07/08/2018 – Market Update
Stocks Seen Rebounding
As the US-China trade war started to take effect, the general stock market held very well last week except the Chinese market had an extended sell-off. The S&P 500 index is forming a mid-term bullish ascending triangle pattern confined between a uptrend line and an upper horizontal resistance level at 2795. The Chinese stock market has become oversold, and a dead-cat bounce is likely to be the next. Crude oil and the US dollar are in consolidation after their recent strong advances while gold is bearish in a mid-term downtrend. The broad stock market is projected to be in a short-term bullish time-window until 7/23/2018.
Table of Contents
- Broad Market in Short-Term Bullish Time-Window
- Sector Performance Ranking with Internet Sector Leading
- S&P 500 Index in Primary Upward Wave 5
- German DAX Index: Elliott Wave
- India Bombay Index Forming 2.5-month Rising Wedge Pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- US Treasury Bond Forming 5-Month Descending Broadening Wedge Pattern
- US Dollar Forming 2-Month Rising Wedge Pattern
- Gold Forming 3-month Bearish Downtrend Channel
- Crude Oil in 1-Year Bullish Uptrend Channel
- Asset Class Performance Ranking with Crude Oil Leading
Broad Market in Short-Term Bullish Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 9 on Friday 7/6/2018 (down from 36 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 7/23/2018 (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: 7/23/2018
Broad Market Instability Index (BIX): 9, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)
Sector Performance Ranking with Internet 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 2.15% above the EMA89. Outperforming sectors are Internet (6.75%), Real Estate (5.53%), and Utilities (5.46%). Underperforming sectors are Home Construction (-3.28%), Banks(-2.94%), and Industrals (-0.90%).
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 upward wave (5) has started. This wave is the last intermediate upward wave of primer wave [5], and it will have a 1–2–3–4–5 sub-wave sequence. Now it is in corrective sub-wave 2. The weekly chart below shows a long-term picture of the SPX staying in a 29-month bullish uptrend channel. Corrective sub-wave 2 tested and bounced of the lower boundary of the uptrend channel last week.
Intermediate upward wave (5) has started. This wave is the last intermediate upward wave of primer wave [5], and it will have a 1–2–3–4–5 sub-wave sequence. Now it is in corrective sub-wave 2. The weekly chart below shows a long-term picture of the SPX staying in a 29-month bullish uptrend channel. Corrective sub-wave 2 tested and bounced of the lower boundary of the uptrend channel last week.
The S&P 500 index on daily chart is forming a 4-month ascending triangle pattern. It is neutral before the price breaks out from the triangle. Currently it is in corrective sub-wave 2 with a–b–c mini-waves.
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 upward wave (5) with corrective sub-wave 2.
India Bombay Index Forming 2.5-month Rising Wedge Pattern
The India Bombay Stock Exchange 30 Sensex index is forming a 2.5-month rising wedge wedge pattern. It is bullish as long as the price stays above the lower boundary of the wedge.
Shanghai Composite Index: Intermediate-Term Pictures
After the price broke below the lower horizontal boundary of a 22-month ascending broadening right-angle pattern, the Shanghai Stock Exchange Composite index has been sinking for a month and has touched 2700 level. A dead-cat bounce is likely to be the next.
US Treasury Bond Forming 5-Month Descending Broadening Wedge Pattern
The 30-year U.S. treasury bond index is forming a 5-month descending broadening wedge pattern. It is neutral before the price breaks out from the wedge.
US Dollar Forming 2-Month Rising Wedge Pattern
The U.S. dollar index is forming a 2-month rising wedge pattern. Now the price is going to test the lower boundary of the wedge. It is neutral before the price breaks out from the wedge.
Gold Forming 3-month Bearish Downtrend Channel
The gold index is forming a 3-month downtrend channel pattern, and it is bearish.
Crude Oil in 1-Year Bullish Uptrend Channel
The crude oil index is forming a 1-year uptrend channel on its weekly chart. It is bullish as long as the price stays above the lower boundary of the channel. Now the price sharply approached the upper boundary of the channel and a consolidation is likely to be the 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 copper is underperforming.
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