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11/04/2018 – Market Update

November 5, 2018 Leave a comment Go to comments

 

Markets Heading into Midterm Election

 

The stock market bounced from the October low last week after it got oversold. Readings of our Broad Market Instability Index went down below the panic threshold level, and the market momentum became positive. The SPX has likely ended downward wave C of a corrective sub-wave A-B-C sequence. Gold and silver are neutral as they stay in their short-term horizontal trading ranges. The 30-year U.S. treasury bond index is still bearish with its multi-month descending broadening wedge pattern in progress. The markets this week will focus on both the 2018 US midterm election and Fed meeting. The broad stock market is projected to be in a short-term bullish time-window until 11/15/2018.

 
Table of Contents

 

 

Broad Market in Short-Term Bullish Time-Window

 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 32 on Friday 11/2/2018 (down from 513 the previous week) which is below the panic threshold level of 42 and indicates a bullish market. The Wilshire 5000 index is below the 89-day exponential moving average, and the momentum is positive. Based on the forecast of the Leading Wave Index (LWX), the broad stock market is projected to be in a short-term bullish time-window until 11/15/2018 (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: upward
Date of Next Cycle High: 11/15/2018
Broad Market Instability Index (BIX): 32, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

 


 
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 Utilities. Underperforming sectors are Oil Equipment, Home Construction, and Energy.
 

 

 
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.

Now it is in intermediate corrective wave (4). This intermediate corrective wave extends the correction started from the early this year, and it has a A–B–C sub-wave sequence. The downward move last month is sub-wave C which is the last wave of intermediate corrective wave (4). There is a bearish sign that downward sub-wave C broke below the lower boundary of a 3-year bullish uptrend channel.

 

The S&P 500 index on daily chart below formed a 4-month rising wedge pattern. Downward sub-wave C of intermediate corrective wave (4) has broken below the lower boundary of the rising wedge, and this downward sub-wave C has had a 1-2-3-4-5 mini-wave sequence. Last week downward mini-wave 5 of the sequence ended, and upward sub-wave 1 of intermediate upward wave (5) started.

 


 
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 it is in intermediate corrective wave (4) which has a A–B–C sub-wave sequence. Downward sub-wave C is ending.

 


 
India Bombay Index Forming 5-Week Descending Broadening Wedge Pattern

 

The India Bombay Stock Exchange 30 Sensex index is forming a 5-week descending broadening wedge pattern. It is bearish as long as the price is below the upper boundary of the wedge.

 


 
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 9-Month Descending Broadening Wedge

 

The 30-year U.S. treasury bond index is forming a 9-month descending broadening wedge pattern. It is bearish and volatile for the index.

 


 
US Dollar in 5.5-Month Ascending Broadening Wedge Pattern

 

The U.S. dollar index is forming a 5.5-month ascending broadening wedge pattern. It is neutral as long as the price stays above the lower boundary of the wedge.

 


 
Gold in 3.5-Month Trading Range

 

The gold index is forming a 3.5-month horizontal trading range between 1185 and 1240. It is neutral before the price breaks out from the range.

 

 
Silver Forming 2.5-Month Trading Range

 

The silver index is forming a 2.5-month trading range between 14.1 and 14.9. It is neutral with the price staying inside the range.

 

 
Crude Oil Broke Below 1-Year Ascending Broadening Wedge Pattern

 

The crude oil index formed a 1-year ascending broadening wedge. Last week the price broke below the lower boundary of the wedge. It is bearish with a downside price target projected at 55.

 


 
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 Crude Oil is underperforming.
 
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