Weekly Technical Outlook on Major Stock Indices 25 Mar to 29 Mar 2019

Start of a potential medium-term down move phase for stock indices.

S&P 500 – Start of a potential medium-term down move phase



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Key Levels (1 to 3 weeks)

Intermediate resistance: 2815/33

Pivot (key resistance): 2875

Supports: 2778 & 2730

Next resistance: 2940

Medium-term (1 to 3 weeks) Outlook

Last week, the SP 500 Index (proxy for the S&P 500 futures) had a volatile session where it traded above the 2840 (excess) long-term pivotal resistance one day after FOMC on Thurs, 21 Mar. It printed a high of 2860 as market participants digested the implications of a dovish monetary policy stance adopted by the Fed. Thereafter, on last Fri, 22 Mar it erased all its gains and ended the week below the 2815/2840 long-term pivotal resistance. Click here for a recap on our previous weekly outlook report.

There are three new bearish technical elements to note as follow:

  • The weekly close below the 2815/40 (excess) long-term pivotal resistance has formed a bearish weekly “Shooting Star” candlestick pattern.
  • Despite the recent stellar outperformance of the semiconductor stocks, the relative strength chart analysis of PHLX Semiconductors ETF (SOXX) against the S&P 500 has not shown clear signs outperformance yet as its ratio remains below a major resistance since Nov 2017.
  • The relative strength chart analysis of the Financials Sector ETF (XLF) against the S&P 500 has continued to deteriorate. Its ratio has staged a challenge to break below a major support in place since Nov 2011 which is in line with last Fri’s U.S yield curve inversion between the 10-year and 3-month Treasuries. These observations indicate a potential significant underperformance of Financials stocks against the S&P 500 in the coming months ahead.

Therefore, we flip back to a bearish bias and given the recent volatile price movement of the Index, we set the weekly pivotal resistance at 2875 (0.5% higher above last week’s high of 2860, also the former medium-term swing high of 26 Jan 2018). The Index may stage a minor bounce at the 2778 immediate support towards the 2815/33 intermediate resistance as the 4-hour Stochastic oscillator has reached an extreme oversold level before another potential downleg materialise to target the next support at 2730. A break below 2730 opens up scope for a further down move to target the significant medium-term support at 2630/2600 (medium-term swing lows of 29 Oct/10 Dec 2018 & 50% Fibonacci retracement of the on-going rebound from 26Dec 2018 swing low to last Thurs, 21 Mar high).

On the other hand, a clearance above 2875 invalidates the bearish scenario for a further squeeze up to retest the current all-time high area of 2940.

Nikkei 225 – Looking vulnerable for a break below 20900



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Key Levels (1 to 3 weeks)

Intermediate resistance: 21360

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 staged the expected push down and it has broken below the ascending trendline support that has held previous pull-back in price action since the start of the 3-month rebound from 26 Dec 2018 swing low.

Right now, the Index is testing the 20900 downside trigger level as per highlighted in last week’s report and given that the shorter-term 4-hour Stochastic oscillator has reached an extreme oversold level, the Index may stage a minor bounce first towards the 21360 intermediate resistance (pull-back of the former ascending trendline support from 26 Dec 2018 low) before another potential downleg materialises to target the next support at 20200. (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 with a daily close 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 – Bears need to break below 28100



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Key Levels (1 to 3 weeks)

Resistances: 29220/510 & 30500

Supports: 28100, 27290, 27070 & 25200/25000

Medium-term (1 to 3 weeks) Outlook

No change, we maintain the neutral stance between 29220/510 (excess) and 28100 (the minor swing low area of 08 Mar 2019) on the Hong Kong 50 Index (proxy for Hang Seng Index futures).

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 – Bounce before potential new drop

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Key Levels (1 to 3 weeks)

Intermediate resistance: 6170

Pivot (key resistance): 6230

Supports: 6035, 5920 & 5825

Next resistances: 6290 & 6380

Medium-term (1 to 3 weeks) Outlook

The Australia 200 Index (proxy for the ASX 200 futures) has staged the bearish breakdown below the 6126 downside trigger level as per highlighted in our last week’s report on last Fri, 22 Mar U.S. session.

No change, maintain the bearish bias with a tightened key medium-term pivotal resistance now at 6230 (the range top in place since 12 Mar 2019). Given that the shorter-term 4-hour Stochastic oscillator has reached an extreme oversold level, the Index may stage a minor bounce first towards the 6170 intermediate resistance before another potential downleg materialises to target the next support at 6035 and a break below it exposes 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 other hand, a clearance with a daily close above 6230 invalidates the bearish scenario for a push up to towards 6290 and even 6380 next (17 Aug 2018 major swing high & 52-week high).

DAX – Bounce before potential new drop



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Key Levels (1 to 3 weeks)

Intermediate resistance: 11500

Pivot (key resistance): 11650

Supports: 11260 & 10940/860

Next resistance: 11800 & 12100 (upper limit of long-term pivot)

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) has continued to inch lower as expected and broke below the 11400 downside trigger level on last Fri, 22 Mar.

Elements remain bearish, thus we maintain our bearish bias with a tightened key medium-term pivotal resistance at 11650 (the minor swing high areas of 21/22 Mar 2019 & 61.8% Fibonacci retracement of the recent slide from 19 Mar 2019 high to today, 25 Mar Asian session current intraday low of 11287). Given that the shorter-term 4-hour Stochastic oscillator has reached an extreme oversold level, the Index may stage a bounce first towards 11500 intermediate resistance (also the former ascending trendline support from 26 Dec 2018 low) before another potential downleg materialises to target the significant medium-term 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 clearance above 11650 negates the bearish tone for a push up to retest 11800 and even the upper limit of the long-term pivotal resistance at 12100 as per highlighted in our “Q1 2019 Global Markets Outlook”.

Charts are from City Index Advantage TraderPro & eSignal






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