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05/06/2018 – Market Update

May 7, 2018 Leave a comment

 

Stocks Showed a Sign of Strength

 

The stock market showed strength last week as the S&P 500 index held well above the support level of 2850. If the SPX breaks above the upper boundary of the 3-month descending triangle pattern, it would confirm the beginning of the intermediate upward fifth-wave with a price target projected at 2930. The US dollar reached our short-term price target of 92.25 last week, and a consolidation is expected next. Gold is still in its mid-term horizontal trading range waiting for a breakout. The 30-year US treasury bond shows a sign of a short-term bottom process but a volatile price movement. The broad stock market is projected to be in a short-term bearish time-window until 5/9/2018, followed by a bullish time-window right after.

 
Table of Contents


 

 

 
Broad Market in Short-Term Bearish Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 46 on Friday 5/4/2018 (up from 40 the previous week) which is above the panic threshold level of 42 and indicates a bearish market. The Wilshire 5000 index is slightly 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 bearish time-window until 5/9/2018, followed by a bullish time-window right after (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: valley
Date of Next Cycle Low: 5/9/2018
Broad Market Instability Index (BIX): 46, above the panic threshold (bearish)
Momentum Indicator: slightly positive (neutral)

 


 
Sector Performance Ranking with Energy 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 0.12% below the EMA89. Outperforming sectors are Energy (5.30%), Oil Equipment (3.70%), and Technology (2.91%). Underperforming sectors are Telecommunication (-6.03%), Consumer Goods (-5.79%), and Biotech (-5.30%).
 

 

 
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 holding right above the trendline.

 

Intermediate corrective wave (4) is in a sub-wave abc sequence. In the following daily chart of the SPX, the middle-term correction is forming a 3-month descending triangle pattern. The range confining the price is getting narrow and narrow that would make the price easy to break out either way. If the price can hold above the lower boundary and breaks above the upper boundary of the triangle, it would confirm the beginning of intermediate upward wave (5) with a price target projected at 2930.

 


 
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 beginning of intermediate upward wave (5).

 


 
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. After the price broke above the upper boundary of the wedge, it has had a sharp advance. 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 hold the price. Now the price is testing the horizontal boundary.

 


 
US Treasury Bond Forming 3-Month Broadening Triangle Pattern


 

The 30-year U.S. treasury bond index is forming a 3-month broadening triangle pattern. This pattern suggests a short-term bottom process but a volatile price movement.

 


 
US Dollar Broke above 3-Month Horizontal Trading Range


 

The U.S. dollar index formed a 3-month horizontal trading range between 88.5 and 90.5.
The price has recently broken above the upper boundary of the range. This breakout is very bullish for the US dollar with a short-term upside price target projected at 92.25. This price target was reached last week, and the dollar will get into a short-term consolidation.

 


 
Gold Forming 4-month Horizontal Trading Range


 

The gold index is forming a 4-month horizontal trading range between 1305 and 1365. It is neutral before the price breaches one of the boundaries of the trading range.

 

 
Silver Forming 10-Month Symmetrical Triangle Pattern


 

The silver index is forming a 10-month symmetrical triangle pattern. It is neutral before the price breaks out from the triangle.

 

 
Crude Oil Bullish above 2.5-Month Ascending Triangle pattern


 

The crude oil index formed a 2.5-month ascending triangle pattern. The price has broken above the upper horizontal boundary. Based on this bullish breakout, the upside price target is projected at 72 as long as the price stays above the horizontal line of the triangle.

 


 
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.