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10/21/2018 – Market Update

October 21, 2018 Leave a comment Go to comments

 

Choppy Market

 

The stock market was volatile last week and readings of our Broad Market Instability Index were still high. The S&P 500 index is in a short-term a-b-c corrective wave pattern. Gold and silver are neutral as their prices are forming horizontal trading ranges. The broad stock market is projected to be in a short-term neutral time-window until 10/25/2018, then in a bullish 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 217 on Friday 10/19/2018 (down from 487 the previous week) which is above the panic threshold level of 42 and indicates a bearish market. The Wilshire 5000 index is below 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 10/25/2018, then in a bullish 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: bottom
Date of Next Cycle High: 11/14/2018
Broad Market Instability Index (BIX): 217, above the panic threshold (bearish)
Momentum Indicator: negative (bearish)

 


 
Sector Performance Ranking with Utilities 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 Utilities, Healthcare, and Pharmaceuticals. Underperforming sectors are Home Construction , Materials, and Oil Equipment.
 

 

 
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 it is in downward sub-wave 2 which is going to have a corrective a-b-c mini-wave sequence. The weekly chart below shows a long-term picture of the SPX staying in a 3-year bullish uptrend channel. The price is testing the lower boundary of the 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. Now downward sub-wave 2 has broken below the lower boundary of the rising wedge, and this sub-wave is gong to have a corrective a-b-c mini-wave sequence. Now it is in upward mini-wave b before downward mini-wave c.

 


 
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. The index formed a 18-month head-and-shoulders top pattern. Recently the price broke below the neckline of the pattern. It is bearish with a downside price target projected at 11000.

 


 
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 has broken below the lower boundary of the wedge. 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 formed a 3.5-year descending triangle pattern. The price breached the lower boundary of the triangle. It is bearish with a downside price target projected at 2000 as long as the price is below the lower boundary of the triangle.

 


 
US Treasury Bond Forming 8.5-Month Descending Broadening Wedge

 

The 30-year U.S. treasury bond index is forming a 8.5-month descending broadening wedge pattern. It is bearish and volatile for the index.

 


 
US Dollar in 5-Month Ascending Broadening Wedge Pattern

 

The U.S. dollar index is forming a 5-month ascending broadening wedge pattern. It is neutral as long as the price stays above the lower boundary of the wedge.

 


 
Gold in 3-Month Trading Range

 

The gold index is forming a 3-month horizontal trading range between 1185 and 1235. It is neutral before the price breaks out from the range.

 

 
Silver Forming 2-Month Trading Range

 

The silver index is forming a 2-month 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 US Dollar 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 the US dollar is outperforming and the US treasury bond is underperforming.
 
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