Weekly Technical Outlook on Major Stock Indices 13 Nov to 17 Nov 2017

S&P 500 – At risk to see the start of a multi-week corrective decline

Key Levels (1 to 3 weeks)

Intermediate resistance: 2588

Pivot (key resistance): 2597

Supports: 2565, 2544 & 2520

Next resistance: 2634

Medium-term (1 to 3 weeks) Outlook

Last week, the U.S SP 500 Index (proxy for the S&P 500 futures) had indeed staged a further up move to print another all-time high level of 2597 on last Tues, 07 November and retested it on Thurs, 09 November but failed to make any headway above 2597. The 2597 level is closed to our first predefined medium-term resistance/target of 2600. (Click here for a recap on our previous weekly technical outlook).

Current key technical elements are now exhibiting bullish exhaustion signs below 2597 which increases the risk of a medium-term (1 to 3 weeks) corrective decline at this juncture.

• The Index has broken below its medium-term ascending channel support from 29 August 2017 low now turns pull-back resistance at 2588 (see 4 hour chart).
• The daily RSI oscillator has flashed a bearish divergence signal and it is now testing a significant corresponding support at the 55% level. These observations suggest that medium-term upside momentum of price action has started to wane.
• Based on relative strength analysis of the key cyclical sectors against the benchmark S&P 500 (from Exchange Traded Funds/ETFs), both the Industrials (XLI) and Financial (XLF) sectors that have a significant combined weightage of around 24% have started to underperform against the S&P 500. These observations suggest that the S&P 500 have lost two key leading  cyclical sectors to support another potential bullish upleg phase in the S&P 500 (see last chart).
• The next significant medium-term support rests at 2544 (minor swing low areas of 19 Oct/26 Oct 2017) follow by 2520 (pull-back support of the former primary/long-term ascending channel from Mar 2009 & close to the 23.6%Fibonacci retracement of the advance from 27 Mar 2017 low to 09 Nov 2017 high).

Therefore, the conviction of another bullish impulsive wave sequence to print a fresh new all-time high has been reduced. As long as the 2597 key medium-term pivotal resistance is not surpassed and a break below 2565 (downside trigger) is likely to reinforce the start of a potential multi-week corrective decline to target the next supports at 2544 and 2520 next.

On the other hand, a clearance above 2597 shall jeopardize the bearish scenario to open up scope for another round of bullish upleg towards the next resistance at 2634.

Nikkei 225 –  Start of a potential multi-week corrective decline

Key Levels (1 to 3 weeks)

Intermediate resistance: 22800

Pivot (key resistance): 23010

Supports: 22100/22000, 21200 & 20840/700

Next resistance: 23420

Medium-term (1 to 3 weeks) Outlook

The Japan 225 Index (proxy for the Nikkei 225 futures) had pushed up and hit the predefined medium-term upper limit resistance/target of 23260 as expected (printed a high of 23420 on last Thurs, 09 Nov). (Click here for a recap on our previous weekly technical outlook).

The Index had staged a magnificent rally of 22% from its 27 August 2017 low within a short-span of time (9 weeks). The current up move of 22% in terms of magnitude and time is the strongest since its current major cycle low of 14835 printed on 24 June 2016 (Brexit referendum). Current key technical elements suggest the Index now faces the risk of a medium-term (1 to 3 weeks) of corrective decline/consolidation within a long-term (multi-month) uptrend that is still in play.

• The Index has formed a daily bearish “One Black Crow” candlestick pattern right at the 23080/260 medium-term resistance zone. In addition, last Thurs (09 Nov)’s initial steep advance has reintegrated back below the upper boundary of a medium-term ascending channel (depicted in brown) from 08 September 2017 low. These observations suggest bullish exhaustion signs and last Thurs (09 Nov)’s initial steep rally is a failure acceleration move which can be classified as a minor “Blow-off” top (depicted by the pink box in the 4 hour) (see daily & 4 hour charts).
• The next significant medium-term supports rest at 21200 (50% Fibonacci retracement of the prior medium-term uptrend from 28 Aug 2017 low to last Thurs, 09 Nov 2017 high) follow by 20840/700 (former major swing high area of 21 Jun/09 Aug 2015 & 61.8% Fibonacci retracement of the prior medium-term uptrend from 28 Aug 2017 low to last Thurs, 09 Nov 2017 high).
• The key medium-term resistance stands at 23010 (former minor swing high areas of 07/08 Nov 2017 & the pull-back resistance of the aforementioned reintegrated upper boundary ascending channel).   

