Home > News > 08/12/2018 – Market Update

08/12/2018 – Market Update

 

U.S. Dollar Breakout

 

The U.S. dollar broke above a 3-month rising wedge chart pattern last week, and advanced sharply to its 13-month high. The dollar is very bullish to start its second upward leg with a price target projected at 97.4. The 30-year U.S. treasury bond index is forming a 6-month inverse head-and-shoulders pattern, and is near a completion of the right shoulder. If the bond price breaks above the neckline of this pattern, the market reaction would turn bullish for the treasury bond but bearish for stocks. The general stock market is still choppy and has a significant internal divergence between the NASDAQ and NYSE indices (see the chart below). For last six months, the NASDAQ index has been in a uptrend to all time highs while the NYSE index has been in a horizontal choppy market going nowhere. The broad stock market is projected to be in a short-term bearish time-window until 8/28/2018.

 

 
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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 62 on Friday 8/10/2018 (up from 30 the previous week) which is above the panic threshold level of 42 and indicates a bearish market. The Wilshire 5000 index is above the 89-day exponential moving average, and the momentum is negative. Based on the forecast of LWX, the broad stock market is projected to be in a short-term bearish time-window until 8/28/2018 (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: 8/28/2018
Broad Market Instability Index (BIX): 62, above the panic threshold (bearish)
Momentum Indicator: negative (bearish)

 


 
Sector Performance Ranking with Internet 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 Internet , Technology, and Pharmaceuticals. Underperforming sectors are Precious Metals, Home Construction, and Consumer Goods.
 

 

 
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 Forming 5-Month Bullish Uptrend Channel


 

The India Bombay Stock Exchange 30 Sensex index is forming a 5-month bullish uptrend channel pattern. The price reached the upper boundary of the channel, and made new highs last week.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index was in a post-bounce decline last week. It reached 2700 level and held above it. 2700 is still a critical level to be watched.

 

In the following weekly chart, the Shanghai Stock Exchange Composite index is forming a 3.5-year descending triangle pattern. If the price breaks below the lower horizontal boundary at 2700, a downside price target would be projected at 2000. How to trade triangle chart patterns can be found here.

 


 
US Treasury Bond Forming 6-Month Inverse 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 near a completion of the right shoulder. Once the price breaks above the neckline, the index would become bullish.

 


 
US Dollar Broke above 3-Month Rising Wedge Pattern


 

The U.S. dollar index formed a 3-month rising wedge pattern. The price broke above the upper boundary of the wedge last week. It is bullish with an upside price target projected at 97.4.

 


 
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.

 


 
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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