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01/28/2018 – Market Update

January 28, 2018 Leave a comment Go to comments

 

Fast Run-Up in Stock Market

 

Rapid rise of the S&P 500 index with a steep slope drives price further away from a 2-year uptrend line. It is most likely that prices will reach 3000, at least twice of the lead-in uptrend-channel high for forming a potential Bump and Run Top pattern. The Chinese stock market broke above the upper boundary of a 2-year rising wedge pattern last week, and it is bullish with an upside price target at 3900. The price of gold rapidly reached a short-term upside price target 1355 while the US dollar index fell through the downside price target 89.5. Crude oil extended gain in a 5-month bullish uptrend channel. The broad stock market is projected to be in a short-term neutral time-window until 1/30/2018.

 
Table of Contents


 

 

 
Broad Market in Short-Term Neutral Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 8 on Friday 1/26/2018 (up from 7 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 neutral time-window until 1/30/2018. (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: 2/20/2018
Broad Market Instability Index (BIX): 8, below the panic threshold (bullish)
Momentum Indicator: slightly negative (bearish)

 


 
Sector Performance Ranking with Biotech 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 8.19% above the EMA89. Outperforming sectors are Biotech (12.25%), Consumer Services (11.85%), and Banks (10.86%). Underperforming sectors are Utilities (-3.75%), Real Estate (-1.58%), and Consumer Goods (4.25%).
 

 

 
S&P 500 Index in Primary Upward Wave 5


 

The SPX is in 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 a 2-year 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 drives prices rising fast with a deep slope in the bump phase. The first price target should be at least twice of the vertical distance from the lead-in trendline to the warning line. These distances can be measured by drawing a vertical line from the highest highs to the lead-in trend line.

 


 
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 Forming 5-Month Ascending Broadening Wedge Pattern


 

The India Bombay Stock Exchange 30 Sensex index is forming a 5-month ascending broadening wedge pattern. The broadening aspect of this pattern suggests increasing price volatility. Watch out for price reversing at the upper trendline.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index broke above the upper boundary of a 2-year rising wedge pattern on the weekly chart last week. Based on this rising wedge breakout, the upside price target is projected at 3900.

 


 
US Treasury Bond Forming 3-Month Falling Wedge Pattern


 

The 30-year U.S. treasury bond index is forming a 3-month falling wedge pattern. Prices moved narrow down into apex for a potential breakout.

 


 
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. This price target was reached last week.

 


 
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. This price target was reached last week.

 

 
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 is testing the resistance.

 

 
Crude Oil in Bullish 5-Month Uptrend Channel


 

Crude oil index is forming a 5-month bullish uptrend channel. Price touched the upper channel line again last week. 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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