Home > News > 05/19/2019 – Market Update

05/19/2019 – Market Update

 

Markets under the Shadow of US-China Trade War

 

The stock market bounced back from losses after the S&P 500 index hit the 89-day exponential moving average last week. Readings of our Broad Market Instability Index were still above the panic threshold level as the US-China trade war entered a new stage. Ascending broadening wedge patterns are being formed on both the S&P 500 index and crude oil index. We should really pay attention and see if the price of the SPX is able to make new highs during the next short-term bullish time-window. If not, a partial rising formation inside the ascending broadening wedge would be most likely to result in a downward breakout from the wedge after. The broad stock market is projected to be in a short-term neutral time-window until 5/22/2019.

 
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Broad Market in Short-Term Neutral Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 136 on Friday 5/17/2019 (up from 73 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 neutral time-window until 5/22/2019 (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: valley
Date of Next Cycle High: 6/7/2019
Broad Market Instability Index (BIX): 136, 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, Real Estate, and Internet. Underperforming sectors are Oil Equipment, Energy, and Materials.

 

 

 
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. Recently downward intermediate wave (Y) has 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 is forming a 3.5-month ascending broadening wedge pattern. It is neutral before the price breaks out from the wedge. We will see if the price is able to make new highs during the next short-term bullish time window. If not, the price would be most likely to break below the lower boundary of the wedge after.

 


 
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. Recently upward intermediate wave (X) has ended, and downward intermediate wave (Y) has 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 is forming a 2-week symmetrical triangle pattern. It is neutral before the price breaks out from the triangle.

 

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 4-Month Falling Wedge Pattern


 

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

 

 
Silver Broke below 4.5-Month Falling Wedge Pattern


 

The silver index formed a 4.5-month falling wedge pattern. Last week the price broke below the lower boundary of the wedge. It is bearish with a downside price target projected at 13.9.

 

 
Crude Oil Forming 4.5-Month Ascending Broadening Wedge Pattern


 

The crude oil index is forming a 4.5-month ascending broadening wedge pattern. It is neutral before the price breaks out from the wedge. We will see if the price is able to reach the upper boundary of the wedge during the next short-term bullish time window. If not, the price would be most likely to break below the lower boundary of the wedge after.

 


 
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 gold is underperforming.

 

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