weekly technical outlook on major stock indices 27 mar to 31 mar sp 500 may see further weakness ahe

S&P 500 – Further potential weakness below 2373/76

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Key Levels (1 to 3 weeks)

Intermediate resistance: 2360

Pivot (key resistance): 2373/76

Supports: 2337, 2315 & 2280

Next resistances: 2411 & 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 plummeted, broke below the 2372 and even the 2354 medium-term pivotal support within a single day on Tue, 21 March 2017 in the U.S. session which invalidated the initial preferred bullish bias (click here for a recap).

The drop was stalled at the 2338/37 intermediate support and still managed to trade above it at close of last Friday, 24 March 2017 U.S. session after the U.S. Congress (House) scrapped the vote on the new health care plan (a first priority for Trump’s administration) to repeal Obamacare as the Republicans did have enough votes among its members to push it through.

Current key technical elements as follow;

• Since the post U.S. presidential election on 09 November 2016, the two leading sectors of the S&P 500 are the Financials and Technology. As seen from the daily technical charts of the Financials (XLF) and Technology (XLK) sectors ETFs, they now faces the risk of a further decline towards their next respective supports at 22.85/25 and 50.85/49.85 respectively.  Therefore from a sector rotation analysis perspective, it can lead to further weakness in the S&P 500 (refer to the first two charts).
• Based on the Elliot Wave Principal and fractal analysis, we still view that the up move from 11 February 2016 low as a “melt-up” phase with potential end target of the primary degree impulsive wave V at 2467/78 before a potential 20% to 30% correction materialises to retrace the on-going multi-year uptrend from March 2009 low.
• From a medium-term horizon (1 to 3 weeks), the price action seen on 21 March 2017 has triggered the start of a potential corrective immediate degree wave 4/ down move based on the Elliot Wave Principal perspective with potential end targets at 2280 and 2240.
• The aforementioned potential corrective wave 4/ end targets of 2280/40 also confluences with the lower boundary of a medium-term ascending channel in place since 11 February 2016 low.
• The daily RSI oscillator has broken below its former support in place since 30 December 2016 and the 50% level. It still has further downside potential before it reaches an extreme oversold level (depicted by the pink box). These observations suggest a revival in downside momentum that can translate into further potential decline in price action of the Index.
• The significant medium-term resistance now stands at the 2373/76 zone which is defined by the pull-back resistance of the former short-term ascending channel support from 04 November 2016 low, minor trendline resistance from 16 March 2017 high and the 61.8% Fibonacci retracement of the recent decline from its current all-time high area of 2400 to last week low of 2336.

Therefore, we have turned bearish to anticipate another potential down leg to complete the on-going corrective down move before a recovery occurs. As long as the 2373/76 medium-term pivotal resistance is not surpassed and a break below 2337 is likely to see a further potential decline towards 2315 before targeting the next support at 2280.

However, a break above 2376 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 target 2411 next.

Nikkei 225 – Further potential decline below 19300/400

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Key Levels (1 to 3 weeks)

Intermediate resistance: 19300

Pivot (key resistance): 19400

Supports: 18830 & 18700/640

Next resistance: 19700/735

Medium-term (1 to 3 weeks) Outlook

The Japan 225 Index (proxy for the Nikkei 225 futures) had staged a bearish breakdown from the “Ascending Wedge” support at 19200 on 21 March 2017, U.S. session. Thereafter, it tumbled by 1.5% to print a low of 18906 on 22 March 2017. Last week’s price action had invalidated the last push up scenario towards the 19700/735 range top.

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

Current technical elements are as follow;

• The former “Ascending Wedge” support from 18 January 2017 low has turned pull-back resistance at 19300.
• The daily RSI oscillator has just broken a major trendline support in place since 21 January 2016 which translates into further potential downside pressure in price action after its failure to break above its resistance in place since 26 January 2017. Medium-term downside momentum has resurfaced.
• Based on intermarket analysis, the USD/JPY has also staged a similar bearish breakdown from its 111.60 range support. Its current technical elements are advocating further potential downside movement towards 109.10/108.40 support below the 112.50 key medium-term resistance. Given its direct correlation with the Nikkei), further downside potential in the USD/JPY will reinforce further weakness in the Nikkei 225 (refer to the 3^rd chart).
• The significant medium-term resistance of the Index stands at 19400 which is defined by the former congestion area formed between 07 March/21March 2017, the trendline resistance from 14 March 2017 high and the 61.8% Fibonacci retracement of the recent decline from 14 March 2017 high to 22 March 2017 low of 18906.
• The significant medium-term support of the Index rests at the 18700/640 zone which is defined by the 18 January 2017 swing low, a former congestion area from 09 September/15 December 2015 and the 0.764 Fibonacci projection of the recent decline from 14 March 2017 high to 22 March 2017 low.

