Weekly Technical Outlook on Major Stock Indices 30 Oct to 03 Nov 2017

S&P 500 – Medium-term uptrend remains intact

Key Levels (1 to 3 weeks)

Intermediate support: 2570/65

Pivot (key support): 2544

Resistances: 2590, 2600 & 2620

Next supports: 2520 & 2489/87

Medium-term (1 to 3 weeks) Outlook

At the start of last week, the U.S SP 500 Index (proxy for the S&P 500 futures) has staged a decline of 1.3% from its previous all-time high level of 2579 printed on 23 October 2017 before it reversed to the upside as expected right at the 2544 predefined key medium-term pivotal support.

It made another fresh new all-time high of 2583 seen on last Friday, 27 October 2017 U.S. session. Click here for a recap on our previous weekly technical outlook.  Current technical elements remain positive as follow;

• Price action of the Index has continued to shape a series of “higher highs and higher lows” after its bullish breakout from the primary/long-term ascending channel resistance from March 2009 (depicted in dotted blue) now turns pull-back support at 2520. This observations suggest an acceleration in medium-term upside momentum of price action which represents a melt-up phase (see daily chart).
• The daily RSI oscillator remains positive above its corresponding support at the 58% level which suggests that medium-term upside momentum of price action remains intact.
• From a sector rotation perspective, a lagging cyclical sector, the Consumer Discretionary has started to show signs of recovery. Based on the exchange traded funds (ETFs), the relative value chart of the S&P Consumer Discretionary sector (XLY) against the benchmark S&P 500 (SPY) has broken a former significant descending resistance in place since 07 September 2017 which suggests that the Consumer Discretionary stocks have just started to outperform the S&P 500. These observations suggest that the S&P 500 still has room for further potential upside as the laggard cyclical sector (Consumer Discretionary) has started to provide the “ammunition” for the bulls while the relative value charts of the other high weightage cyclical/growth sectors (Technology, Industrials, Financials) versus the S&P 500 remain positive (see last chart).
• The key medium-term support remains at 2544 (see 4 hour chart)
• The next significant resistance stands at 2600 follow by 2620 which is defined by the upper boundary of a medium-term ascending channel from 29 August 2017 low and a Fibonacci projection cluster (see daily & 4 hour charts).

Therefore, we are maintaining the bullish bias above the 2544 key medium-term pivotal support for another potential bullish upleg to target the next resistances at 2600 follow by 2620.

However, a clear break below (daily close) 2544 shall negate the bullish tone of the current medium-term uptrend in place since 21 August 2017 low for a deeper corrective pull-back/consolidation towards the next support at 2520 in the first step.

Nikkei 225 –  Potential last push up towards 22475/500

Key Levels (1 to 3 weeks)

Intermediate support: 21800/755

Pivot (key support): 21450

Resistance: 22475/22500

Next support: 20930 & 20230

Medium-term (1 to 3 weeks) Outlook

The Japan 225 Index (proxy for the Nikkei 225 futures) had reversed up as expected right above 21450 predefined intermediate support (printed a low of 21586 on last Wed, 25 Oct U.S. session) and hit the first medium-term resistance/target of 21900/22000 (printed a high of 22121 on Fri, 27 Oct). Click here for a recap on our previous weekly technical outlook.  Current key elements are advocating for a cautious stance as upside medium has started to slow down after a steep run-up in price action from 28 August 2017 low.

• The daily RSI oscillator has started to flash a bearish divergence signal after it hit an extreme overbought level of 80% seen last week but it has not stage a bearish down from its corresponding ascending support at the 67% level. These observations suggest that the medium-term upside momentum of price action has eased where the risk of a multi-week correction increases.
• Based on the Elliot Wave Principal/fractal analysis, the Index is now likely in the midst of undergoing an intermediate degree final wave 5 upleg to complete a higher major degree bullish impulsive wave 7/ with potential end target at 22475/22500 (Fibonacci projection cluster) (see 4 hour chart).
• The key medium-term support now rests at 21450 which is defined by the lower boundary of the medium-term ascending channel from 08 September 2017 low and close to the 23.6% Fibonacci retracement of the recent advance from 28 August 2017 low to 27 October 2017 high.

Thus, the Index is likely to see a potential final upleg to target the next resistance at 22475/500, holding above the tightened 21450 key medium-term pivotal support.     

