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05/12/2019 – Market Update

May 12, 2019 Leave a comment

 

Stock Market Turns Volatile

 

The stock market suffered sharp losses last week as readings of our Broad Market Instability Index jumped above the panic threshold level. The S&P 500 index finally had a downward breakout from its 4-month bearish rising wedge pattern, and a downward intermediate wave started. A downside price target is projected at 2740 for the S&P 500 index. The broad stock market is projected to be in a short-term bearish time-window until 5/17/2019.

 
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 73 on Friday 5/10/2019 (up from 16 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 5/17/2019 (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: 5/17/2019
Broad Market Instability Index (BIX): 73, above the panic threshold (bearish)
Momentum Indicator: negative (bearish)

 

 
Sector Performance Ranking with Home Construction 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 Home Construction, Semiconductors, and Real Estate. Underperforming sectors are Oil Equipment, Energy, and Biotech.

 

 

 
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. Last week downward intermediate wave (Y) just started, and it will have a sub-wave a-b-c sequence. Now it is in downward sub-wave a.

 

The S&P 500 index on daily chart below formed a 4-month rising wedge pattern which corresponds to upward intermediate wave (X). Last week the price broke below the lower boundary of the wedge, and downward intermediate wave (Y) started. It is bearish with a downside price target projected at 2740.

 


 
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. Last week upward intermediate wave (X) just ended, and downward intermediate wave (Y) started.

 


 
India Bombay Index Broke below 5-Week Ascending Broadening Wedge Pattern


 

The India Bombay Stock Exchange 30 Sensex index formed a 5-week ascending broadening wedge pattern. Last week the price broke below the lower boundary of the wedge. It is bearish with a downside price target projected at 38260. This price target has been quickly reached.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index formed a 2-month ascending broadening wedge pattern. Last week the price broke below the lower boundary of the wedge. It is bearish with a downside price target would be projected at 2900. This price target has been quickly reached.

 

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 5-Month Ascending Broadening Wedge


 

The 30-year U.S. treasury bond index is forming a 5-month ascending broadening wedge pattern. It is neutral before the price breaks out from the wedge.

 


 
US Dollar Forming 12-Month Rising Wedge Pattern


 

The U.S. dollar index is forming a 12-month rising wedge pattern. It is neutral before the price breaks out from the pattern.

 


 
Gold Forming 3.5-Month Falling Wedge Pattern


 

The gold index is forming a 3.5-month falling wedge pattern. It is neutral before the price breaks out from the pattern.

 

 
Silver Forming 4-Month Falling Wedge Pattern


 

The silver index is forming a 4-month falling wedge pattern. It is neutral before the price breaks out from the pattern.

 

 
Crude Oil Broke Below 4-Month Rising Wedge Pattern


 

The crude oil index formed a 4-month rising wedge pattern. The price has broken below the lower boundary of the wedge. It is bearish with a downside price target projected at 57.5.

 


 
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 oil is underperforming.