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10/07/2018 – Market Update

October 8, 2018 Leave a comment

 

Market Volatility Surged Up

 

Last week readings of our Broad Market Instability Index crossed above the panic threshold level and surged up to a 7-month high, and the market momentum was dipped in the negative territory. The S&P 500 index sharply broke below its 4-month rising wedge as a short-term corrective wave started towards the downside. The price of the SPX could retrace to the level of 2810. The 30-year U.S. treasury bond index also broke below its 6-month trading range and declined fast. The broad stock market is projected to be in a short-term bearish time-window until 10/18/2018.

 
Table of Contents

 

 

Broad Market in Short-Term Bearish Time-Window

 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 150 on Friday 10/5/2018 (up from 37 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 very negative. Based on the forecast of the Leading Wave Index (LWX), the broad stock market is projected to be in a short-term bearish time-window until 10/18/2018 (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): 150, above the panic threshold (bearish)
Momentum Indicator: very 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 , Energy, and Utilities. Underperforming sectors are Home Construction , Precious Metals, 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.

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 has ended, and short-term downward sub-wave 2 has started. 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 formed 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). Last week the price broke below the lower boundary of the rising wedge with downward sub-wave 2 which is going to have a corrective a-b-c mini-wave sequence. This downward breakout has a downside price target projected at 2810.

 


 
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 Broke Below 5.5-Month Ascending Broadening Wedge Pattern

 

The India Bombay Stock Exchange 30 Sensex index formed a 5.5-month ascending broadening wedge pattern which typically has a bearish indication. The price broke below the lower boundary of the wedge last week. It is bearish with a downside price target projected at 32800.

 


 
Shanghai Composite Index: Intermediate-Term Pictures

 

The Shanghai Stock Exchange Composite index is forming a 10-month falling wedge pattern. It is bearish as long as the price is 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 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 Broke Below 6-Month Trading Range

 

The 30-year U.S. treasury bond index formed a 6-month trading range between 139 and 145. The price broke below the lower boundary of the range last week. It is bearish with a downside price target projected at 135.

 


 
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 Forming 7-week Trading Range

 

The silver index is forming a 7-week trading range between 14.1 and 14.9. It is neutral with the price staying inside the range.

 

 
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 the US treasury bond is underperforming.
 
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