Therefore, as long as the 19400 medium-term pivotal resistance is not surpassed, the Index is likely to shape another downleg to target the next supports at 18830 follow by 18700/640 next.

On the other, a clearance above 19400 may negate the preferred bearish tone to see another round of upward choppy movement to retest the 19700/735 range top in place since 09 January 2017.

Hang Seng Index – Risk of minor pull-back  before new rise

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Key Levels (1 to 3 weeks)

Intermediate support: 24000

Pivot (key support): 23850

Resistances: 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 managed to print a new weekly high of 24672 on 21 March 2017 in the mid European session. Thereafter, it started to trade sideways above its weekly low 24213 throughout the later part of the week in line with weakness seen in the rest of the major indices.

Current technical elements are as follow;

• The Hong Kong 50 Index has continued to be the outperformer among the major indices as its medium-term uptrend from 28 December 2016 low remains intact. It continues to trade above the lower boundary of its ascending channel now acting as support at 23850.
• The aforementioned ascending channel support of 23850 also confluences closely with the 23.6% Fibonacci retracement of the on-going medium-term up move from 28 December 2016 low to last week high of 24672.
• The daily RSI still has room to manoeuvre to the upside before it reaches an extreme overbought level. This observation suggests that upside momentum remains intact and not “overstretched” yet.
• The significant medium-term resistance stands at 25135/480 zone which is defined by the upper boundary of the ascending channel and the 0.618/0.764 Fibonacci projection of the up move from 28 December 2016 low to 23 February 2017 high projected from 09 March 2017 low.

Maintain bullish bias but the Index may see a minor pull-back first towards the 24000 intermediate support with a maximum limit set at the 23850 medium-term pivotal support before a new potential upleg materialises to target the next resistances at 25135 and 25480.

However, 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: 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 moved within our expectation where it broke below 5740 and tumbled straight towards the first medium-term target/support of 5674 (printed a low of 5662 on 22 March 2017).

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

Current technical elements are as follow;

• The Index has staged rebound after it hit the 5674 support) and right now it is below the former trendline support from 01 March 2017 minor swing low now turns pull-back resistance at 5780 (see 4 hour chart).
• The 4 hour short-term Stochastic oscillator has just exited its overbought zone and still has room to manoeuvre to the downside before it reaches an extreme oversold level. These observations suggest that short-term downside momentum of price has resurfaced.
• The significant medium-term support rests at 5580/70 which is the (neckline support of the potential bearish “Double Top” configuration).

Maintain bearish bias below the 5830/50 medium-term pivotal resistance for another potential decline to retest the 5674 intermediate support and a break below it opens up scope for a deeper down move to target the next support at 5580/70.

However, 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 – 11900 remains the potential downside trigger level

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Key Levels (1 to 3 weeks)

Pivot (key resistance): 12200/280

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) had performed worse than our expectation as it did not shape that anticipated “last push up” scenario towards the bearish “Ascending Wedge” range top at 12200. It only printed a high of 12112 on 21 March 2017 in the opening hour of the U.S. session and broke below the “Ascending Wedge” support in the same hour.

Thereafter, it declined towards the 11900 predefined downside trigger level and interestingly, it did not break below it and started to stage a rebound that lasted till last Friday, 24 March 2017.

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

Current key technical elements are as follow;

• The recent rebound from the 11900 support is now right below the former “Ascending Wedge” support from the 07 February 2017 minor swing low now turns pull-back resistance at 12118 (see 4 hour chart).
• The daily RSI oscillator is still capped by its trendline resistance in place since 22 February 2017 which suggests a lack of upside momentum.
• 11900 remains the potential downside trigger level.
• The significant medium-term support remains at the 11465/30 zone (recent congestion swing lows seen from 17 January 2017 to 07 February 2017 that confluences with the former swing high area of 30 November 2015).

No change, maintain bearish bias below 12200/280 medium-term pivotal resistance but 11900 needs to be broken to the downside in order to open up scope for a potential deeper decline to target the next supports at 11720 and 11465/30.

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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