Weekly Technical Outlook on Major Stock Indices 18 Mar to 22 Mar 2019

S&P 500 – Mix elements

Key Levels (1 to 3 weeks)

Resistances: 2840, 2875 & 2940

Supports: 2730, 2680 & 2630/2600

Medium-term (1 to 3 weeks) Outlook

The SP 500 Index (proxy for the S&P 500 futures) has staged a challenge on the 2815 key long-term pivotal resistance last week and recorded a weekly close of 2822 (0.2% above 2815). The pushed up above 2815 was recorded on last Fri, 15 Mar which also occurred coincidently on an option expiration date for both stocks and indices. In addition, the breakout about 2815 had been led by the Technology sector where the semiconductor stocks (SOXX – an ETF that tracks the PHLX Semiconductor Sector) surged by 2.90% versus a gain of 0.50% seen in the S&P 500 on last Fri, 15 Mar. Click here for a recap on our previous weekly outlook report.

Despite the break above 2815 on the S&P 500, we remain cautious due to several technical elements as follow;

• The daily RSI oscillator of the SP 500 Index has continued to exhibit a bearish divergence signal in place since 20 Feb 2019. In addition, the shorter-term 4-hour Stochastic oscillator has just started to display a bearish divergence signal at its overbought region.
• These observations suggest that the recent upside momentum of its price action has started to wane.
• In terms of relative strength analyses on the key high-beta indices/sector (Nasdaq 100, Russell 2000, PHLX Semiconductors Sector & NYSE FANG+ Index) against the S&P 500, only the Nasdaq 100 has started to show outperformance while the Russell 200 continues to underperform and mix readings are seen in both the Semiconductor Sector (SOXX) and NYSE FANG+ Index). Thus, there is still no clear sign of overall outperformance seen in these high-beta indices against the S&P 500.

Given such mix elements, we are not convinced on last Fri’s bullish breakout above 2815, thus we prefer to turn neutral at this juncture between 2840 (excess derived from Fibonacci expansion cluster) and 2730 (the swing low area of 08 Mar 2019). Only a break below 2730 revives the bearish tone for a potential multi-week decline to target the next supports at 2680 and 2630/2600.

On the flipside, a clearance with a daily close above 2840 triggers a further impulsive up move towards the next intermediate resistance at 2875 (former medium-term swing high of 26 Jan 2018) and even the all-time high area of 2940 next.

Nikkei 225 – Remains below 21880 key resistance

Key Levels (1 to 3 weeks)

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 traded sideways last week below the 21880 key medium-term pivotal resistance. No major changes on its key technical elements.

We maintain the bearish bias with 20900 as the downside trigger level in order to open up scope for 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 flipside, 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 – 29220/510 remains the key resistance to watch

Key Levels (1 to 3 weeks)

Resistances: 29220/510 & 30500

Supports: 28100, 27290, 27070 & 25200/25000

Medium-term (1 to 3 weeks) Outlook

In today, 18 Mar Asian session, the Hong Kong 50 Index (proxy for Hang Seng Index futures) has started to inch higher and looks set to challenge the 29220/510 key long-term pivotal resistance in line with the positive performance seen U.S. stock market on last Fri, 15 Mar.

Mix elements for now, prefer to turn neutral between 29220/510 (excess) and 28100 (the minor swing low area of 08 Mar 2019). Bears need to have a break below 28100 to reinforce a potential multi-week decline towards the supports of 27290 and 27070. On the flipside, a clearance with a daily close above 29510 opens up scope for an impulsive up move to target the next intermediate resistance at 30500 (2.00 times Fibonacci expansion of the up move from 26 Oct 2018 low to 03 Dec 2018 high projected from 03 Jan 2019 low).

ASX 200 – Watch the 6126 downside trigger

Key Levels (1 to 3 weeks)

Intermediate resistance: 6230

Pivot (key resistance): 6290 (excess)

Supports: 6126 (trigger), 6035 & 5920

Next resistance: 6380

Medium-term (1 to 3 weeks) Outlook

Last week, the Australia 200 Index (proxy for the ASX 200 futures) has traded sideways below the 6290 key pivotal resistance. No major changes on its key technical elements, we maintain the bearish bias and added a downside trigger level at 6126 (the minor swing low of 13 Mar 2019). A break below 6126 is likely to reinforce a potential multi-week decline to target the next supports at 6035 and 5920 (former swing high areas of 07 Nov 2018/18 Jan 2019 & the 38.2% Fibonacci retracement of the entire rebound from 23 Dec 2018 low to 06 Mar 2019 high).

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

DAX – Still below 12800 key resistance

Key Levels (1 to 3 weeks)

Pivot (key resistance): 11800

Supports: 11400 (trigger) & 10940/860

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

Medium-term (1 to 3 weeks) Outlook

Last Fri 15 Mar, the Germany 30 Index (proxy for the DAX futures) has inched higher to retest the previous week swing high of 11700 in line with the positive performance seen in the U.S stock indices.

Current price action of the Index remains below the 11800 key long-term pivotal resistance (lower limit, also the former neckline support of the major bearish reversal “Head & Shoulders” configuration). No change, maintain the bearish bias with an adjusted downside trigger level at 11400 (the ascending support from 26 Dec 2018 low & minor swing low areas of 28 Feb/08 Mar 2019). A break below 11400 reinforces a potential multi-week decline to target the next supports 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 flipside, a break with a daily close above 11800 negates the bearish tone for a further 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”.