Weekly Technical Outlook on Major Stock Indices 08 Jan to 12 Jan 2018

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By :  ,  Financial Analyst

S&P 500 – Coming close to 2780 significant resistance



Key Levels (1 to 3 weeks)

Resistances: 2780 & 2820

Supports: 2668, 2593 & 2556/43

Medium-term (1 to 3 weeks) Outlook

Last week, the U.S. SP 500 Index (proxy for the S&P 500 futures) has performed better than expected without any 1% to 2% pull-back and rallied straight towards the 2720/45 medium-term resistance/target. Click here for a recap on our previous weekly technical outlook.

Since the end of Dec 2017, the Index has rallied for 14 consecutive months which is the longest winning streak in history. Current technical elements are now indicating the risk of mean reversion/corrective decline that may see a 5% to 7% corrective decline.

  • The daily RSI oscillator is now coming close to an extreme overbought level of 85% in conjunction with its current price action which is hovering just below the upper boundary of a major ascending channel from 11 Feb 2016 low now acting as a resistance at 2780.
  • Based on the Elliot Wave/Principal/fractal analysis, the Index has already met its bullish impulsive primary degree/multi-month wave (3) target of 2745 with excess now at 2780.

Therefore, we prefer to turn neutral now between 2668 and 2780. A break below 2668 is likely to trigger a potential multi-week corrective decline/wave (4) towards the next supports at 2593 follow by 2556/43 next.

Nikkei 225 -  Bullish breakout from range, further potential upside after risk of minor pull-back



Key Levels (1 to 3 weeks)

Intermediate support: 23550

Pivot (key support): 23325

Resistances: 24200 & 24540

Next supports: 22970 & 21990/890

Medium-term (1 to 3 weeks) Outlook

The Japan 225 Index (proxy for the Nikkei 225 futures) has staged a bullish breakout from its 3-weeks plus of “triangle range” configuration in place since 09 Nov 2017 high.

Overall, technical elements remain positive except in the shorter-term where it faces the risk of a pull-back/consolidation. The 4 hour Stochastic oscillator has shaped a bearish divergence signal at its overbought region.

Thus, we keep a bullish stance on the Index with a risk of an initial minor pull-back towards the intermediate support of 23550 with a maximum limit set at the 23325 key medium-term pivotal support before another potential upleg materialises to target the next resistances at 24200 follow by 24540 next.

However, failure to hold above 23325 should negate the preferred bullish scenario to see a deeper pull-back to retest the former “triangle range” resistance now turns pull-back support at 22970. Only a clear break below (daily close) 22970 implies a failure bullish breakout to trigger a multi-week corrective down move towards the next support at 21990/890 in the first step.

Hang Seng – Further potential upside



Key Levels (1 to 3 weeks)

Intermediate support: 30460

Pivot (key support): 30070

Resistances: 31360 & 31750

Next supports: 29330 & 28900/740

Medium-term (1 to 3 weeks) Outlook

The Hong Kong 50 Index (proxy for Hang Seng Index futures) had rallied as expected and hit the first medium-term resistance/target of 30700/900.

Technical elements remain positive, thus we maintain our bullish bias above a tightened key medium-term support now at 30070 (the former minor swing high area of 21 Nov 2017 & the minor ascending trendline from 06 Dec 2017 low) for a further potential upleg to target the next resistances at 31360 before 31750 (major swing high area of Oct 2007, before the Great Financial Crisis and a Fibonacci projection cluster).

On the other hand, failure to hold above 30070 shall invalidate the bullish scenario for a potential corrective decline to retest 29330 and even the next support at 28900/740 (also coincides with the lower boundary of the major ascending channel from 28 Dec 2016 low).

ASX 200 – Rise in progress



Key Levels (1 to 3 weeks)

Intermediate support: 6090/70

Pivot (key support): 6026

Resistances: 6190 & 6240/60

Next support: 5940/10

Medium-term (1 to 3 weeks) Outlook

Last week, the Australia 200 Index (proxy for the ASX 200 futures) had pushed higher in a series of “higher highs” as expected after its recent bullish breakout from its “triangle range” configuration.

No change on its key technical elements where we maintain our bullish bias with a tightened key medium-term pivotal support now at 6026 for a further potential upleg to target the next resistances at 6190 follow by 6240/60 next.

However, failure to hold above 6026 shall invalidate the bullish scenario to trigger a corrective decline phase towards the next support at 5940/10 in the first step.

DAX – Corrective decline scenario invalidated



Key Levels (1 to 3 weeks)

Intermediate support: 13240

Pivot (key support): 13000

Resistances: 13530/560 & 13760

Next support: 12740

Medium-term (1 to 3 weeks) Outlook

Last week, the Germany 30 Index (proxy for the DAX futures) had broken above 13220 medium-term pivotal resistance which invalidated the residual corrective downleg scenario.

Current technical elements suggest that a medium-term low has been formed at 12740 where the Index is now in the midst of undergoing a potential multi-week bullish impulsive upleg.

In the shorter-term, the Index may see a pull-back/consolidation at its recent 13530/560 swing high  printed on 07 Nov 2017 due to an extreme overbought reading from the 4 hour Stochastic oscillator.

The intermediate support to hold the potential pull-back rests at 13240 with a maximum limit set at the 13000 key medium-term pivotal support before another potential upleg materialises to target the next resistance at 13760.

On the other hand, a break below 13000 shall invalidate the bullish scenario to see another round of choppy decline to retest last week low of 12740.

Charts are from City Index Advantage TraderPro

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this email, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs. All queries regarding the contents of this material are to be directed to City Index, a trading name of GAIN Capital Singapore Pte Ltd.

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