Weekly Technical Outlook on Major Stock Indices 19 Feb to 23 Feb 2018

S&P 500 – Recovery process remains intact

Key Levels (1 to 3 weeks)

Intermediate support: 2720

Pivot (key support): 2662

Resistances: 2745, 2810 & 2877/80

Next support: 2540/30

Medium-term (1 to 3 weeks) Outlook

The U.S. SP 500 Index (proxy for the S&P 500 futures) had rallied from the predefined 2540/30 major support zone as expected. Last week’s up move in price action has almost recovered 50% of the recent plunge seen from its current all-time high level of 2877 printed on 29 Jan 2018. Click here for a recap on our previous weekly technical outlook.

The Index is now testing the upper limit of the 2728/45 upside trigger level which is defined by the 61.8% Fibonacci retracement of the steep decline from 29 Jan 2018 high to 05 Feb 2018 U.S. session low,

Current technical elements are still positive to advocate for a further potential recovery in price action.

• The weekly RSI oscillator has tested and staged a rebound from a significant corresponding ascending trendline in place since 11 Feb 2016 low acting as support now at the 50% level. A sign of revival in medium-term upside momentum of price action.
• The recent underperformance of the high beta S&P Technology sector in place since late Nov 2017 has started to abate as is relative strength chart on its ETFs (XLK versus SPY) has now formed an ascending support (see last chart). Similar observations can also been seen in the relative strength chart of the Industrials ETF (XLI) versus S&P 500 ETF (SPY), another heavy  weight growth related sector. In addition, the Consumer Discretionary and Financial sectors continue to outperform according to their respective relative strength charts against the SPY. These observations suggest the key momentum driven Technology sector (a previous leader that has turned into a laggard) has now started to play a significant role in last week’s up move seen in the S&P 500.   
• The key medium-term support now rests at 2662 which is defined by 50% Fibonacci retracement of the up move from 09 Feb 2018 U.S. session low to 16 Feb 2018 high and close to the ascending channel support from 06 Feb 2018 low.

Therefore as long as the adjusted 2662 key medium-term pivotal support holds and a clearance above 2745 (a daily close above it), the Index is likely to stage another upleg to target the next medium-term resistances of 2810 (former minor swing low area of 01 Feb 2018) follow by its current all-time high zone of 2877/80 in the first step.

On the other hand, failure to hold above 2662 should jeopardise the recovery scenario for a decline to retest the 2540/30 major support zone.

Nikkei 225 – Watch the 23000 potential upside trigger level

Key Levels (1 to 3 weeks)

Intermediate support: 21700

Pivot (key support): 20800/600

Resistances: 22800/23000 (upside trigger), 24200 & 24540 

Next support: 19300

Medium-term (1 to 3 weeks) Outlook

The recent 15% plunge from its 20-year high of 24200 has started to stabilize at the 20800/600 major support zone as expected (the former major swing high areas of Jun 2015/Mar 2000, 38.2% Fibonacci retracement of the up move from 24 Jun 2016 to 23 Jan 2018 high & the major ascending channel support from 24 Jun 2016 low).

No major changes on its key technical elements. We maintain the bullish bias and as long as the 20800/600 key pivotal support holds, the Index is likely to see a further potential push up to retest the intermediate resistance at 22800/23000 (the 61.8% Fibonacci retracement of the decline from 23 Jan high to 09 Feb 2018 low & former range top from 09 Nov/18 Dec 2017). A break above 23000 is likely to increase the probability of the recovery phase to retest its recent 20-year high of 24200 in the first step.

However, failure to hold above 20800/600 should invalidate the recovery process and kick start a multi-month corrective down move towards the next support at 19300 in the first step.

Hang Seng – In the midst of undergoing a recovery

Key Levels (1 to 3 weeks)

Intermediate support: 30075

Pivot (key support): 29070

Resistances: 31400 (upside trigger) & 33430/530

Next support: 28600/100

Medium-term (1 to 3 weeks) Outlook

The Hong Kong 50 Index (proxy for Hang Seng Index futures) has started to stabilise above its recent 09 Feb 2018 swing low area of 29070 with positive momentum. The daily RSI oscillator has turned up from its oversold region and it is now attempting to surpass the 50% level.

Therefore, we turn bullish with the key medium-term pivotal support at 29070 and a break above the 31400 upside trigger level (50% Fibonacci retracement of the decline from 29 Jan 2018 high to 09 Feb 2018 low & the descending trendline resistance from 29 Jan 2018 high) is likely to reinforce a potential recovery process for a further rally to retest its current all-time high area of 33430/530 in the first step.

On the flipside, failure to hold above 29070 should invalidate the recovery process for a further slide to test the its major support zone of 28600/100 (the former major swing high areas of Apr/May 2015 & the 38.2% Fibonacci retracement of the up move from May 2016 low to 29 Jan 2018 high).

ASX 200 – Recovery process intact, watch 5990 potential upside trigger next

Key Levels (1 to 3 weeks)

Intermediate support: 5870

Pivot (key support): 5780

Resistances: 5990 (upside trigger) & 6150

Next support: 5670

Medium-term (1 to 3 weeks) Outlook

Last week, the Australia 200 Index (proxy for the ASX 200 futures) had managed to push up as expected after the appearance of a daily bullish reversal “Long-legged Doji” candlesick pattern at the 5780/5670 major support zone on 09 Feb 2018. It recouped almost 50% of the losses from the recent plunge see from its 09 Jan 2018 high.

Current price action is now hovering right below the 5990 upside trigger level (pull-back resistance of the former trendline support from 15 Nov 2017 low & the 61.8% Fibonacci retracement of the steep decline from 09 Jan 2018 high to 09 Feb 2018 U.S. session low) with the daily RSI oscillator that is attempting to break above the 50% level (a sign of revival in medium-term upside momemtum).

Therefore, we maintain the bullish with an adjusted key medium-term pivotal support now at 5780 (minor swing low areas of 12/14 Feb 2018 & the 61.8% Fibonacci retracement of the on-going up move from 09 Feb 2018 U.S. session low) and a break above 5990 is likely to reinforce the potential recovery process to retest the 09 Jan 2018 swing high area of 6150 in the first step.

On the other hand, a break below 5780 should negate the bullish tone for a slide back to retest 5670 (lower limit of the major support zone).

DAX – Recovery process intact, watch 12845 potential upside trigger next

Key Levels (1 to 3 weeks)

Intermediate support: 12370

Pivot (key support): 11900/800

Resistances: 12845 (upside trigger), 13140 & 13560

Next support: 10800

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) had shaped the expected up move from the 11900/800 major support zone and recovered almost 50% of the recent plunge from its current all-time high area of 13560.

Key technical elements remain unchanged. Therefore as long as the 11900/800 key pivotal support holds and a break above 12845 (61.8% Fibonacci retracement of the steep decline from 23 Jan 2018 high to 06 Feb 2018 low & the former range support from 15 Nov 2017 low) is likely to reinforce the recovery process for a further potential push up towards the next resistances at 13140 (76.4% Fibonacci retracement of the steep decline from 23 Jan 2018 high to 06 Feb 2018 low) follow by the current all-time high area of 13560.

On the other hand, failure to hold above 11900/800 should invalidate the recovery scenario to open up scope a multi-month corrective down move to test the next support at 10800 in the first step.

Charts are from City Index Advantage TraderPro  & eSignal

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