Will We See a Year-End Rally this Year?

Will We See a Year-End Rally this Year?

We are now into the final month of the year 2021 – hope this year has been a good one for you so far! 🙂 

I think this question is probably in the minds of many, “is the stock market going to see a year-end rally, and a good end to the year 2021?” Personally, I feel that it will very much depend on how the new Covid-19 variant in Omicron develops (remember last Friday, when the news about this new variant broke out, the major Indexes fell by more than 1+%.) If this newly discovered variant is found to be not as dangerous as initially feared, then chances are high that we’ll see a bullish rally all the way into the new year 2022. On the other hand, if the variant is found to be not only highly transmissible, but at the same time may result in serious illnesses or even death (after contracting it), and that the current vaccines do not offer a good protection against it, then we might see a bearish end to the current financial year. 

This post was originally posted here. The writer, Lim Jun Yuan is a veteran community member and blogger on InvestingNote, with a username known as @ljunyuan and has close to 2,000 followers.

In today’s post, I’ll be sharing with you my technical analysis of the Indexes of Singapore (Straits Times Index), Hong Kong (Hang Seng Index), as well as the United States (S&P 500 Index, Dow Jones Index, and NASDAQ) where you’ll find some of the key support and resistance levels I’ve identified (for you to take note of) in both bullish as well as bearish scenarios.

Let’s begin:

Straits Times Index – $STI(STI.SI)

After climbing to a high of 3,273 points on 09 November, Singapore’s benchmark Straits Times Index started to retrace (I’ve highlighted this with a downward pointing arrow in the Index’s recent movements above) – at the time of writing, the index is at 3,079 points (which is where the 200-day moving average on a weekly timeframe is.) 

Bullish Scenario: In order for it to go up to where the 20-day moving average on a weekly timeframe (at 3,146 points) is, it will first need to break above the resistance range (the area between the 200-day moving average on a weekly timeframe, at 3,079 points, and the 20-day moving average on a weekly timeframe, at 3,095 points.) 

Bearish Scenario: If the Index is unable to break above the resistance area highlighted above, then it could retreat to where the 150-day moving average on a weekly timeframe is, at 3,008 points. Another support line can be found at 2,899 points (where the 100-day moving average on a weekly timeframe is.)

My Take: Looking at the stochastic, it looks like it is about to cross upwards into an uptrend position from an oversold position – suggesting that chances are high that the  bullish scenario is more likely to play out in the near-term (where it will attempt to try to break into and above the resistance area.) 

Hang Seng Index – $HSI(^HSI.IN)

The Hong Kong market is in a bear market, as the Index have declined by more than 20% from its peak – at the time of writing, the Index is currently at 23,836 points – down by 7,347 points (or 23.6%) from its high of 31,183 points on 18 February this year. 

Looking at the moving average lines – the 20-day, 50-day, as well as the 100-day exponential moving average (on a daily timeframe) are all pointing upwards – suggesting that in the near-term or even in the mid-term, it is highly likely that the bearish movements is set to continue.

That said, however, there could be some technical rebound coming up (as stochastic has reversed into an uptrend in an oversold territory), where the index could be headed to where the 20-day exponential moving average on a daily timeframe is at 24,675 points. Whether or not we’ll continue to see some more bullish run up to 25,687 points (where the 100-day exponential moving average on a daily timeframe is) will depend on whether or not the index is able to break through the resistance area between where the 20-day and the 50-day exponential moving average on a daily timeframe are (at 24,675 points and 25,088 points.)

Finally, for those of you who are wondering at which point will the Chinese market reverse into a bull market once again – if I were to base my calculation on the low of 23,175 points yesterday, then the Index have to rise up to above 27,810 points (a rise by 20% from its trough) – personally, I do not foresee this to happen anytime soon (especially with all the negative news about regulations by the Chinese government on listed companies that’s ongoing right now.)

S&P 500 – $S&P 500(^GSPC.IN) 

After peaking at 4,574 points on 22 November, the S&P 500 started to retrace (notice that stochastic have also reversed into a downtrend right at where the overbought territory is). At the time of writing, the Index has broken slightly under where the 50-day exponential moving average on a daily timeframe is (at 4,574 points.) 

Bullish Scenario: If the Index were to rebound back up, it could once again break above the support-turned-resistance line at 4,574 points and move up to where the 20-day exponential moving average on a daily timeframe is – at 4,641 points. If it is able to also break above this resistance line, then it’s very likely that the Index will once again attempt to break above the current 52-week high at 4,574 points. 

