Market News & Analysis

Weekly Technical Outlook on Major Stock Indices (09 Jan to 13 Jan) – Approaching major risk zones as U.S. Q4 earnings looms

S&P 500 – Rise in progress towards major risk zone

sp500-weekly_09-jan-2017

sp500-4-hour_09-jan-2017

xlf-weekly_-09-jan-2017(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Intermediate support: 2270

Pivot (key support): 2257             

Resistances: 2303 & 2326/35

Next supports: 2214 & 2178

Medium-term (1 to 3 weeks) Outlook

Last week, the U.S. S&P 500 Index (proxy for the S&P 500 futures) has shaped the expected push up and surpassed the previous all-time high of 2278. It printed a fresh new all-time of 2282 on last Friday, 06 January 2016 with the technology sector leading the pack (up 0.73%). Click here to recap our previous weekly technical outlook/strategy.

This week will see the start of the U.S. Q4 2016 earnings session, where major banks J.P Morgan (JPM), Bank of America (BAC) and Wells Fargo (WFC) will report their respective earnings numbers on Friday, 13 January 2016.  Based on FactSet’s forecasts, S&P 500’s Q4 2016 earnings are expected to record a 3% y/y growth where the biggest driver comes from the Financials with an expected y/y growth of 13.8%.

Markets participants will be looking at two main revenue sources of Financials; trading revenues and loan growth. Fixed income trading is likely to see continued improvement due to a steeper U.S. treasury yield curve across all maturities which are likely to boast Q4 earnings of Financials.  As highlighted last week, the Financials is a key sector to watch as it one of the leaders of the post-U.S. presidential election Trumponomics rally.  Even though the technical chart of the Financials ETF (XLF) is showing limited upside potential but it is still 5.5% away from the lower limit of its key long-term resistance zone of 24.84 from last Friday, 06 January 2017 closing price of 23.54. This observation suggests that the S&P 500 still has potential legs to the upside with support coming in from the Financials sector.   

In addition, technical elements remain positive in the medium-term for the S&P 500. Therefore, we are maintain our bullish bias with a tightened key medium-term pivotal support at 2257 for a further potential push up to target 2303 follow  by the lower limit of the major risk zone at 2326/35. But do be cautious now as we are in the potential tail end of the “melt-up” phase that is in place since 11 February 2016 low before a potential severe correction sets in.

On the other hand, failure to hold above 2257 may invalidate the preferred bullish scenario for another round of corrective decline to retest the next supports at 2214 and 2178.

Nikkei 225 – Potential final push up in progress towards risk zone

japan-index-daily_09-jan-2017

japan-index-4-hour_09-jan-2017(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Intermediate support: 19460

Pivot (key support): 19330

Resistances: 19860 & 20000

Next support: 18930

Medium-term (1 to 3 weeks) Outlook

Last week, the Japan 225 Index (proxy for the Nikkei 225 futures) has pushed up and retested the first medium-term upside target at 19550 as per highlighted in our previous weekly technical outlook/strategy (click here for a recap).

Technical elements are still positive such as the daily RSI oscillator that has continued to inch upwards from its key ascending trendline and still has room to manoeuvre upwards before hitting the extreme overbought level. These observations suggest that medium-term upside momentum remains intact.

We have tightened the key medium-term pivotal support to 19330 and maintain the bullish bias for a further potential push up towards 19860 before 20000 (the lower limit of the major risk zone where a potential pronounced correction is likely to occur).

However, a break below 19330 is likely to invalidate the preferred bullish scenario for a decline to target the next support at 18930.

Hang Seng Index – risk of pull-back before new rise 

hong-kong-daily_09-jan-2017

hong-kong-4-hour_09-jan-2017(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Intermediate support: 22200

Pivot (key support): 22060/21920

Resistances: 22650 & 22950/23100

Next support: 21400

Medium-term (1 to 3 weeks) Outlook

Last week, the Hong Kong 50 Index (proxy for Hang Seng Index futures) has risen as expected and almost hit the expected first medium-term upside target of 22650 (printed a current intraday high of 22632 in today’s 09 January 2017 Asian session). Click here to recap our previous weekly technical outlook/strategy.

Right now in terms of fractal analysis and short-term momentum oscillators, the Index faces the risk of a short-term pull-back/consolidation below 22650. For example, the 4 hour Stochastic has exited from its extreme overbought level and still has room to manoeuvre to the downside before hitting its extreme oversold level.

The support to watch for this anticipated pull-back/consolidation rests at 22200 with a maximum limit set at the tightened key medium-term pivotal support zone of 22060/21920 before another potential upleg materialises to target the key resistance zone of 22950/23100 (the descending trendline in place since 09 September 2016 high).

On the other hand, failure to hold above 21920 may negate the preferred bullish tone to see a further slide to retest the 21400 support (former swing high areas of 20 April/07 June 2016 & the 61.8% Fibonacci retracement of the up move from 11 February 2016 low to 09 September 2016 high).

ASX 200 – 5850 almost reached, turn neutral

asx-200-daily_09-jan-2017

asx-200-4-hour_09-jan-2017(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Resistances: 5850 & 6000

Supports: 5700 & 5580

Medium-term (1 to 3 weeks) Outlook

The Australia 200 Index (proxy for the ASX 200 futures) has continued to push as expected and almost hit our medium-term upside target of 5850 as per highlighted in our previous weekly technical outlook/strategy (click here for a recap).

Some technical elements have turned negative such as momentum oscillators. The daily RSI oscillator has surpassed a previous extreme overbought level coupled with the shorter-term 4 hour Stochastic oscillator that has just flashed an impending bearish divergence signal at its overbought region. These observations suggest that the current up move is overstretched where a potential mean reversion (pull-back/consolidation) is likely to occur at this juncture.

Therefore, we prefer to adopt a neutral stance for now between 5850 and 5700.

DAX – Further potential push up in progress

dax-daily_09-jan-2017

dax-4-hour_09-jan-2017(Click to enlarge charts)

Key Levels (1 to 3 weeks)

Intermediate support: 11480

Pivot (key support): 11360

Resistances: 11800 & 12020

Next support: 10810

Medium-term (1 to 3 weeks) Outlook

The Germany 30 Index (proxy for the DAX futures) has continued to inch high bit by bit since its bullish breakout from the minor range of 11480/400.

No major changes in technical elements and we are maintaining our bullish bias with a tightened key medium-term support now at 11480 for a further potential push up towards 11800 before targeting the next resistance at 12020 (lower limit of major risk zone) next.

On the other hand, failure to hold above 11360 is likely to invalidate the preferred direct rise scenario to see a deeper decline towards the next support at 10810 (the former 3 months plus of range top in place from 14 August to 15 November 2016 and 61.8% Fibonacci retracement of the recent steep up move from 05 December 2016 low to last week high of 11646).

Charts are from City Index Advantage TraderPro & eSignal

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