Therefore, the Index may have formed a minor “Blow-off” top at 23420 and right now it is undergoing a potential initial phase of a medium-term (1 to 3 weeks) corrective decline.

As long as the 23010 key medium-term pivotal resistance is not surpassed and a break below the 22100/22000 intermediate resistance/downside acceleration level (the lower boundary of the ascending channel from 08 Sep 2017 low) is likely to reinforce a further potential decline to target the next support at 21200 in the first step.

However, a clearance above 23010 shall jeopardise the bearish scenario for a squeeze up to retest 23420.

Hang Seng – 29300 resistance almost reached with mix elements

Key Levels (1 to 3 weeks)

Resistances: 29300 & 30230

Supports: 28000 & 26830

Medium-term (1 to 3 weeks) Outlook

The Hong Kong 50 Index (proxy for Hang Seng Index futures) had staged the accelerated push up as expected after it lagged before it peers for the past two weeks. In today (13 Nov) Asian session, it has continued to advance and almost hit the medium-term resistance/target of 29300 (printed a current intraday high of 29239). (Click here for a recap on our previous weekly technical outlook).

Current key elements are mix at this juncture as there are no clear bullish exhaustion signs except the daily RSI oscillator that is coming close to a significant resistance at the 70% which corresponds with the upper boundary of a major ascending channel from 11 February 2016 (depicted in brown on the daily chart).

Therefore, we prefer to turn neutral at this juncture between 29300 and 28000. Only a clear break above 29300 9 (daily close above) opens up scope for a further potential acceleration to target the next resistance at 30230.

ASX 200 – 6065 resistance almost reached with mix elements

Key Levels (1 to 3 weeks)

Resistances: 6065 & 6130

Supports: 5970, 5860 & 5800

Medium-term (1 to 3 weeks) Outlook

The Australia 200 Index (proxy for the ASX 200 futures) had shaped the expected up move and almost hit the predefined 6065 medium-term resistance/target (printed a high of 6055 on last Thurs, 09 Nov).

Current key technical elements are mix at this juncture with a bearish divergence signal being flashed in the shorter-term 4 hour Stochastic oscillator. Therefore, we prefer to turn neutral now between 6065 and 5970. A clear break below 5970 (daily close below it) is likely to trigger the start a corrective decline towards 5860 and even 5800 (pull-back support of the former 4-month range configuration resistance).

DAX – Start of a potential multi-week corrective decline phase

Key Levels (1 to 3 weeks)

Intermediate resistance: 13230

Pivot (key resistance): 13330

Supports: 13050 & 12900

Next resistance: 13534/560 & 13730

Medium-term (1 to 3 weeks) Outlook

Last week, the Germany 30 Index (proxy for the DAX futures) had shaped the initial push up towards the first medium-term resistance/target of 13560 (printed a high of 13534 on Tues, 7 Nov). Thereafter, it broke below 13200 key medium-term pivotal support on last Thurs (09 Nov) which invalidated the medium-term uptrend in place since 29 August 2017 low.

Current key technical elements are now advocating the start of a potential medium-term (1 to 3 weeks) of current decline/consolidation within a longer-term (multi-month) major uptrend that is still in play since 24 June 2016 low.

• The Index has staged a bearish breakdown below its former medium-term ascending channel from 29 August 2017 now turns pull-back resistance at 13230 (see 4 hour chart).
• Current price action has started to evolve into a minor descending channel from last Tues (07 Nov) high with its upper boundary acting as a resistance at around 13330 (see 4 hour chart).
• The next significant medium-term support rests at 12900 which is defined by the lower boundary of the aforementioned minor descending channel, the former major swing high area of 07 May/20 Jun 2017 and the 38.2% Fibonacci retracement of the up move from 29 August 2017 low to 07 November 2017 high.

Therefore as long as the 13330 key medium-term pivotal resistance is not surpassed, the Index is likely to undergo a potential initial corrective decline phase to target the next supports at 13050 follow by 12900 next.

On the other hand, a clearance above 13330 shall negate the bearish tone to see squeeze up to retest last week’s swing high area of 13534/560.

Charts are from City Index Advantage TraderPro & eSignal

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