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03/25/2018 – Market Update

March 26, 2018 Leave a comment

 

Volatile Market

 

The market volatility jumped as Fed rate hike hit markets last week. The S&P 500 index had a downward breakout from a 6-week ascending triangle pattern, and it became critical to test if the market is able to hold 27-month long-term uptrend. The price of crude oil broke out upward from its short-term symmetrical triangle pattern and advanced sharply. The 30-Year US treasury bond, US dollar and gold all are still in their short-term horizontal trading ranges waiting for next breakouts either upward or downward. The broad stock market is projected to be in a short-term neutral time-window until 4/2/2018.

 
Table of Contents


 

 

 
Broad Market to be in Short-Term Neutral Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 95 on Friday 3/23/2018 (up from 25 the previous week) which is above the panic threshold level of 42 and indicates a bearish market. The Wilshire 5000 index is below 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 4/2/2018. (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: downward
Date of Next Cycle Low: 4/2/2018
Broad Market Instability Index (BIX): 95, above the panic threshold (bearish)
Momentum Indicator: negative (bearish)

 


 
Sector Performance Ranking with Semiconductors 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 -3.56% below the EMA89. Outperforming sectors are Semiconductors (0.79%), Consumer Services (-1.73%), and Technology (-1.88%). Underperforming sectors are Biotech (-6.58%), Consumer Goods (-6.32%), and Internet (-6.26%).
 

 

 
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.

Now it is in intermediate wave (4) with a sub-wave abc sequence. The weekly chart below shows that a long-term picture of the SPX formed a 27-month bullish uptrend channel. The price is testing the lower boundary of the channel, and it is critical now to check if the market is able to hold this long-term uptrend.

 

Intermediate corrective wave (4) is in a sub-wave abc sequence. The previous bounce is just upward sub-wave b with a short-term (a)-(b)-(c) mini sub-waves. Now it is in downward sub-wave c.

In the following daily chart of the SPX, the middle-term correction formed a 6-week ascending triangle pattern. The price broke below the lower boundary of the triangle last week. Based on this bearish downward breakout, the downside price target is projected at 2567.

 


 
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 still in intermediate corrective wave (4).

 


 
India Bombay Index Broke below 6-Month Ascending Broadening Wedge Pattern


 

The India Bombay Stock Exchange 30 Sensex index formed a 6-month ascending broadening wedge pattern. Recently the price has broken below the lower boundary. Based on this bearish breakout, the downside price target is projected at 31250.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index is forming a 1.5-year ascending broadening right-angle pattern. The broadening aspect of this pattern suggests increasing price volatility with uncertain price movement. The horizontal boundary of the triangle is a major support line to be tested.

 


 
US Treasury Bond in 2-Month Horizontal Trading Range


 

The 30-year U.S. treasury bond index is forming a 2-month horizontal trading range between 141.7 and 145. It is neutral before the next breakout from the trading range.

 


 
US Dollar Forming 2.5-Month Horizontal Trading Range


 

The U.S. dollar index is forming a 2.5-month horizontal trading range between 88.5 and 90.5. It is neutral before the price breaches one of the boundaries of the trading range.

 


 
Gold Forming 2.5-month Horizontal Trading Range


 

The gold index is forming a 2.5-month horizontal trading range between 1315 and 1365. It is neutral before the price breaches one of the boundaries of the trading range.

 

 
Silver Forming 9-Month Symmetrical Triangle Pattern


 

The silver index is forming an 9-month symmetrical triangle pattern. It is neutral before the price breaks out from the triangle.

 

 
Crude Oil Broke above 7-Week Symmetrical Triangle pattern


 

The crude oil index formed a 7-week symmetrical triangle pattern. Both trendlines act as barriers that prevent the price from heading higher or lower, but once the price breaches one of these levels, a sharp movement typically often follows. Last week the price broke above the upper boundary of the triangle, and advanced sharply. Based on this bullish breakout, the upside price target is projected at 68.

 


 
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 copper is underperforming.