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03/18/2018 – Market Update

March 19, 2018 Leave a comment Go to comments

 

Markets Wait on Fed Meeting

 

The price movements in financial markets are bounded in either consolidative patterns or trading ranges ahead of Fed meeting. The S&P 500 index pulled back from the upper resistance level of 2790 last week, and formed a 6-week ascending triangle pattern that suggests the stock market under accumulation. The 30-Year US treasury bond, US dollar and gold all are in their short-term horizontal trading ranges waiting for next breakouts either upward or downward. The crude oil formed a short-term symmetrical triangle pattern on the verge of a breakout too. The broad stock market is projected to be in a short-term bullish time-window until 3/26/2018.

 
Table of Contents

 

 

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

 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 25 on Friday 3/16/2018 (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 positive. Based on the forecast of LWX, the broad stock market is projected to be in a short-term bullish time-window until 3/26/2018. (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: 3/26/2018
Broad Market Instability Index (BIX): 25, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

 


 
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 2.23% above the EMA89. Outperforming sectors are Semiconductors (8.60%), Technology (6.82%), and Internet (5.09%). Underperforming sectors are Precious Metals (-6.04%), Oil Equipment (-3.18%), and Home Construction (-2.98%).
 

 

 
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). 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) ended in late January, intermediate corrective wave (4) has been developed with a, b, c, d and e sub-waves. In the following daily chart of the SPX, the middle-term correction with a sub-wave a–b–c–d–e sequence formed a 6-week ascending triangle pattern. Generally ascending triangles are bullish patterns that indicate accumulation. But the bullish bias can be realized only when the price breaks above the horizontal upper boundary of the triangle.

 


 
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 intermediate corrective wave (4) is ending.

 


 
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.

 


 
US Treasury Bond in 1.5-Month Horizontal Trading Range

 

The 30-year U.S. treasury bond index is forming an 1.5-month horizontal trading range between 141.7 and 145. It is neutral before the next breakout from the trading range.

 


 
US Dollar Forming 2-Month Horizontal Trading Range

 

The U.S. dollar index is forming a 2-month horizontal trading range between 88.5 and 90.5. It is also forming a potential bullish double bottom pattern. It is neutral before the price breaches one of the boundaries of the trading range. The Fed meeting this coming week could move the dollar for an upward breakout.

 


 
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. It is neutral before the price breaches one of the boundaries of the trading range. The Fed meeting this coming week could move gold for a downward breakout.

 

 
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 7-Week Symmetrical Triangle pattern

 

The crude oil index is forming 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 often follows.

 


 
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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