weekly technical outlook on major stock indices 17 july to 21 july 2017 bullish trend intact except

S&P 500 – Risk of a minor pull-back before new potential upleg

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Key Levels (1 to 3 weeks)

Intermediate support: 2445

Pivot (key support): 2430

Resistances: 2467 & 2476/80

Next support: 2403

Medium-term (1 to 3 weeks) Outlook

Last week, the S&P 500 Index (proxy for the S&P 500 futures) had rallied as expected and we had highlighted at the start of the week that the consolidation in place since 20 June 2017 is likely to have ended. The Index staged the expected bullish impulsive upleg to hit our first medium-term upside target/resistance of 2457 and printed a new all-time high level of 2463 on Friday, 14 July 2017.

Based on sector rotation analysis, last week’s up move had been led by the previous beaten down Technology stocks due to “high valuation “concerns of the FAANGs (Facebook, Amazon, Apple, Netflix, Google/Alphabet) as the S&P 500 Technology sector ETF (XLK) rallied by 3.3%. We have also highlighted its positive technical elements earlier and anticipated that it should be the key driver of the next upleg for the S&P 500. Click here for a recap on our previous weekly technical outlook.

Current key technical elements as follow:

• The Index has staged a bullish breakout from former its minor range configuration descending resistance from 20 June 2017 high now turns pull-back support at 2430 (see 4 hour chart).
• The next significant medium-term resistances stand at 2467 and 2476/80 which are defined by Fibonacci projection clusters and the upper boundary of a short-term bullish ascending channel in place since 17 April 2017 low (see daily chart & 4 hour charts).
• The daily RSI oscillator remains bullish and still has room for further potential upside before it reaches an extreme overbought level at the 82% level that has coincided with the medium-term swing high area of 01 March 2017. These observations suggest that medium-term upside momentum of price action remains intact for the Index.
• The shorter-term 4 hour Stochastic oscillator is now hovering very close to an extreme overbought level which highlights the risk of a minor pull-back/consolidation at this juncture.

Therefore, we maintain our bullish bias but the Index may see a minor pull-back first towards the 2445 intermediate support with a maximum limit set at the 2430 new medium-term pivotal support. Thereafter, another potential bullish impulsive upleg is likely to materialise to target the next resistances at 2467 and 2476/80 next.

On the other hand, a break below 2430 should negate the preferred bullish tone to trigger another round of choppy decline towards the next support at 2403 (the previous week medium-term pivotal support).

Nikkei 225 – Consolidation above 19740 medium-term support

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Key Levels (1 to 3 weeks)

Intermediate support: 20000/19900

Pivot (key support): 19740

Resistances: 20500/680 & 20950/21100

Next supports: 19280 & 18860/640

Medium-term (1 to 3 weeks) Outlook

Last week, the Japan 225 Index (proxy for the Nikkei 225 futures) had consolidated above its intermediate support zone of 20000/19900 which is attributed to a weaker USD/JPY within a medium-term range configuration.

No major changes in technical element. We maintain our initial bullish bias above the 19740 medium-term pivotal support for another round of  potential impulsive upleg to target the next resistances at 20500/660 follow by 20950/21100 next.

On the other hand, failure to hold above 19740 should invalidate the preferred bullish scenario to open up scope for a corrective decline towards the next supports at 19280 and even 18660/640 next (gap that was formed after the outcome of the 1^st round of the French presidential election).

 Hang Seng –  Maintain bullish bias but risk of minor pull-back at 26960

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Key Levels (1 to 3 weeks)

Intermediate support: 26300/100

Pivot (key support): 25850

Resistances: 26960 & 27480

Next support: 25000

Medium-term (1 to 3 weeks) Outlook

Last week, the Hong Kong 50 Index (proxy for Hang Seng Index futures) had rallied as expected and hit our first medium-term upside target/resistance at 26335/400 on Thursday, 13 July. Click here for a recap on our previous weekly technical outlook.

Current key elements as follow:

• The current medium-term uptrend in place since 28 December 2016 low remains intact. In addition, the daily RSI oscillator remains positive as it has not flash any bearish divergence signal and it still has room for further potential upside before it reaches an extreme overbought level at 86% (occurred before the major swing high of 27 April 2015). These observations suggest that medium-term upside momentum of price action remains intact (see daily chart).
• The next significant medium-term resistance after 26960 stands at 27480 which is defined by the medium-term swing high area of 12 June/24 June 2015, a Fibonacci projection cluster and the upper boundary of the medium-term ascending channel in place since 28 December 2016 low (see daily & 4 hour charts).
• The significant medium-term support now rests at 25850 which is defined by the pull-back support of the former minor descending trendline from 08 June 2017 high and the 50% Fibonacci retracement  of the on-going rally from 04 July 2017 low  (see 4 hour chart).
• The 4 hour Stochastic oscillator has flashed a bearish divergence signal and exited from its overbought region. These observations highlight the risk of an imminent minor pull-back /consolidation in the price action of the Index.

Therefore, we maintain the bullish bias but at the 26960 resistance, the Index may see a minor pull-back first towards the intermediate support at 26300/100 with a maximum limit set at the 25850 new medium-term pivotal support. Thereafter, the Index should resume its potential bullish impulsive upleg to target 27480 next.  

However, a break (daily close) below 25850 is likely to negate the preferred bullish tone to see a deeper slide towards the next support at 25000.

ASX 200 – Sideways below 5805/822 key medium-term resistance

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Key Levels (1 to 3 weeks)

Pivot (key resistance): 5805/822

Supports: 5680, 5625 & 5615/5580

Next resistances: 5904 & 6000

Medium-term (1 to 3 weeks) Outlook

Last week, the Australia 200 Index (proxy for the ASX 200 futures) had continued to churn sideways below the 5805/822 medium-term pivotal resistance in the form of a “symmetrical triangle” range configuration.

No major changes in technical elements except we have added a 5680 downside acceleration level (defined by the lower boundary of the aforementioned “symmetrical triangle”) and a break below it is likely to increase the bearish conviction for a potential down move to retest the 08 June 2017 swing low area of 5625 before targeting the support zone of 5615/5580 next.

On the other hand, a clearance above 5822 is likely to invalidate the preferred bearish scenario to see a further squeeze up towards the next resistance at 5904 (swing high area of 04 May/11 May 2017).

DAX – 12730 will be the potential upside trigger level

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Key Levels (1 to 3 weeks)

Intermediate support: 12500

Pivot (key support): 12310

Resistances: 12730 (upside trigger), 12955 & 13130/255

Next support: 12250/12090

Medium-term (1 to 3 weeks) Outlook

Last week, the Germany 30 Index (proxy for the DAX futures) had staged a minor bullish breakout and rallied towards the intermediate resistance of 12730 (printed a high of 12678 on Thursday, 13 July).

No change in major technical elements and 12730 needs to be taken out on the upside to open up scope for a further potential up move to retest its current all-time high of 12955 printed in June 2017.

On the other hand, a break below the 12310 medium-term pivotal support is likely to jeopardise the bulls for a deeper slide towards the next support at 12250/12090 (the gap seen after the outcome of the first round of French presidential election & the ascending trendline support in place since 24 June 2016 low).

Charts are from City Index Advantage TraderPro

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