12/07/2018 – Market Update
Market Direction Needs Decisive Range Breakout
The stock market turned downward sharply last week. The price movement of the S&P 500 index has been bounded in a trading range between 2630 and 2815 for two months. The next decisive breakout from either side of the range will be critical to the stock market direction. Currently it is testing the lower boundary of the range. The 30-year U.S. treasury bond moved up sharply last week but it will face an upside resistance near 144 soon. Gold turned bullish after its price broke out to the upside from a 4.5-month horizontal trading range. The broad stock market is projected to be in a short-term neutral time-window until 12/14/2018.
Table of Contents
- Broad Market in Short-Term Neutral Time-Window
- Sector Performance Ranking with Utilities Sector Leading
- S&P 500 Index in Primary Upward Wave 5
- German DAX Index: Elliott Wave
- India Bombay Index Forming 5-Week Ascending Broadening Wedge Pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- US Treasury Bond Broke above 7-Week Trading Range Pattern
- US Dollar Broke below 2.5-Month Uptrend Channel
- Gold Broke above 4.5-Month Trading Range
- Crude Oil Broke Below 1-Year Ascending Broadening Wedge Pattern
- Asset Class Performance Ranking with US Treasury Bond Leading
Broad Market in Short-Term Neutral Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 95 on Friday 12/7/2018 (up from 12 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 12/14/2018 (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: 12/24/2018
Broad Market Instability Index (BIX): 95, 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, Real Estate, and Healthcare. Underperforming sectors are Oil Equipment, Semiconductors, 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.
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 started from October is sub-wave C which is the last wave of intermediate corrective wave (4). There is a bearish sign that downward sub-wave C has broken below the lower boundary of a 3-year bullish uptrend channel.
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 started from October is sub-wave C which is the last wave of intermediate corrective wave (4). There is a bearish sign that downward sub-wave C has broken below the lower boundary of a 3-year bullish uptrend channel.
The S&P 500 index on daily chart below is forming a 2-month trading range between 2630 and 2815 with a choppy a-b-c-d-e wave sequence of intermediate corrective wave (4). It is neutral before the price breaks out from the range.
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. Now it is still in Downward sub-wave C.
India Bombay Index Forming 5-Week Ascending Broadening Wedge Pattern
The India Bombay Stock Exchange 30 Sensex index is forming a 5-week ascending broadening wedge pattern. It is neutral before the price breaks out from the pattern.
Shanghai Composite Index: Intermediate-Term Pictures
The Shanghai Stock Exchange Composite index is forming a 11-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 10-month Descending Broadening Wedge Pattern
The 30-year U.S. treasury bond index is forming a 10-month descending broadening wedge pattern. The price advanced sharply last week. The upper boundary of the wedge is a resistance to be tested. It is neutral before the price breaks out from the pattern.
US Dollar Broke below 2.5-Month Bullish Uptrend Channel
The U.S. dollar index formed a 2.5-month uptrend channel. The price broke below the lower boundary of the channel last week. It is a short-term bearish sign for the dollar.
Gold Broke above 4.5-Month Trading Range
The gold index formed a 4.5-month horizontal trading range between 1185 and 1240. The price broke above the upper boundary of the range. It is bullish with an upside price target projected at 1285.
Silver Forming 3.5-Month Descending Broadening Wedge
The silver index is forming a 3.5-month descending broadening wedge pattern. It is bearish as long as the price is below the horizontal boundary of the wedge.
Crude Oil Broke Below 1-Year Ascending Broadening Wedge Pattern
The crude oil index formed a 1-year ascending broadening wedge. The price has broken below the lower boundary of the wedge. It is bearish with a downside price target projected at 55. This price target has been crossed over with a sharp selloff. Now it should be in a consolidation.
Asset Class Performance Ranking with US Treasury Bond 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 Treasury bond is outperforming and Crude Oil is underperforming.
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