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02/18/2018 – Market Update

February 19, 2018 Leave a comment Go to comments

 

Stock Market in a Short-Term Bullish Time-Window

 

Last week the stock market bounced back after a sharp decline, and readings of our Broad Market Instability index reduced below the panic threshold level. Technical analysis suggests that the S&P 500 index is in a short-term upward sub-wave which is a part of the intermediate corrective forth-wave. The 30-Year US treasury bond is in a bearish 2-month downtrend channel. The broad stock market is projected to be in a short-term bullish time-window until 3/5/2018.

 
Table of Contents

 

 

 
Broad Market in Short-Term Bullish Time-Window

 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 12 on Friday 2/16/2018 (down from 445 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 positive. Based on the forecast of LWX, the broad stock market is projected to be in a short-term bullish time-window until 3/5/2018. (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: upward
Date of Next Cycle High: 3/5/2018
Broad Market Instability Index (BIX): 12, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

 


 
Sector Performance Ranking with Banks 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 2.33% above the EMA89. Outperforming sectors are Banks (6.01%), Consumer Services (5.09%), and Technology (4.58%). Underperforming sectors are Real Estate (-4.67%), Oil Equipment (-4.29%), and Utilities (-4.13%).
 

 

 
S&P 500 Index in Primary Upward Wave 5

 

The SPX is in primer impulse wave [5] which is the last upward wave of 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.

Intermediate upward wave (3) with 1–2–3 –4–5 sub-wave sequence ended last month. Now it is in intermediate corrective wave (4), and will have three sub-waves, typically a, b and c, which a and c are downward waves and b is a bounce wave in between. Currently we are in upward sub-wave b for a bounce. The SPX is still in a 27-month uptrend channel.

 


 
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 6-Month Ascending Broadening Wedge Pattern

 

The India Bombay Stock Exchange 30 Sensex index is forming a 6-month ascending broadening wedge pattern. The broadening aspect of this pattern suggests increasing price volatility. Now price is testing the lower boundary of the wedge. If price is unable to hold above the lower boundary of the wedge, a downward breakout from the pattern could push the index further down to 31250.

 


 
Shanghai Composite Index: Intermediate-Term Pictures

 

The Shanghai Stock Exchange Composite index is forming a 1.5-year ascending broadening right-angle pattern. It may temporarily find a support at the lower horizontal boundary. If price breaks below the horizontal support level, the index could dip to 2860.

 


 
US Treasury Bond in 2-Month Bearish Downtrend Channel

 

The 30-year U.S. treasury bond index is forming a 2-month bearish downtrend channel pattern. It is bearish as long as price stays below the upper boundary of the channel.

 


 
US Dollar Forming 1-Month Horizontal Trading Range

 

The U.S. dollar index is forming an 1-month horizontal trading range between 88.5 and 90.5. It would be a double bottom pattern if price is able to hold above the lower horizontal boundary.

 


 
Gold Forming 7-month Ascending Right Triangle Pattern

 

The gold index is forming a 7-month ascending right triangle pattern. Recently price recovered from a partial decline, and now is testing the upper horizontal boundary of the triangle.

 

 
Silver Forming 7-Month Symmetrical Triangle Pattern

 

The silver index is forming a 7-month symmetrical triangle pattern. It is neutral before price breaks out from the triangle.

 

 
Crude Oil Forming a Bump-and-Run Reversal Top Pattern

 

The crude oil index is forming a potential bump-and-run reversal top pattern. Since price broke above the uptrend channel confined between the lead-in trendline and the first parallel line in December, the index has advanced rapidly into the bump phase along a bump trendline having a steep up slope. By measuring vertically from the lead-in trendline to the highest high, the bump has run up more than twice the lead-in height.

Recently price has sharply reversed and crossed below both the second parallel line and the bump trendline. This bump-and-run top reversal is bearish for crude oil.

 


 
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 treasury bond is underperforming.
 
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