02/24/2019 – Market Update
Negative Divergence in Stocks Continued
The broad stock market closed slightly higher last week as the market momentum continued weakening. Gold, silver, 30-year U.S. treasury bond, and US dollar still maintained bullish momentum. Crude oil became bullish after its price broke above the neckline of a head-and-shoulders bottom pattern. The broad stock market is projected to be in a short-term bullish time-window until 2/28/2019, then in a bearish time-window right after.
Table of Contents
- Broad Market in Short-Term Bullish Time-Window
- Sector Performance Ranking with Precious Metals Sector Leading
- S&P 500 Index in Primary Upward Wave 5
- German DAX Index: Elliott Wave
- India Bombay Index Forming 2.5-Month Ascending Triangle Pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- US Treasury Bond Forming 1-Year Broadening Triangle Pattern
- US Dollar Forming 8-Month Ascending Broadening Pattern
- Gold Forming 5-Month Rising Wedge Pattern
- Crude Oil Broke Above Inverted Head-and-Shoulders Pattern
- Asset Class Performance Ranking with Gold Leading
Broad Market in Short-Term Bullish Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 3 on Friday 2/22/2019 (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 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 bullish time-window until 2/28/2019 (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 High: 2/28/2019
Broad Market Instability Index (BIX): 3, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)
Sector Performance Ranking with Precious Metals 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 Precious Metals, Utilities, and Real Estate. Underperforming sectors are Oil Equipment, Energy, and Pharmaceuticals.
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 A–B–C sub-wave sequence. This A–B–C 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.
Now intermediate upward wave (5) has started. This intermediate wave should have a 1–2–3–4–5 sub-wave sequence. Currently it is still in upward sub-wave 1, and corrective sub-wave 2 will be the next.
Intermediate corrective wave (4) extended the correction started from early last year, and it had a A–B–C sub-wave sequence. This A–B–C 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.
Now intermediate upward wave (5) has started. This intermediate wave should have a 1–2–3–4–5 sub-wave sequence. Currently it is still in upward sub-wave 1, and corrective sub-wave 2 will be the next.
The S&P 500 index on daily chart below formed a 4-month descending broadening wedge pattern. Recently the price has broken above the upper boundary of the wedge. It is bullish with an upside price target projected at 2925.
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. Intermediate corrective wave (4) which has a A–B–C sub-wave sequence has ended. Now it is in intermediate upward wave (5) which will have a 1–2–3–4–5 sub-wave sequence.
India Bombay Index Forming 2.5-Month Ascending Triangle Pattern
The India Bombay Stock Exchange 30 Sensex index is forming a 2.5-month ascending triangle pattern. It is neutral before the price breaks out from the pattern.
Shanghai Composite Index: Intermediate-Term Pictures
The Shanghai Stock Exchange Composite index formed a 4-month descending triangle pattern. The price has broken above the upper boundary of the triangle. It is bullish with an upside price target projected at 2820.
In the following weekly chart, the Shanghai Stock Exchange Composite index is forming a 4-year falling wedge pattern. It is neutral before the price breaks out from the pattern.
US Treasury Bond Forming 1-Year Broadening Triangle Pattern
The 30-year U.S. treasury bond index is forming a 1-Year 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 5-Month Rising Wedge Pattern
The gold index is forming a 5-month rising wedge pattern. It is bullish as long as the price is above the lower boundary of the wedge.
Silver Forming 5-Month Rising Wedge Pattern
The silver index is forming a 5-month rising wedge pattern. It is bullish as long as the price is above the lower boundary of the wedge.
Crude Oil Broke Above Inverted Head-and-Shoulders Pattern
The crude oil index formed a 3-month inverted head-and-shoulders pattern. Last week the price breached the neckline. It is bullish with an upside price target projected at 64.
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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