Important breakouts are almost always followed by retreats, during which the breakout level is retested. The seminal move by the Dow Jones Industrial Average and Standard & Poor’s 500 Index on April 2 should prove to be no exception. For the first time this year, both indices broke out oftheir respective sideways ranges into new all-time highs simultaneously. Watch out for the pullback, which should materialise within the next three trading sessions.

The Straits Times Index has not made a new all-time high, but it did break out of a sideways trading range, indicating an initial upside of 3,200, which has been met, and a subsequent target of 3,324. The FTSE REIT Index too broke out of a multimonth base formation at 714 and has risen above the 200-day moving average at 723. The breakout indicates an initial upside of 738 and is supported by rising quarterly momentum, and a positive cross between the 50-and 100-day moving averages.

Elsewhere in Asia, the Hang Seng China Enterprise Index (HSCEI) continued to rise. Since March 20, this index has risen 9.6% and is now approaching a resistance at 10,153. In addition, short-term indicators are at the top end of their range.

The Hang Seng Index (22,565)is in a resistance area at 22,693, a level that coincides with its 100-day moving average. Short-term indicators are at the top end of their range, and quarterly ROC appears overstretched. In addition, the index has risen 1,332 points within a few sessions. Prices will probably retreat first before attempting a breakout. Support is raised to 22,000.

VIX IS WEAK IN THE SHORT TERM

The Volatility Index (13.08) has weakened and may stay at this level in the near term. Over the next two weeks, though, it is likely to rebound from here, back to 14.6 initially and possibly higher. The eventual upside stays at 18.

DOW MAY PULL BACK

The Dow (16,573) has cleared resistance at 16,500, but this has yet to be confirmed by prices staying above this level for three sessions and prices would have to hold at 16,500 during the pullback. The 50- and 100-day moving averages have drawn together. If they draw apart, the Dow will move up decisively, towards a target of 17,600.

EXPECT A TEMPORARY RETREAT FOR THE S&P 500

The S&P 500 (1,890) may ease temporarily in the next few sessions. Overall, it has cleared resistance at 1,877, confirming an earlier upside. When the index broke above 1,843, it indicated a target of 1,943. The rising 50- and 100-day moving averages drew together last month and are now drawing away, supporting the breakout.