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04/08/2018 – Market Update

April 9, 2018 Leave a comment

 

Choppy Markets

 

The stock market was choppy last week in the shadow of rising US-China Trade Tensions. The S&P 500 index struggled to defend the level of 2580 which is the lower horizontal boundary of a 2-month descending triangle pattern. Also the Shanghai Stock Exchange Composite index was traded right above a long-term support level 3100. The 30-Year US treasury bond is forming a 2-month uptrend channel. The US dollar and gold are still in their short-term horizontal trading ranges waiting for breakouts. The broad stock market is projected to be in a short-term bullish time-window until 4/20/2018.

 
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 29 on Friday 4/6/2018 (up from 24 the previous week) which is below the panic threshold level of 42 and indicates a bullish market. The Wilshire 5000 index is below the 89-day exponential moving average, and the momentum is slightly positive. Based on the forecast of LWX, the broad stock market is projected to be in a short-term bullish time-window until 4/20/2018. (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: 4/20/2018
Broad Market Instability Index (BIX): 29, below the panic threshold (bullish)
Momentum Indicator: slightly positive (neutral)

 


 
Sector Performance Ranking with Home Construction 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 2.64% below the EMA89. Outperforming sectors are Home Construction (0.22%), Utilities (-0.64%), and Consumer Services (-1.51%). Underperforming sectors are Biotech (-9.08%), Internet (-6.63%), and Oil Equipment (-4.62%).
 

 

 
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 corrective 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. Now downward sub-wave c is ending. In the following daily chart of the SPX, the middle-term correction is forming a 2-month descending triangle pattern. Once it gets support at the horizontal boundary, the price should move up towards the 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 it is in the late part of intermediate corrective wave (4).

 


 
India Bombay Index Broke above 2.5-Month Falling Wedge Pattern


 

The India Bombay Stock Exchange 30 Sensex index formed a 2.5 month falling wedge pattern. Last week the price broke above the upper boundary of the wedge. Based on this bullish breakout, the upside price target is projected at 35600.

 


 
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 Forming 2-Month Uptrend Channel


 

The 30-year U.S. treasury bond index is forming a 2-month uptrend channel. It is bullish as long as the price stays above the lower boundary of the channel.

 


 
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 3-month Horizontal Trading Range


 

The gold index is forming a 3-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 Forming 2.5-Month Ascending Triangle pattern


 

The crude oil index is forming a 2.5-month ascending triangle pattern. It is neutral before the price breaks out from the triangle. The price may test the lower boundary of the triangle soon.

 


 
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 equity is underperforming.
 
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