2364, 2350 & 2326/31

Medium-term (1 to 3 weeks) Outlook

Throughout today’s Asian and European sessions (24 April) , the U.S. S&P 500 Index (proxy for the S&P 500 futures) has continued its push up above the 2364 medium-term pivotal resistance due to “risk-on” ripples effect triggered by  the outcome of the 1^st  round of French presidential election.

The preferred corrective decline scenario towards 2300 has been jeopardised for now. On the contrary, we are hesitant to turn outright bullish at this juncture based on the following technical elements;

• The daily RSI oscillator is now right below a significant pull-back resistance in place since 20 March 2017 which suggests that the current upside momentum of price action may stall at this juncture.
• Despite the current bullish break above the “Expanding Wedge” resistance at 2364 (depicted in dotted pink in the 4 hour chart), the Index has not surpassed a medium-term range top at 2380 formed from 20 March to 05 April 2017.
• The shorter-term (4 hour) Stochastic oscillator has almost reached its extreme oversold level.
• A proxy of risk –on/risk-off behaviour from the FX market is the movement of USD/JPY.  Its current rebound is still being capped by its key medium-term resistance of 110.63 where a potential bearish reversal may occur at this juncture which is likely to translate to a potential risk-off movement for risk assets that can revive the bearish tone on the S&P 500 (refer to the Nikkei 225 section for more details).

Due to mixed elements, we have decided to adopt a neutrality stance between 2380 and 2364. Only a daily close above 2380 is likely to trigger to start of another impulsive upleg to retest the current all-time high area of 2400 before targeting the next resistance at 2418 (1.618 Fibonacci projection from 27 March 2017 low, refer to 4 hour chart).

On the other hand, failure to hold above 2364 can be considered as failure bullish breakout for a potential revival of the bears for a slide to cover today’s gapped up at 2350 follow by a retest of 2326/21 (minor swing low area of 27 March & 17 April 2017)

Nikkei 225 – 19100 is the resistance to watch to maintain bearish bias

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Key Levels (1 to 3 weeks)

Pivot (key resistance): 18850/19100 (excess)

Supports: 18640 (gap/downside trigger), 18200, 18110 & 17860

Next resistances: 19350 & 19700/735

Medium-term (1 to 3 weeks) Outlook

The Japan 225 Index (proxy for the Nikkei 225 futures) had indeed shaped the expected corrective rebound and hit its target/resistance at 18580/640.  Please click here for a recap on our previous weekly technical outlook report.

In today’s early Asian session (24 April), the Index has staged a gapped up and pierced above the 18850 medium-term pivotal resistance due to the results of the 1^st round of French presidential election where centerist (pro business) Macron will face off with Le Pen (far-right, anti-Euro) on the final round of election on 07 May 2017. A sign of relief as depicted by the “risk-on reactions” from the markets that the final two candidates are not a Le Pen (far-right) and Melenchon (far-left, anti-austerity) pairing that can trigger a potential economic slowdown in Europe due to their respective populist and anti-Eurosceptic stance.

However, there are several key technical elements that prevent us to join the on-going “risk-on” bandwagon and question the sustainability of the rally of the Index seen in today (24 April) Asian session.

• Despite this morning gapped up rally, the Index is still below a significant resistance zone of 19100/19350 as per defined by a confluence of elements. The former range support area from 27 February to 21 March 2017, the 61.8% Fibonacci retracement of the recent decline from 13 March 2017 high to 17 April 2017 low and the pull-back resistances of the former “Ascending Wedge” support from 18 January 2017 low as well as the former ascending trendline support from 24 June 2016 low (see daily chart).
• The daily RSI oscillator is now testing its corresponding significant resistance area which suggests that the current upside momentum of price action may stall at this juncture.
• Based on intermarket analysis, the USD/JPY has shaped the anticipated corrective rebound as expected and it is now right below the 110.63 key medium-term resistance. Interestingly, it has shown a bearish reaction right below the 110.63 level and shaped an impending bearish daily “Shooting Star” candlestick pattern. These observations suggest a potential bearish reversal in the price action of USD/JPY which is likely to translate to a similar bearish reversal in the Nikkei 225 based on its significant historical direct correlation with the movement of the USD/JPY.

Therefore, we are maintaining the bearish bias on the Index and tolerate the medium-term pivotal resistance to an excess of 19100 with 18640 as the potential downside trigger that needs to be broken down to open up scope for a further decline to retest 18200 before targeting the next support at 18110.

