03/04/2018 – Market Update
Stock Market is Still in a Correction Phase
The intermediate-term correction of the stock market continues with a possible A-B-C corrective wave sequence, and downward wave C started last week. The S&P 500 index is forming a 7-week symmetrical triangle pattern that presents psychological energy coiling up like a spring to set up for next breakout. A sharp movement could follow once the price breaches either boundary of the triangle pattern. The broad stock market is projected to be in a short-term bearish time-window until 3/21/2018.
Table of Contents
- Broad Market to be in Short-Term Bearish Time-Window
- Sector Performance Ranking with Semiconductors Sector Leading
- S&P 500 Index in Primary Upward Wave 5
- German DAX Index: Elliott Wave
- India Bombay Index Forming 6-Month Ascending Broadening Wedge Pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- US Treasury Bond in 3-Month Bearish Downtrend Channel
- US Dollar Forming 1.5-Month Horizontal Trading Range
- Gold Forming 2-month Horizontal Trading Range
- Silver Forming 8-Month Symmetrical Triangle Pattern
- Crude Oil Forming a Bump-and-Run Reversal Top Pattern
- Asset Class Performance Ranking with Crude Oil Leading
Broad Market to be in Short-Term Bearish Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 47 on Friday 3/2/2018 (up from 10 the previous week) which is above the panic threshold level of 42 and indicates a bearish 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 3/21/2018. (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: 3/21/2018
Broad Market Instability Index (BIX): 47, 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 0.38% above the EMA89. Outperforming sectors are Semiconductors (6.33%), Technology (4.99%), and Banks (2.86%). Underperforming sectors are Precious Metals (-7.71%), Home Construction (-6.88%), and Real Estate (-6.25%).
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. The weekly chart below shows that a long-term picture of the SPX is still in a 27-month bullish uptrend channel.
After intermediate upward wave (3) having 1–2–3 –4–5 sub-wave sequence ended in late January, intermediate corrective wave (4) has been in progress with a, b and c sub-waves, which a and c are downward waves and b is a bounce wave in between. Currently we are in downward sub-wave c.
In the following daily chart of the SPX, the ongoing middle-term correction with a sub-wave a–b–c sequence is forming a 7-week symmetrical triangle pattern that psychological energy coils up like a spring to set up for next breakout. 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 often follows. In case a breakout is downward, the downside price target would be projected at 2500.
In the following daily chart of the SPX, the ongoing middle-term correction with a sub-wave a–b–c sequence is forming a 7-week symmetrical triangle pattern that psychological energy coils up like a spring to set up for next breakout. 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 often follows. In case a breakout is downward, the downside price target would be projected at 2500.
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. The price is likely to test the lower boundary again. If the price is unable to hold above the lower boundary of the wedge, a downward breakout from the pattern could push the price 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. The price could test the lower horizontal boundary again.
US Treasury Bond in 3-Month Bearish Downtrend Channel
The 30-year U.S. treasury bond index is forming a 3-month bearish downtrend channel pattern. It is bearish as long as the price stays below the upper boundary of the channel.
US Dollar Forming 1.5-Month Horizontal Trading Range
The U.S. dollar index is forming an 1.5-month horizontal trading range between 88.5 and 90.5. It is also forming a potential bullish double bottom pattern. Last week prices tried to break above the upper horizontal boundary of the range but failed. The price is still inside the trading range.
Gold Forming 2-month Horizontal Trading Range
The gold index is forming a 2-month horizontal trading range between 1315 and 1365. It is also forming a potential bearish double top pattern. Last week prices tried to break below the lower horizontal boundary of the range but failed. The price is still inside the trading range.
Silver Forming 8-Month Symmetrical Triangle Pattern
The silver index is forming an 8-month symmetrical triangle pattern. It is neutral before the 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. After price broke above the uptrend channel confined between the lead-in trendline and the first parallel line in December, the index 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 ran up more than twice the lead-in height.
Since last month the 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.
Since last month the 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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