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03/24/2019 – Market Update

March 24, 2019 Leave a comment

 

Stocks Reversed Lower on Fed Decision

 

The Federal Reserve left its policy rate unchanged and cut growth forecast Wednesday. That triggered a big drop for Treasury yields, and the 30-year U.S. treasury bond index sharply broke out from a 9-week trading range to the upside. Readings of our Broad Market Instability Index crossed above the panic threshold level and made a big jump over 100 we have not seen since late December the beginning of the V-shaped recovery for stocks. The stock market fell and the S&P 500 index retreated below the 2820 level which has been a major resistance over months. Precious metals and utilities now are top outperforming sectors. The broad stock market is projected to be in a short-term bearish time-window until 4/8/2019.

 
Table of Contents

 

 

Broad Market in Short-Term Bearish Time-Window

 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 101 on Friday 3/22/2019 (up from 20 the previous week) which is above the panic threshold level of 42 and indicates a bearish market. The Wilshire 5000 index is above 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 bearish time-window until 4/8/2019 (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: downward
Date of Next Cycle Low: 4/8/2019
Broad Market Instability Index (BIX): 101, above the panic threshold (bearish)
Momentum Indicator: negative (bearish)

 

 
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, Banks, 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.

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 it is in intermediate upward wave (5). This intermediate wave should have a 1–2–3–4–5 sub-wave sequence. Currently it is in corrective sub-wave 2.

 

The S&P 500 index on daily chart below formed a 5-month descending broadening triangle pattern. The upper boundary of the triangle is the 2820 level which has been a major resistance over four months. Last week the price crossed back below the resistance level. Now it is in corrective sub-wave 2 which is a short-term sideways correction with a mini-wave a-b-c sequence. This short-term expanded flat correction may drive mini-wave c to go down beyond mini-wave a.

 


 
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 above 3-Month Ascending Triangle Pattern

 

The India Bombay Stock Exchange 30 Sensex index formed a 3-month ascending triangle pattern. Recently the price has broken above the upper boundary of the triangle and it was bullish with an upside price target projected at 38700. But last Friday the index had a sharp U-turn when the price hit the 38500 level, and a consolidation began.

 


 
Shanghai Composite Index: Intermediate-Term Pictures

 

Recently the Shanghai Stock Exchange Composite index has broken above the neckline of a double-bottom pattern. Based on this breakout, an upside price target was projected at 3125. This price target has been reached. Currently is it in a consolidation.

 

In the following weekly chart, the Shanghai Stock Exchange Composite index formed a 4-year falling wedge pattern. Recently the price has breached the upper boundary of the wedge. It is bullish with an upside price target projected at 3450 as long as the price stays above the upper boundary of the wedge.

 


 
US Treasury Bond Broke above 2.5-Month Trading Range

 

The 30-year U.S. treasury bond index formed a 2.5-month trading range between 144 and 146.5. The price broke above the upper boundary of the range last week. It is bullish with an upside price target projected at 153.5.

 


 
US Dollar Forming 10.5-Month Rising Wedge Pattern

 

The U.S. dollar index is forming a 10.5-month rising wedge pattern. It is neutral before the price breaks out from the pattern.

 


 
Gold Forming 5-Month Ascending Broadening Wedge Pattern

 

The gold index is forming a 5-month ascending broadening wedge pattern. It is neutral before the price breaks out from the pattern.

 

 
Silver Forming 5-Month Uptrend Channel

 

The silver index is forming a 5-month uptrend channel. It is bullish as long as the price stays above the lower boundary of the channel.

 

 
Crude Oil Forming 3-Month Rising Wedge Pattern

 

The crude oil index is forming a 3-month rising wedge pattern. It is neutral before the price breaks out from the wedge.

 


 
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.