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01/20/2019 – Market Update

January 22, 2019 Leave a comment Go to comments

 

Watch out for a Pullback after V-Shaped Recovery

 

The broad stock market extended a V-shaped recovery into the fourth week without a pullback as readings of our Broad Market Instability Index reached 0 which is an extreme low level below the panic threshold. The S&P 500 index is forming a 3.5-month descending broadening wedge pattern, and the price is approaching the upper boundary of the wedge for a resistance. It is expected to have a consolidation or pullback corresponding to a short-term corrective wave to the downside. The broad stock market is projected to be in a short-term neutral time-window until 1/25/2019, followed by 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 0 on Friday 1/18/2019 (down from 4 the previous week) which is below the panic threshold level of 42 and indicates a bullish market. The Wilshire 5000 index is right above 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 neutral time-window until 1/25/2019 (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: peak
Date of Next Cycle Low: 2/13/2019
Broad Market Instability Index (BIX): 0, 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, Real Estate, and Biotech. 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.

Intermediate corrective wave (4) extended the correction started from early last year, and it had a ABC sub-wave sequence. This ABC corrective sequence formed a expended flat formation which wave B extends beyond the start of wave A, and wave C extends beyond the end of wave A. The end of wave C provides a great trading opportunity.

Now intermediate upward wave (5) has started. This intermediate wave should have a 12345 sub-wave sequence. Currently upward sub-wave 1 is nearing the end, and corrective sub-wave 2 will be the next.

 

The S&P 500 index on daily chart below formed a 3.5-month descending broadening wedge pattern. The broadening wedge indicates a volatile market with great uncertainty. The V-shaped recovery has got into the fourth week without a pullback. The upper boundary of the wedge will be a reference line to test market strength. Now the price is very near the upper boundary of the wedge. It is expected to have a consolidation or pullback corresponding to corrective sub-wave 2 to the downside.

 


 
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 ABC sub-wave sequence. Downward sub-wave C has ended.

 


 
India Bombay Index Forming 7-Week Ascending Triangle Pattern


 

The India Bombay Stock Exchange 30 Sensex index is forming a 7-week ascending triangle pattern. It is neutral before the price breaks out from the triangle.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index formed a 3.5-month descending triangle pattern. The price broke above the upper boundary of the triangle. This is a short-term bullish sign for the index as long as the price stays above the upper boundary of the triangle.

 

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 in intermediate-term 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 11-month Broadening Triangle Pattern


 

The 30-year U.S. treasury bond index formed a 11-month broadening triangle pattern. The broadening triangle indicates a volatile market with great uncertainty. It is neutral before the price break out from the triangle.

 


 
US Dollar Forming 8-Month Ascending Broadening Pattern


 

The U.S. dollar index is forming a 8-month ascending broadening wedge pattern. It is neutral before the price breaks out from the pattern.

 


 
Gold Forming 4-Month Rising Wedge Pattern


 

The gold index is forming a 4-month rising wedge pattern. It would become bearish if the price breaks below the lower boundary of the wedge.

 

 
Silver Forming 4-Month Rising Wedge Pattern


 

The silver index is forming a 4-month rising wedge pattern. It would become bearish if the price breaks below the lower boundary of the wedge.

 

 
Crude Oil V-Shaped Recovery


 

The crude oil index had a V-shaped recovery. Now the price is reaching a neckline to potentially form an inverted head-and-shoulders pattern. A pullback from here would make the right shoulder of the pattern.

 


 
Asset Class Performance Ranking with Gold 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 Gold is outperforming and Crude Oil is underperforming.

 

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