Weekly Technical Outlook on Major Stock Indices 11 Mar to 15 Mar 2019

S&P 500 – Bearish elements have surfaced below key resistance

Key Levels (1 to 3 weeks)

Intermediate resistance: 2782

Pivot (key resistance): 2815 (long-term pivot)

Supports: 2680 & 2630/2600

Next resistances: 2875 & 2940

Medium-term (1 to 3 weeks) Outlook

In our previous weekly outlook report (click here for a recap), we had highlighted that the SP 500 Index (proxy for the S&P 500 futures) was coming close to a key pivotal resistance at 2815 and the risk of a medium-term (multi-week) bearish reversal had increased after 9^th consecutive weeks of gains that recorded a return of 18 % from its 26 Dec 2018 low.        

The Index had challenged the 2815 key pivotal resistance on last Mon, 04 Mar as it printed an intraday high of 2817 but closed below 2815 at 2790. Thereafter, it staged a decline of 2.4% to print a low of 2722 on last Fri, 08 Mar and recorded its worst weekly performance since the start of the multi-month rally from 26 Dec 2018 low. Several bearish elements have surfaced that increase the odds of a multi-week bearish reversal;

• The Index has ended last week with a bearish weekly “Evening Doji Star” candlestick pattern.
• The daily RSI oscillator has exited from its overbought region after a prior bearish divergence signal. In addition, price action of the Index has staged a breakdown from the bearish “Ascending Wedge” range support in motion since 29 Jan 2019 low.
• From the perspective of relative strength analyses on several high-beta indices/sector (Nasdaq 100, Russell 2000, PHLX Semiconductors Sector & NYSE FANG+ Index) against the S&P 500, these high-beta indices and sector have shown signs of weakness and their outperformance (Nasdaq 100, PHLX Semiconductors Sector & NYSE FANG+ Index) has started to ease against the S&P 500 (refer to the 3rd chart).
• The 4-hour Stochastic oscillator has started to exit from its oversold region which highlights the risk of a minor rebound towards the 2782 intermediate resistance.

Therefore, if the 2815 key pivotal resistance is not surpassed, the Index is likely to stage a further potential decline to target the next supports at 2680 and 2630/600 in the first step (38.2% Fibonacci retracement of the entire up move from 26 Dec 2018 low to 04 Mar 2019 high & former swing lows areas of 03 May/29 Oct/10 Dec 2018 & 23 Jan 2019).

On the other hand, a weekly close above 2815 shall see the return of a melt-up phase to target 2875 follow by the 2940 all-time high area.

Nikkei 225 – Watch the 20900 downside trigger level

Key Levels (1 to 3 weeks)

Intermediate resistance: 21350

Pivot (key resistance): 21880

Supports: 20900 (trigger), 20200 & 19210/18970

Next resistance: 22800/23050 (long-term pivot)

Medium-term (1 to 3 weeks) Outlook

The Japan 225 Index (proxy for the Nikkei 225 futures) has tested the 21880 key medium-term range resistance and staged a decline of 4.7% to print a low of 20836 on last Fri, 08 Mar and a daily close above the 20900 medium-term range support. In addition, the daily RSI has staged a bearish breakdown from a corresponding significant ascending support in place since 26 Dec 2018 which highlights a momentum bearish signal that precedes a potential breakdown in price action of the Index.

Therefore, we flip to a bearish bias and a break below 20900 is likely to see a further potential decline to target the next support at 20200 in the first step (swing low areas of 17 Jan/09 Feb 2019 & close to 61.8% Fibonacci retracement of the entire up move from 26 Dec 2018 low to 04 Mar 2019 high).

On the other hand, a clearance above the 21880 medium-term pivotal resistance shall invalidate the bearish scenario for an extension of the rebound towards 22800 and even the 23050 key long-term pivotal resistance.

Hang Seng – Bearish reaction from 29100/220 key resistance

Key Levels (1 to 3 weeks)

Intermediate resistance: 28640

Pivot (key resistance): 29100/220

Supports: 27350/290 & 27070

Next resistances: 30500

Medium-term (1 to 3 weeks) Outlook

The Hong Kong 50 Index (proxy for Hang Seng Index futures) has staged a bearish reaction from the 29100 key medium-term pivotal as it printed an intraday high of 29219 on 04 Mar 2019 before a daily close below 29100 at 28641 in the U.S. session.

In addition, the price action of the Index has reintegrated back below the upper boundary of a medium-term “Expanding Wedge” range configuration in motion since 26 Oct 2018 low and staged a bearish breakdown from its minor “Ascending Wedge” range configuration in place since 08 Feb 2019 low.

No change, we maintain the bearish bias below 29100/220 key medium-term pivotal resistance. The Index may stage a minor bounce first at this juncture towards the 28640 intermediate resistance as the 4-hour Stochastic oscillator has exited from its oversold region before another potential downleg materialises to target the next support at 27070 and even the lower boundary of the “Expanding Wedge” at 25200/25000.

On the other hand, a clearance above 29220 invalidates the bearish scenario for another round of squeeze up towards the next resistance at 30500.

ASX 200 – Retreated from 6200 key long-term resistance

Key Levels (1 to 3 weeks)

Intermediate resistance: 6230

Pivot (key resistance): 6290 (excess)

Supports: 6035 & 5920

Next resistance: 6380

Medium-term (1 to 3 weeks) Outlook

The Australia 200 Index (proxy for the ASX 200 futures) continued its ascending to test the 6200 key long-term pivotal resistance where it printed a high of 6288 on last Wed, 08 Mar before a weekly close back below 6200, also the pull-back resistance of the former major ascending channel support from 10 Feb 2016 low.

In addition, the daily RSI oscillator has exited from its overbought region with a prior bearish divergence signal which suggests that the on-going medium-term upside momentum of its price action has started to wane.

Thus, we tolerate last week’s excesses and maintain the bearish bias with 6290 as the key pivotal resistance where the Index may shape a minor bounce at this juncture first towards the 6230 intermediate resistance as the 4-hour Stochastic oscillator has exited from its oversold region before another potential downleg materialises to target the next supports at 6035 and 5920.

On the other hand, a clearance above 6290 invalidates the bearish scenario for another round of melt-up phase towards the next resistance at 6380 in the first step.

DAX – Watch the 11340 downside trigger level

Key Levels (1 to 3 weeks)

Intermediate resistance: 11560

Pivot (key resistance): 11800

Supports: 11340 (trigger), 10940/860

Next resistance: 12100 (upper limit of long-term pivot)

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) has floated up towards the former neckline support of the major bearish reversal “Head & Shoulders” configuration now turns pull-back resistance at 11800 where it printed a high of 11700 on last Mon, 04 Mar (Asian session).

No change, we maintain the bearish bias below an adjusted key medium-term pivotal resistance at 11800 and added 11340 as the new downside trigger level (the ascending support from 26 Dec 2018 low & former minor swing high area of 06 Feb 2019) to reinforce a potential down move target the next support at 10940/860 (50% Fibonacci retracement of the entire up move from 26 Dec 2018 low to 04 Mar 2019 high & minor swing low areas of 17 Jan/08 Feb 2019).

On the other hand, a break above 11800 negates the bearish tone for a push up to challenge the upper limit of the long-term pivotal resistance at 12100 as per highlighted in our “Q1 2019 Global Markets Outlook”.