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04/21/2019 – Market Update

April 22, 2019 Leave a comment

 

Bearish Signs for Stocks

 

The broad stock market was flat with the market momentum just turned negative last week. Readings of our Broad Market Instability Index started rising for a signal of waking-up market volatility. Chart patterns in the mid-term horizon suggests a market turnaround is near, as bearish rising wedges are building up on the S&P 500 index and crude oil, while bullish falling wedges are forming on gold and silver. The broad stock market is projected to be in a short-term bearish time-window until 5/9/2019.

 
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 34 on Thursday 4/18/2019 (up from 12 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 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 5/9/2019 (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: 5/9/2019
Broad Market Instability Index (BIX): 34, below the panic threshold (bullish)
Momentum Indicator: negative (bearish)

 

 
Sector Performance Ranking with Semiconductors 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 Semiconductors, Home Construction, and Technology. Underperforming sectors are Oil Equipment, Biotech, and Pharmaceuticals.

 

 

 
S&P 500 Index in Primary Downward Wave W


 

As shown in the weekly chart below, since early 2016 the SPX has been in primary impulse wave [5] which is the last upward wave of a multi-year primary five-wave sequence started from 2009. This fifth primary upward wave developed an intermediate (1)(2)(3)(4)(5) five-wave sequence. Both intermediate upward wave (5) and primary upward wave [5] should end in last October, and primary corrective wave [W][X][Y] sequence started right after.

Currently the SPX is in primary corrective wave [W] which is the first primary downward wave of the primary corrective wave [W][X][Y] sequence. In downward wave [W] of a bear market, the fundamental news is usually still positive. Most people see the drop as a correction in a still-active bull market.

This downward wave [W] is going to have an intermediate (W)(X)(Y) three-wave sequence progressively to the downside. So far intermediate waves (W) and (X) have developed. Now it is near the end of upward intermediate wave (X), and downward intermediate wave (Y) will be the next.

 

The S&P 500 index on daily chart below is forming a 3-month rising wedge pattern which corresponds to upward intermediate wave (X). It is neutral before the price breaks out from the wedge. A downside breakout from the wedge will correspond to downward intermediate wave (Y).

 


 
German DAX Index: Elliott Wave


 

In the following weekly chart, since early 2018 the German DAX index has been in primary downward wave [W] which will have an intermediate (W)(X)(Y) three-wave sequence progressively to the downside. So far intermediate wave (W) and wave (X) have developed. Now it is near the end of upward intermediate wave (X), and downward intermediate wave (Y) will start.

 


 
India Bombay Index Forming 2.5-Month Rising Wedge Pattern


 

The India Bombay Stock Exchange 30 Sensex index is forming a 2.5-month rising wedge pattern. It is neutral before the price breaks out from the wedge.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index is forming a 3-week trading range between 3150 and 3270. It is neutral before the price breaks out from the range.

 

In the following weekly chart, the Shanghai Stock Exchange Composite index formed a 4-year falling wedge pattern. Recently the price has broken above 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 Forming 4-Month Ascending Broadening Wedge


 

The 30-year U.S. treasury bond index is forming a 4-month ascending broadening wedge pattern. It is neutral before the price breaks out from the wedge.

 


 
US Dollar Forming 11.5-Month Rising Wedge Pattern


 

The U.S. dollar index is forming a 11.5-month rising wedge pattern. It is neutral before the price breaks out from the pattern.

 


 
Gold Forming 3-Month Falling Wedge Pattern


 

The gold index is forming a 3-month falling wedge pattern. It is neutral before the price breaks out from the pattern.

 

 
Silver Forming 3-Month Falling Wedge Pattern


 

The silver index is forming a 3-month falling wedge pattern. It is neutral before the price breaks out from the pattern.

 

 
Crude Oil Forming 4-Month Rising Wedge Pattern


 

The crude oil index is forming a 4-month rising wedge pattern. It is neutral before the price breaks out from the wedge.

 


 
Asset Class Performance Ranking with Equity 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 equity is outperforming and gold is underperforming.