However, failure to hold above 214475/500 shall negate the bullish bias for a deeper pull-back to test the 20930 downside trigger level (former medium-term swing high area of 24 Jun/11 Aug 2015). Only a break below 20930 is likely to open up scope for the start of a multi-week corrective down move towards the next support at 20230(range congestion from 22 Sep/27 Sep 2017) in the first step.

Hang Seng – Bullish exhaustion signs have emerged

Key Levels (1 to 3 weeks)

Resistances: 28545/650 & 29300

Supports: 28000, 27300 & 26830

Medium-term (1 to 3 weeks) Outlook

The Hong Kong 50 Index (proxy for Hang Seng Index futures) had not made any headway for the past two weeks after it hit a 2-year high of 28805 on 16 October 2017. Last week, it staged a retest on the 28000 key medium-term pivotal support on Wed, 25 October before a rebound occurred.

Bullish exhaustion signs have started to emerge as follow;

• The daily RSI oscillator is capped below by a corresponding resistance at the 70% level which suggests the lack of upside momentum in price action.
• On the shorter-term, the Index has traced out an impending bearish reversal chart configuration, “Head & Shoulders in place since 06 October 2017 with its neckline support  at 28000 that confluences with our previous 28000 key medium-term pivotal support as per highlighted last week.

Therefore, the medium-term uptrend of the Index in place since 28 December 2016 low is now at risk of undergoing a multi-week corrective decline. We turn neutral between 28545/650 and 28000. A clear break (daily close) below 28000 is likely to open  up scope for a corrective decline towards the next supports at 27300 (swing low areas of 26/28 Sep 2017 & the potential exit of the bearish “Head & Shoulders” and even 26830 next (close to 23.6% Fibonacci retracement of the advance from 28 Dec 2016 low to 16 Oct 2017 high & the ascending trendline from 28 Dec 2016 low).

ASX 200 – 5860 remains the key support for further potential upside

Key Levels (1 to 3 weeks)

Intermediate support: 5880

Pivot (key support): 5860

Resistances: 5950 & 6000

Next support: 5800

Medium-term (1 to 3 weeks) Outlook

On Last Fri, 27 October, the Australia 200 Index (proxy for the ASX 200 futures) had a negative knee-jerk reaction after Australia’s High Court disqualified Deputy Prime Minster Barnaby Joyce from parliament due to his dual citizenship. Interestingly, the Index has managed to stage a recovery from the 5860 predefined key medium-term pivotal support (no daily close below after it printed a low of 5850 on last Fri).

No major changes in technical elements, as long as the 5860 medium-term pivotal support holds the index is likely to stage a further potential upleg to target the next resistances at 5950 follow by 6000 next (Fibonacci cluster & upper boundary of the short-term ascending channel from 04 Oct 2017 low).

On the other hand, failure to hold above 5860 shall put the bulls on hold to see a deeper pull-back to retest the 5800 pull-back support of the former 4-month range configuration resistance.

DAX – Further potential upside remains intact above 13050 support

Key Levels (1 to 3 weeks)

Pivot (key support): 13050

Resistances: 13260 & 13435/560

Next supports: 12900 (downside trigger), 12650 & 12300

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) had stage a bullish breakout from its minor range configuration in place since 18 October 2017 and rallied towards the medium-term resistance/target of 13240 as expected (printed a high of 13252 on last Fri, 27 Oct). Click here for a recap on our previous weekly technical outlook.  

Technical elements remain positive except the Index faces the risk of a minor corrective decline/consolidation below 13260 intermediate resistance within its medium-term uptrend in place since 29 August 2017 low.

Therefore, we maintain the bullish bias and tightened the key medium-term pivotal support to 13050 (former minor swing high areas of 18/25 Oct 2017 & the lower boundary of the medium-term ascending channel from 29 Aug 2017) for a further potential bullish up towards the next resistance at 13435/560 (Fibonacci projection cluster & the upper boundary of the aforementioned medium-term ascending channel).

However, a break below 13050 shall negate the bullish tone for a slide to retest the 12900 range congestion support of 19 October to 26 October 2017. Only a clear break below 12900 (daily close)   is likely to trigger a potential corrective down move towards the next support at 12650 in the first step.

Charts are from City Index Advantage TraderPro & eSignal

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