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Global Stocks Break Multi-Year Neckline, What Happens Next?

Via Credit Suisse,

The MSCI World Developed index has seen its expected fall to pivotal price and "neckline" support at 1586/72. Below here would mark a medium-term top, and further weakness to 1400/1380.


S&P 500 September Contract

The S&P 500 fall extended below 1886/82 for a move to our lower target of trendline support April 2014 at 1832, from which a sharp retracement higher is underway.  Above 1950/52 is needed to suggest strength can extend back to the price gap from Monday morning at 1967/71, but we would look for this to then cap, for a fresh turn lower again.  Support shows at 1900 initially, then 1887, with a break below 1868 needed for a retest of 1832/31.  Below here can target the 1814/03 lows of April and October 2014, loss of which would mark a larger top for 1732/27 – the 38.2% retracement of the 2011/2015 rise.  VIX has needs to hold 37.10/00 to suggest the immediate risk can stay higher for a retest of the 50% retracement of the entire 2008/14 fall at 49.90.

Flat.  Sell at 1950, stop above 1972, for a retest of 1832.

Above 1972 can see the recovery extend back to 2002, then 2028.

Russell 2000

The Russell has gapped lower again on the open this week, and removed our main target at 1138/34 – the late 2014 low and the 61.8% retracement of the rally from October.  This sets a larger top and keeps the immediate risks down to the 78.6% retracement level next at 1095.  We allow for a bounce here, but a direct break can throw open a move down to major support at 1040/32 ? the October 2014 low and the 38.2% retracement of the 2011/15 rise.  Resistance moves to 1149 initially, then 1159, with 1173 ideally capping to keep the immediate trend still lower. 

Covered an existing short at 1138/34.   Re-sell at 1148, stop above 1173, for 1040.

Above 1173 can see a move back up to 1189 then 1194. 

Euro Stoxx 50 September Contract

Another dramatic session for the Euro Stoxx as the sharp fall extends below medium-term channel support at 3102/00.  The recovery from the 2951 spike low has been accompanied by a DeMark exhaustion signal, and we look for a recovery back to test gap resistance from Monday morning at 3208/32, also the 382% retracement of the fall from the 3688 August high.  We look for this to then try to cap, for a fresh move lower.  Support shows at 3060/53 initially, with a break below 3034 needed to reassert a bearish tone again for a move back to 2951, then 2918 – the late 2014 low.  Above 3232 can ease the immediate bearish tone, for a deeper recovery back to 3280.

Short took profit at 3065. Retry a short at 3200/10, stop above 3255.  Also add below 3020.  Take profit at 2920.

Above 3255 should see strength extend back to 3280/3300.  Retry a short here, stop above 3355.  

FTSE 100 September Contract

The FTSE fall extended to a low of 5761, following which a sharp retracement higher has emerged.  We look for strength to extend price gap and 38.2% retracement resistance at 6117/29, but we look for this to then try to cap, for a fresh move lower.  Support shows at 5947 initially, below which should see a move back to 5856/55, then 5818.  Below this latter level can see a move back to the 5761 recent low, ahead of 5695/94 – the 38.2% retracement of the entire 2009/2015 bull market.  Above 6129 can see a deeper recovery back to 6184.

Flat.  Sell at 6110/30, stop above 6185.  Take profit at 5700.

Above 6185 can see strength back to 6250/60.  Retry a short here, stop above 6275.

Nikkei 225

A rollercoaster session for the Nikkei as it was unable to sustain its early strength, and the market has closed near the session’s low on increased volume, leaving the immediate spotlight on the 50% retracement of the rally from last October at 17740/30.  Below here should see the immediate risk stay lower for 17420 at first, followed by the February low and the measured target from the top at 17335/270, where we would look for buying to show. A direct capitulation though can suggest further selling for the 61.8% retracement at 16970, ahead of 16595.  Near-term resistance moves to 18175, followed by 18540. An extension higher can target 18835/970, above which is needed to ease the downside pressure.

Short took profit at 19250. Sell again at 18600, stop above 19000, for 17350.

Above 19000 can see a move higher for 19115/55.

Shanghai Composite

Shanghai Comp has gapped lower on the open, taking out a series of key supports at  3121/3049 respectively – the 61.8% retracement of the entire 2013/2015 bull trend and February low.  This reinforces our bearish view for a further decline towards 2935 at first, ahead of the 78.6% retracement of the 2014/2015 bull trend and price support at 2666/60. Whilst we would allow for an initial hold here, bigger picture, we continue to favor an eventual breakdown towards 2562 next (the 78.6% retracement of the entire 2013/2015 uptrend), with our core target remaining at 2480/40, the top of the 2012/2014 base. Nearterm resistance shows at 3123, followed by 3192. Above is needed to target further gap resistance at 3388, which we look to ideally cap.

Covered the short at 3050/49. Sell again at 3050/3100, stop above 3192, for 2670.

Above 3192 can see a move higher for 3388.  Retry a short here, stop above 3491.