08/26/2018 – Market Update
Possible Short-Term Bottom on US Treasury Bond
The 30-year U.S. treasury bond index has developed an inverse head and shoulders pattern, which signals a short-term bottom process and a possible price recovery after a 2-year downtrend. The price of the index is testing the neckline of the pattern and waiting for a confirmation of breaking decisively above resistance of the neckline. SPX Elliott Wave analysis suggests that the short-term upward third wave is underway to advance towards the upper boundary of a 5-month bullish uptrend channel for hitting all-time highs. The price of crude oil sharply bounced off the lower boundary of an ascending broadening wedge pattern. The broad stock market is projected to be in a short-term bullish time-window until 9/4/2018.
Table of Contents
- Broad Market in Short-Term Bullish Time-Window
- Sector Performance Ranking with Pharmaceuticals Sector Leading
- S&P 500 Index in Primary Upward Wave 5
- German DAX Index: Elliott Wave
- India Bombay Index Forming 5-Month Bullish Uptrend Channel
- Shanghai Composite Index: Intermediate-Term Pictures
- US Treasury Bond Forming 6.5-Month Inverse Head-and-Shoulders Pattern
- US Dollar in 3.5-Month Bullish Uptrend Channel Pattern
- Gold Potentially Forming Bump-and-Run Reversal Bottom Pattern
- Crude Oil Forming 10-Month Ascending Broadening Wedge Pattern
- 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 11 on Friday 8/24/2018 (down from 50 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 9/4/2018 (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: 9/4/2018
Broad Market Instability Index (BIX): 11, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)
Sector Performance Ranking with Pharmaceuticals 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 Pharmaceuticals , Real Estate, and Utilities. Underperforming sectors are Precious Metals, Home Construction, and Semiconductors.
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 1–2–3–4–5 sub-wave sequence. Now it is in upward sub-wave 3. The weekly chart below shows a long-term picture of the SPX staying in a 2.5-year bullish uptrend channel.
Intermediate upward wave (5) is in progress. 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 upward sub-wave 3. 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 5-month uptrend channel. Currently it is in an upward mini-wave iii of upward sub-wave 3.
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. Currently the price is near the all time high.
Shanghai Composite Index: Intermediate-Term Pictures
The Shanghai Stock Exchange Composite index is forming a 7-month falling wedge pattern. It is bearish as long as the price stays below the upper boundary of the wedge.
In the following weekly chart, the Shanghai Stock Exchange Composite index is forming a 3.5-year descending triangle pattern. The price is testing the lower horizontal boundary at 2700. Once the price breaks below the horizontal boundary, the downside price target would be projected at 2000. How to trade triangle chart patterns can be found here.
US Treasury Bond Formed 6.5-Month Inverse Head-and-Shoulders Pattern
The 30-year U.S. treasury bond index formed a 6.5-month inverse head-and-shoulders pattern. The price breached the neckline last week. If the price stays above the neckline, an upside price target would be projected at 148.
US Dollar in 3.5-Month Bullish Uptrend Channel Pattern
The U.S. dollar index is forming a 3.5-month bullish uptrend channel pattern. It is bullish as long as the price remains above the lower boundary of the channel.
Gold Potentially Forming Bump-and-Run Reversal Bottom Pattern
The gold index is potentially forming a bump-and-run reversal bottom pattern. Now the price is testing the warning line.
Silver Forming 2.5-Month Bearish Downtrend Channel Pattern
The silver index is forming a 2.5-month bearish downtrend channel pattern. It is bearish as long as the price stays below the upper boundary of the channel.
Crude Oil Forming 10-Month Ascending Broadening Wedge Pattern
The crude oil index is forming a 10-month ascending broadening wedge. It is bullish as long as the price stays above the lower boundary of the wedge.
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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