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05/20/2018 – Market Update

May 21, 2018 Leave a comment Go to comments

 

Bullish Stocks and Bearish Gold & Bonds

 

Gold had a bearish downward breakout from a mid-term trading range last week as the US dollar extended its advance. The 30-year U.S. treasury bond also broke down from its mid-term broadening triangle pattern. The S&P 500 index is at the early stage of its intermediate upward wave with a projected price target at 2930. The broad stock market is projected to be in a short-term bullish time-window until 5/24/2018.

 
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 18 on Friday 5/18/2018 (down from 23 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 5/24/2018 (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: 5/24/2018
Broad Market Instability Index (BIX): 18, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

 


 
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 1.59% above the EMA89. Outperforming sectors are Energy (9.1%), Oil Equipment (8.24%), and Technology (3.65%). Underperforming sectors are Home Construction (-5.41%), Telecommunication (-5.34%), and Consumer Goods (-4.09%).
 

 

 
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.

Intermediate corrective wave (4) with a sub-wave a–b–c sequence has ended. Now Intermediate upward wave (5) just started with upward sub-wave 1. The weekly chart below shows that a long-term picture of the SPX stays in a 28-month bullish uptrend channel.

 

In the following daily chart of the SPX, the middle-term correction formed a 3-month descending triangle pattern. The price has recently broken above the upper boundary of the triangle. Based on this bullish breakout, the upside price target is 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) with upward sub-wave 1.

 


 
India Bombay Index Broke Upside Price Target Reached

 

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 was projected at 35600. This target was reached last week, and the price retreated for a consolidation.

 


 
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. Recently the price has bounced off the horizontal boundary.

 


 
US Treasury Bond Broke below 3.5-Month Broadening Triangle Pattern

 

The 30-year U.S. treasury bond index formed a 3.5-month broadening triangle pattern. The price broke below the lower boundary of the triangle last week. Based on this bearish breakdown, a downside price target is projected at 138.3.

 


 
US Dollar in Consolidation

 

The U.S. dollar index has reached our short-term upside price target of 92.25 after the price broke above its 3-month trading range. Now it should be in a short-term consolidation.

 


 
Gold Broke below 4.5-month Horizontal Trading Range

 

The gold index formed a 4.5-month horizontal trading range between 1305 and 1365. Last week the price broke below the lower boundary of the range. Based on this bearish breakdown, a downside price target is projected at 1267.

 

 
Silver Forming 11-Month Symmetrical Triangle Pattern

 

The silver index is forming a 11-month symmetrical triangle pattern. It is neutral before the price breaks out from the triangle.

 

 
Crude Oil Upside Price Target Reached

 

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 was projected at 72. Last week the price target was briefly reached. A consolidation is expected next.

 


 
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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