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01/21/2018 – Market Update

January 21, 2018 Leave a comment Go to comments

 

Market Momentum Dried Up

 

The stock market posted another weekly gain at record highs, but the momentum dried up. As the S&P 500 index moves further away from its 2-year lead-in trend line, fast price rising pushes the index into the bump phase of a potential Bump and Run Reversal Top pattern. Based on a recent breakdown from a 3-month descending broadening wedge pattern, the U.S. dollar is bearish with a downside price target projected at 89.5 while gold is bullish for an upside price target at 1355. The 30-year U.S. treasury bond index is forming a short-term falling wedge pattern narrow down into an apex for a possible breakout soon. The market reaction on the US government shutdown drama will give a clue on market direction. The broad stock market is projected to be in a short-term bearish time-window until 2/13/2018.

 
Table of Contents


 

 

 
Broad Market about to Turn into Short-Term Bearish Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 7 on Friday 1/19/2018 (down from 18 the previous week) which is below the panic threshold level of 42 and indicates a bullish market. The Wilshire 5000 index is above the 89-day exponential moving average, and the momentum is negative. Based on the forecast of LWX, the broad stock market is projected to be in a short-term bearish time-window until 2/13/2018. (see the second table below).

 

The LWX Indicator in Last Four Weeks (Actual)

 

The LWX Indicator in Next Four Weeks (Forecast)

 

The daily chart below has the Wilshire 5000 index with both the BIX and the Momentum indicators. The current market status is summarized as follows:

Short-Term Cycle: peak
Date of Next Cycle Low: 2/13/2018
Broad Market Instability Index (BIX): 7, below the panic threshold (bullish)
Momentum Indicator: negative (bearish)

 


 
Sector Performance Ranking with Home Construction Sector Leading


 

The following table is the percentage change of sectors and major market indexes against the 89-day exponential moving average (EMA89). The Wilshire 5000 index, as an average or a benchmark of the total market, is 6.90% above the EMA89. Outperforming sectors are Home Construction (13.95%), Banks (10.02%), and Consumer Services (9.98%). Underperforming sectors are Utilities (-6.15%), Real Estate (-3.38%), and Telecommunication (1.96%).
 

 

 
S&P 500 Index in Primary Upward Wave 5


 

The SPX formed a 2-year bullish uptrend channel pattern on the weekly chart. This uptrend channel can be counted as a part of primer impulse wave [5] which is the last upward wave inside a multi-year primer [1][2][3][4][5] five-wave sequence started from 2009. The current primer upward wave [5] is in progress to develop an intermediate (1)(2)(3)(4)(5) five-wave sequence. We are in the middle of primer wave [5] with intermediate upward wave (3) that is in a process to have 12345 sub-wave sequence. Now intermediate upward wave (3) has upward sub-wave 5 in development.

Sub-wave 5 has broken above the upper line of the uptrend channel. This is a warning sign for forming a potential Bump-and-Run Reversal Top pattern. As prices move further away from the lead-in trend line, excessive speculation kicks in and pushes prices rising fast to form a bump top.

 


 
German DAX Index: Elliott Wave


 

In the following weekly chart, the German DAX index is in primer impulse wave [5] of a multi-year primer [1][2][3][4][5] five-wave sequence. Upward primer wave [5] is in progress to develop an intermediate (1)(2)(3)(4)(5) five-wave sequence. Currently it is in intermediate corrective wave (4).

 


 
India Bombay Index in 5-Month Bullish Uptrend Channel


 

The India Bombay Stock Exchange 30 Sensex index is forming a 5-month bullish uptrend channel. Now prices reach the upper boundary of the channel, and will test the resistance to see if we will get a breakout or pullback from there.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index formed a 2-year rising wedge pattern on the weekly chart. Now prices reach the upper boundary of the wedge, and will test the resistance to see if we will get a breakout or pullback from there.

 


 
US Treasury Bond Forming 2.5-Month Falling Wedge Pattern


 

The 30-year U.S. treasury bond index is forming a 2.5-month falling wedge pattern. Prices reach the lower boundary of the wedge as the pattern becomes narrow down into apex for a breakout either upward or downward.

 


 
US Dollar Bearish Below 3-Month Descending Broadening Wedge Pattern


 

The U.S. dollar index formed a 3-month descending broadening wedge pattern. Price has broken below the lower boundary of the wedge. The dollar index is bearish with a downside price target projected at 89.5.

 


 
Gold Broke above 4-Month Falling Wedge Pattern


 

The gold index formed a 4-month falling wedge pattern, and prices broke above the upper boundary of the wedge. It is bullish with an upside price target projected at 1355.

 

 
Silver Forming 4-Month Descending Broadening Triangle Pattern


 

The silver index is forming a 4-month descending broadening triangle pattern. Price is near the upper horizontal resistance of the pattern, and may test the resistance.

 

 
Crude Oil in Bullish 5-Month Uptrend Channel


 

Crude oil index is forming a 5-month bullish uptrend channel. Price just pulled back from the upper channel line. It is bullish as long as prices stay above the lower boundary of the channel.

 


 
Asset Class Performance Ranking with Crude Oil Leading


 

The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently crude oil is outperforming and the US dollar is underperforming.
 
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