Bearish Scenario: If the Index were to continue to break down further, then it could be headed to a support area between 4,507 points (where the 20-day moving average on a weekly timeframe is) and 4,478 points (where the 100-day exponential moving average on a daily timeframe is). And if the Index were to fall further down, then the next support line could be found at 4,382 points (where the 150-day exponential moving average on a weekly timeframe is).

My Take: At this point, as stochastic is already touching the oversold territory (and notice in the past how the index moves up shortly after the stochastic touches the oversold territory), in my personal opinion, the bullish scenario is more likely to play out in the near-term (unless or otherwise the world receives some negative news relating to the Omicron variant.) 

Dow Jones Industrial Average – $DJI(^DJI.IN) 

The Dow Jones Industrial Average (or Dow Jones for short) also saw some retracement after hitting a high of 36,565 points on 08 November (I’ve pointed out the movements via a downward pointing arrow above). Based on the Index’s close at 34,483 points, the Dow Jones have fallen by 2,082 points (or down by about 5.7%) from its high. 

Bullish Scenario: Currently, the Index have broken under the 150-day exponential moving average on a daily timeframe (at 34,557 points.) Looking how the Index have moved lately, it has rebounded whenever it touches this particular support line, and it’s possible the same scenario could play out once again – if it does, then the next resistance area could be found between 35,054 points (where the 100-day exponential moving average on a daily timeframe is) and 35,196 points (where the 20-day moving average on weekly timeframe is). If the bull run is able to continue from there, then the next resistance area can be found between 35,430 (where the 50-day exponential moving average on a daily timeframe is) and 35,567 points (where the 20-day exponential moving average on a daily timeframe is.)

Bearish Scenario: On the other hand, if the Index were to break down further, then the next support area can be found between 34,000 (where the 200-day exponential moving average on a daily timeframe is) and 33,818 points (where the 50-day moving average on a weekly timeframe is.)

My Take: Both the MACD as well as stochastic are in a downtrend, and pointing downwards. In my opinion, its going to be a 50-50 – where the Index could either move down to next support area, or up to the next resistance area. However, I feel the latter is more likely to happen instead of the former, as looking at its recent movements, the Index tend to bounce back up when it hits the 150-day exponential moving average (on a daily timeframe) support line. The same goes for its stochastic, where it tend to bounce back up fairly quickly the moment it goes into the oversold territory (and stochastic is currently in an oversold position right now.) 

NASDAQ – $NASDAQ(^IXIC.IN) 

The NASDAQ Index moved very similarly to the S&P 500 – where it started to retrace a day after reaching a high of 16,212 points on 22 November (the S&P 500 also hit a new 52-week high on the very same day.)

At the time of writing, the Index have broken below the support line at 15,701 points (where the 20-day exponential moving average on a daily timeframe is), and about to touch the next support line at 15,418 points (where the 50-day exponential moving average on a daily timeframe is.) 

Bullish Scenario: If the Index were to rebound from its current position, it could once again retest the support-turned-resistance line at 15,701 points – and if it is able to break above this line and resume its recovery, then it is possible that the Index attempt to break higher than its current 52-week high (at 16,212 points.)

Bearish Scenario: On the other hand, if the Index were to continue to go down further, and even break below the support line at 15,418 points (where the 50-day exponential moving average on a daily timeframe is), then the next support area could be found between 15,156 (where the 20-day moving average on a weekly timeframe is) and 15,057 (where the 100-day exponential moving average on a daily timeframe is.)

My Take: In the near-term, there’s a 50-50 chance that the bullish or the bearish position may play out – for the case of the bullish situation, the index could be headed towards the 15,701 resistance line; on the other hand, if the retracement were to continue, then the Index could test the 15,418 support line. 

Closing Thoughts

There you have it, my technical analysis of the Indexes in Singapore, Hong Kong, and the United States. However, do take note that technical analysis is always just an “analysis” – there’s no certainty that the scenarios described above will play out, as external events (both positive or negative) as far as clarity of the severity of the new Omicron variant is concerned could result in the Indexes move wilding in either direction.

With that, I have come to the end of my share today. As always, I do hope you’ll find the contents presented above useful, and here’s wishing you a wonderful rest of the day ahead! 🙂 

Once again, this article is a guest post and was originally posted on Ljunyuan‘s profile on InvestingNote. 


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