Weekly Technical Outlook on Major Stock Indices 28 Aug to 01 Sep 2017

S&P 500 – Still faces the risk of a further corrective decline below 2455/62 resistance

Key Levels (1 to 3 weeks)

Intermediate resistance: 2455

Pivot (key resistance): 2462

Supports: 2417 & 2408/2403

Next resistance: 2490

Medium-term (1 to 3 weeks) Outlook

Last week, the S&P 500 Index (proxy for the S&P 500 futures) had shaped the expected minor rebound to test intermediate resistance zone of 2448/53 (printed a high of 2455 before it staged a retreat and traded sideways).

No major changes on its key technical elements.  An interesting element that is worth highlighting with be the relative strength/ratio analysis on the key sectors of the S&P 500 (refer to the last chart) where the S&P Technology sector (XLK) which has the highest single sector weightage of 25% has continued to outperform the benchmark S&P 500 (SPY). On the contrary, the other key sectors (Industrials, Consumer Discretionary & Financials) that have a combined weightage of 36% continue to underperform against the S&P 500 since its current all-time high printed on 08 August 2017. These observations suggest that the only Technology is the sole sector that is holding the fort for the S&P 500 where it has not created a positive feedback loop back into the Industrials, Consumer Discretionary & Financials sectors. Thus, the S&P 500 may not be able to stage an impulsive upleg at this juncture due to the lack of support from the other key sectors.

As long as the 2462 key medium-term pivotal resistance is not surpassed, the Index is likely to shape another round of potential bearish impulsive downleg to retest the 18 August 2017 minor swing low area of 2420/17 before targeting the next support at 2408/2403.

However, a clearance above 2462 should invalidate the corrective decline scenario for a squeeze up to retest the current all-time area of 2490.

Nikkei 225 – Further potential corrective decline below 19570/800 resistance

Key Levels (1 to 3 weeks)

Intermediate resistance: 19570

Pivot (key resistance): 19800

Supports: 19300, 19050 & 18860

Next resistance: 20300

Medium-term (1 to 3 weeks) Outlook

Last week, the Japan 225 Index (proxy for the Nikkei 225 futures) had staged the expected minor rebound towards the intermediate support zone of 19700/800 before it traded sideways (printed a high of 19550 on 25 August).  Click here for a recap on our previous weekly technical outlook.

No major changes on its key technical elements. Therefore, as long as the 19800 key medium-term pivotal resistance is not surpassed and a break below the 19300 intermediate support is likely to open up scope for a potential deeper corrective decline to target the next supports at 19050 and 18860 next.

On the other hand, a clearance above 19850 should invalidate the bearish tone to see a squeeze up to retest the 20300 range resistance in place since 20 June 2017.

Hang Seng – Further potential upside through breakout of 27840/960 resistance

Key Levels (1 to 3 weeks)

Intermediate support: 27600

Pivot (key support): 27000

Resistance: 28570/700

Next support: 26000

Medium-term (1 to 3 weeks) Outlook

The Hong Kong 50 Index (proxy for Hang Seng Index futures) had staged a bullish break above the 27960 key medium-term pivotal resistance as per highlighted in our previous weekly technical outlook report. Therefore, an extension of the mean reversion decline scenario within a longer-term major uptrend has been invalidated.

Key elements are as follow;

• The daily RSI has staged a rebound from its corresponding support at the 50% and still has room to push higher before it reaches an extreme overbought level. These observations suggest that medium-term upside momentum of price action has resurfaced (see 1st chart).
• The next significant medium-term resistance for the Hong Kong 50 Index stands at the 28570/700 zone which is defined by a confluence of elements. The upper boundary of a major bullish ascending channel in place since 11 February 2016 low, the upper boundary of a short-term bullish ascending channel in place since 05 July 2017 low and a Fibonacci projection cluster (see 1st & 2nd charts).
• The key medium-term support now rests at 27000 which is defined by the recent swing low area of 11 August/18 August 2017 and close to the medium-term ascending trendline in place since 28 December 2017 low (see 1st chart).
• The shorter-term 4 hour Stochastic has reached an extreme overbought level which suggests that in the short-term, the price of the Index may see pull-back after last Friday, 25 August rally towards the intermediate support at 27600 (the former minor range resistance from 16 Aug 2017 high) (see 2nd chart).
• Based on intermarket analysis, technical elements remain positive as the China A50 Index has staged a bullish break above the 12000 former medium-term swing high area of 01 August 2017. Given its direct correlation with the Hang Seng Index since December 2016, a further potential up move in the China A50 is likely to translate into a similar potential positive movement in the Hang Seng Index (see 3rd chart).

Therefore, as long as the 27600 medium-term pivotal support holds, the Index is likely to see a further potential up move to target the next resistance at the 28570/700 zone.

However, a break below 27600 should invalidate the potential up move to open up scope to reinstate a corrective decline towards the next support at 26000.

ASX 200 –5680 remains the key range support to watch

Key Levels (1 to 3 weeks)

Resistances: 5805/822 & 5904

Supports: 5680, 5625 & 5615/5580

Medium-term (1 to 3 weeks) Outlook

The Australia 200 Index (proxy for the ASX 200 futures) had inched lower towards the 5680 “Symmetrical Triangle” range support in place since early June 2017.

No major changes in technical elements. We remain neutral and only a clear break (daily close) below the 5680 significant “Symmetrical Triangle” range support is likely to open up scope for a potential corrective decline towards next supports at 5625 (08 June 2017 swing low area) before the 5615/5580 zone (the major ascending channel support from 10 February 2016 low).

DAX – Still facing further potential downside pressure below 12340 resistance

Key Levels (1 to 3 weeks)

Intermediate resistance: 12260

Pivot (key resistance): 12340

Supports: 11930 & 11800

Next resistance: 12670

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) had tested and challenged the 12210 intermediate resistance before it retreated in the later part of last week.

No major changes on its technical elements as per highlighted in our previous weekly technical outlook report, click here for a recap.

Therefore, as the 12340 key medium-term pivotal resistance is not surpassed, the Index may see a further potential push down to retest the 11930 minor swing low area of 11 August 2017 before targeting the next support at 11800.

However, a clearance above 12340 is likely to negate the preferred bearish bias for an extension of the corrective rebound towards the next resistance at 12670 (minor swing high area of 13 July 2017 & close to the 76.4% Fibonacci retracement of the current medium-term decline from 20 Jun 2017 high to 11 Aug 2017 low).

Charts are from City Index Advantage TraderPro & eSignal

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