Home > News > 08/05/2018 – Market Update

08/05/2018 – Market Update

 

Divergence between U.S. and Chinese Stocks

 

The general stock market continued to experience choppy trading last week. The stock performance divergence between the US market and the Chinese market has widened (see the chart below) as the US-China trade conflict escalates. At the close of last Friday, the S&P 500 index was just about 1% below the all time high while the Shanghai Stock Exchange Composite index plunged to two-year low. It seems that the threat of a trade war so far has no significant impact on U.S. stock market but is hurting the benchmark index in China. Currently the Shanghai Composite is fast approaching a critical support level at 2700. Breaking below this level would trigger further sell-off on Chinese stocks, please be extra cautious. The broad stock market is projected to be in a short-term bearish time-window until 8/10/2018.

 

 
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Broad Market in Short-Term Bearish Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 30 on Friday 8/3/2018 (down from 33 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 slightly negative. Based on the forecast of LWX, the broad stock market is projected to be in a short-term bearish time-window until 8/10/2018 (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: downward
Date of Next Cycle Low: 8/10/2018
Broad Market Instability Index (BIX): 30, below the panic threshold (bullish)
Momentum Indicator: slightly negative (neutral)

 


 
Sector Performance Ranking with Technology Sector Leading


 

The following table ranks sectors by using the StockCharts Technical Rank (SCTR) based on six key indicators which cover long-term, medium-term and short-term timeframes. Outperforming sectors are Technology , Internet, and Healthcare. Underperforming sectors are Precious Metals, Home Construction, and Telecommunication.
 

 

 
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) is in progress. This wave is the last intermediate upward wave of primer wave [5], and it will have a 12345 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 2.5-year bullish uptrend channel.

 

The S&P 500 index on daily chart below is forming a 4-month uptrend channel. Currently it is in a consolidation with corrective sub-wave 2 having a mini-wave abc sequence.

 


 
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 Reached Upside Price Target


 

The India Bombay Stock Exchange 30 Sensex index formed a 2.5-month rising wedge wedge pattern. After the price broke above the upper boundary of the wedge, it has been bullish with an upside price target projected at 37300. This price target has been reached, and the price is now in a consolidation.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

After a short-lived dead-cat bounce, the Shanghai Stock Exchange Composite index resumed its decline last week. 2700 is becoming a critical level to be checked this coming week. If the price breaks below this level, sell-off would accelerate with the next downside price target projected at 2000.

 


 
US Treasury Bond Forming 6-Month Head-and-Shoulders Pattern


 

The 30-year U.S. treasury bond index is forming a 6-month inverse head-and-shoulders pattern. Now the price is in the right shoulder. The index would become bullish if the price breaks above the neckline.

 


 
US Dollar Forming 3-Month Rising Wedge Pattern


 

The U.S. dollar index is forming a 3-month rising wedge pattern. It is neutral before the price breaks out from the wedge.

 


 
Gold in 4-month Bearish Downtrend Channel


 

The gold index is forming a 4-month downtrend channel pattern, and it is bearish. The price is looking for a bounce off the lower boundary of the downtrend channel.

 

 
Silver Broke below 1-Year Symmetrical Triangle Pattern


 

The silver index formed a 1-year symmetrical triangle pattern. Recently the price has broken below the lower boundary of the triangle. It is bearish with a downside price target projected at 15.

 

 
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 is in a consolidation.

 


 
Asset Class Performance Ranking with Crude Oil Leading


 

The following table ranks asset class by using the StockCharts Technical Rank (SCTR) based on six key indicators which cover long-term, medium-term and short-term timeframes. Currently crude oil is outperforming and gold is underperforming.
 
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