On the other hand a break above 19100 may jeopardise the preferred bearish tone to see a further squeeze up towards the next resistance at 19350 and even the major range top of 19735.

Hang Seng Index – Potential range bound between 24330 & 23720

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Key Levels (1 to 3 weeks)

Resistances: 24330, 25135 & 25480

Supports: 23300 & 23100/22820

Medium-term (1 to 3 weeks) Outlook

Last week, the Hong Kong 50 Index (proxy for Hang Seng Index futures) had challenged the 23850 medium-term pivotal support (printed a low of 23722 on 19 April) but did not have a clear break below it and reversed back above 23850.

Current key technical elements as follow:

• Since its 21 March 2017 high, the Index is evolving within an “Expanding Wedge/Triangle” consolidation configuration with its upper boundary/resistance now at 24330 and lower boundary/support at 23600.
• The daily RSI oscillator remains at its significant pull-back support which suggests that downside momentum of price action has not surfaced.

Therefore due to mixed elements, we have decided to turn neutral between the aforementioned “Expanding Wedge” ranges of 24330 and 23600. Only a daily close above 24330 is likely to revive the bullish bias for a further potential up move to target the next resistance at 25135 and even 25480 next.

ASX 200 – Potential consolidation above 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

Last week, the Australia 200 Index (proxy for the ASX 200 futures) had shaped a 1.5% decline in the first half of last week to print a low of 5789 on 19 April in line with a plunge in iron ore prices that triggered a sell-off in mining stocks.

However, the Index did not have a daily close below the 5800 medium-term pivotal support and reversed some of its losses.  Please click here for a recap on our previous weekly technical outlook report.

Current key technical elements as follow:

• The key medium-term support remains at 5800 which is defined by the former range top from 09 January to 15 March 2017 now turns into a pull-back support and the shorter-term ascending channel support in place since 06 February 2017 low.
• The daily RSI oscillator also remains bullish above its corresponding significant ascending trendline support in place since 04 November 2016 low.
• The shorter-term (4 hour) Stochastic oscillator still shows further downside potential before it reaches an extreme oversold level. This observation suggests that Index may see a short-term pull-back/consolidation.
• The intermediate resistance stands at 5915 which is defined by the 61.8% Fibonacci retracement of the recent decline from 12 April 2017 high to 19 April 2017 low and the former minor range top from 30 March to 06 April 2017.

Therefore, as long as the 5914 intermediate resistance is not surpassed, the Index may see a pull-back first/consolidation first towards 5830 with a maximum limit set at the 5800 medium-term pivotal support before a new potential upleg materialises to retest 5945 before targeting the key long-term resistance of 6000.

However, 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 – 12410 target reached, risk of a corrective decline/consolidation

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Key Levels (1 to 3 weeks)

Resistances: 12410/480 & 12820

Supports: 12220, 12090, 11940 & 11820

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) had whipsawed and challenged the 12080/12030 medium-term pivotal support before it managed to close above12030 on last Thursday, 20 April 2017 and maintained such its positive momentum towards close of last week.

In today’s opening European session (24 April), the Index has continued its intraday parabolic rally and even surpassed the previous all-time high of 12390 printed in April 2015 aided by the “risk-on” ripples effects from the outcome of the 1^st French presidential election. The Index has reached our medium-term upside target/resistance of 12410. Please click here for a recap on our previous weekly technical outlook report.

Current key technical elements as follow:

• The daily RSI oscillator is now coming close to a corresponding significant resistance in place since early January 2017. This observation suggests limited upside potential in the on-going upside momentum of price action.
• Based on the Elliot Wave Principal and fractal analysis, the Index may have completed the intermediate degree impulsive wave 3 that is in place since 04 November 2016 low with its potential end target at 12480 as per defined by a Fibonacci projection cluster. These observations suggest that a potential multi-week corrective decline, the intermediate degree wave 4 may occur soon (see daily chart).
• The shorter-term (4 hour) Stochastic oscillator continues to hover below its extreme overbought level without any bearish signals.
• The key medium-term supports rests at 12220 (former swing high area of 11 April/12 April 2017), 12090 (today’s gapped up) and 11940 (20 April 2017 low).

Therefore due to mixed elements, we have decided to turn neutral between 12480 and 12220. Only a break below 12220 (daily close) is likely to trigger a potential corrective decline to test the 12090 gap support in the first step for follow by 11940/11820 next.

Charts are from City Index Advantage TraderPro & eSignal

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