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09/30/2018 – Market Update

October 1, 2018 Leave a comment

 

Sideways Markets

 

The general stock market extended sideways into the fifth week, and price movement was almost flat. Last week readings of our Broad Market Instability Index were approaching the panic threshold level, and the market momentum was in the negative territory. The broad stock market is projected to be in a short-term neutral time-window until 10/5/2018, then in a bearish time-window right after.

 
Table of Contents

 

 

Broad Market in Short-Term Neutral Time-Window

 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 37 on Friday 9/28/2018 (up from 16 the previous week) which is approaching the panic threshold level of 42 and indicates a neutral market. The Wilshire 5000 index is above the 89-day exponential moving average, and the momentum is negative. Based on the forecast of the Leading Wave Index (LWX), the broad stock market is projected to be in a short-term neutral time-window until 10/5/2018, then in a bearish time-window right after (see the second table below).

 

The Leading Wave Index (LWX) Indicator in Last Four Weeks (Actual)

 

The Leading Wave Index (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: 10/18/2018
Broad Market Instability Index (BIX): 37, near the panic threshold (neutral)
Momentum Indicator: negative (bearish)

 


 
Sector Performance Ranking with Healthcare 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 Healthcare , Consumer Services, and Biotech. Underperforming sectors are Precious Metals, Home Construction, and Materials.
 

 

 
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.

Currently it is in intermediate upward wave (5) which is going to a 1–2–3–4–5 sub-wave sequence. Now upward sub-wave 1 is ending, and short-term corrective sub-wave 2 will be next. The weekly chart below shows a long-term picture of the SPX staying in a 3-year bullish uptrend channel.

 

The S&P 500 index on daily chart below is forming a 4-month rising wedge pattern which corresponds to upward sub-wave 1 of the 1–2–3–4–5 sub-wave sequence. This rising wedge in sub-wave 1 is likely to be a leading diagonal which has a bullish indication for strong intermediate upward wave (5). The price currently is testing the lower boundary of the rising wedge with starting downward sub-wave 2 which is a corrective a-b-c mini-wave 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. Now intermediate upward wave (5) is downgraded to intermediate corrective wave (4) which has a a–b–c sub-wave sequence. Currently is in downward sub-wave c. Please note that it is forming a head-and-shoulders pattern and the price is near the neckline of the pattern.

 


 
India Bombay Index in 5.5-Month Ascending Broadening Wedge Pattern

 

The India Bombay Stock Exchange 30 Sensex index is forming 5.5-month ascending broadening wedge pattern which typically has a bearish indication. The price is testing the lower boundary of the wedge. A downward breakout could drive the price down to 32800.

 


 
Shanghai Composite Index: Intermediate-Term Pictures

 

The Shanghai Stock Exchange Composite index is forming a 9-month falling wedge pattern. Recently the price has broken above the upper boundary of the wedge. This breakout has a bullish indication with an upside price target projected at 2900.

 

In the following weekly chart, the Shanghai Stock Exchange Composite index is forming a 3.5-year descending triangle pattern. The price tested the lower horizontal boundary at 2700 and rebounded. The long-term picture is neutral as long as the price is below the upper boundary of the triangle.

 


 
US Treasury Bond in 6-Month Trading Range

 

The 30-year U.S. treasury bond index is forming a 6-month trading range between 139 and 145. It is neutral as long as the price moves inside the range.

 


 
US Dollar in 4.5-Month Ascending Triangle Pattern

 

The U.S. dollar index is forming a 4.5-month ascending triangle pattern. It is neutral as long as the price stays above the lower boundary of the triangle.

 


 
Gold in 6-Month Descending Broadening Wedge Pattern

 

The gold index is forming a 6-month descending broadening wedge pattern. It is bearish as long as the price stays below the upper boundary of the wedge.

 

 
Silver Broke above 3-Month Downtrend Channel

 

The silver index formed a 3-month downtrend channel pattern. The price has sharply broken above the upper boundary of the channel. This breakout has a short-term bullish indication for the silver index.

 

 
Crude Oil Forming 11-Month Ascending Broadening Wedge Pattern

 

The crude oil index is forming a 11-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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