Mid-Month Technical Outlook of Major Global Indices

Equity markets have fallen sharply around the world on concerns of the Coronavirus outbreak, and this week, a few of them have posted double-digit single-day declines.

While I do think it will require some form of a catalyst for a trend change in the markets, there are a few charts that are starting to look interesting from a technical perspective.

Most of the analysis here relies on horizontal support or resistance levels. In other words, levels that triggered strong selling or buying in the past that stand to catch the attention of technical traders.

Technical Outlook – S&P 500 (SPX500)

The S&P 500 is currently at an interesting technical point. On a weekly chart, the index is catching a bid from a horizontal level at $2408. This same level held the decline in 2018 on a weekly close basis to trigger a bullish reversal.

Further, the 200-week moving average is in play and the index looks like it’s attempting to close above it this week. This moving average has rarely been tested. The last two times, in 2016 and 2019, a bullish reversal followed.

If the index fails to hold this level, the next area of interest falls at $2116 which held the S&P 500 lower between late 2014 until the middle of 2016.

Technical Outlook – Euro Stoxx 50 (SX5E)

Similar to the S&P 500, the Euro Stoxx 50 also appears to be at an interesting technical juncture. The index is testing a rising trendline that extends back to the low posted in 2009. Further, there two major levels in play that have been respected on weekly and monthly charts.

Upside resistance is seen at 2966 which is an area that acted as support in December 2018. Support at 2509 is significant, a drop below it might imply a significant downside.

Technical Outlook – DAX (DAX)

The German index is also trading near a major support level. It stems from the lower bound of a trend channel that has encompassed price action since 2009.

Resistance is found at 10,474 as the level acted as support in December 2018. In the event of a further drop, the next area to keep an eye on is 8,136 as it acted as major resistance in 2000 and then once again between 2007-2008. Further, the 200-month moving average falls near the level to create a confluence.

Technical Outlook – FTSE 100 (UKX)

While the first three technical indices have generally shown potential, the chart for the FTSE 100 does not seem to be as encouraging. The index has fallen into a congestion zone that had contained it from 2010 until the middle of 2013 and is right in the middle of it.

Support is seen at 4916 while a recovery to 6069 might be met with sellers. This index has broken down from a rising trend channel that had encompassed price action since 2009, in contrast to other indices that are currently testing support from similar trend channels.

Technical Outlook – Nikkei 225 (NI225)

The Nikkei chart also seems to point to more downside. The Japanese index made a triple top as the 24,129 level proved to be major resistance over the last few years. The measured move objective for this chart pattern falls at 14,295 which implies the potential for a further 18% decline.

A rally above the breakdown point at 19,136 would invalidate the triple top pattern.

Technical Outlook – Toronto Stock Exchange Composite Index(TSX)

This index looks similar to the S&P 500 although the 200-month moving average is being tested rather than the 200-week. The last time the index tested this moving average was during the financial crises. Needless to say, the moving average triggered a bullish reversal.

Further support is seen at $11,247 which acted as resistance in 2000 and support in 2011 and 2012.

Bottom Line

Several of the global indices are trading at important technical levels that could potentially trigger a turn. However, the outlook is not broad-based as a few technical indices are pointing to more downside. Nevertheless, if there was an area where the markets might see a bounce, this might be it.