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06/02/2019 – Market Update

June 2, 2019 Leave a comment

 

Stocks Tumble as US Treasury Bond Bullish Breakout

 

The broad stock market extended slide last week. Readings of our Broad Market Instability Index surged to 295 which is the highest level in five months. A downward breakout from a 4-month ascending broadening wedge pattern on the S&P 500 index implies a downside price target at 2680. The 30-year U.S. treasury bond index had an upward breakout from a 5-month ascending broadening wedge pattern and it became bullish with an upside price target projected at 155. Gold also broke out upward from its 4-month falling wedge pattern and an upside price target is projected at 1340. The broad stock market is projected to be in a short-term bearish time-window until 6/10/2019.

 
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 295 on Friday 5/31/2019 (up from 74 the previous week) which is above the panic threshold level of 42 and indicates a bearish market. The Wilshire 5000 index is below 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 6/10/2019 (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: 6/10/2019
Broad Market Instability Index (BIX): 295, 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, Real Estate, and Utilities. Underperforming sectors are Oil Equipment, Energy, 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. 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 formed a 4-month ascending broadening wedge pattern. The price broke below the lower boundary of the wedge last week. It is bearish with a downside price target projected at 2680 which is the lowest valley of the wedge pattern.

 


 
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 in downward intermediate wave (Y).

 


 
India Bombay Index Broke above Descending Broadening Triangle Pattern


 

The India Bombay Stock Exchange 30 Sensex index formed a 2-month descending broadening triangle pattern. The price broke above the upper boundary of the triangle. Based on this breakout, an upside price target is projected at 41100.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index is forming a 4-week descending 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 Broke above 5-Month Ascending Broadening Wedge


 

The 30-year U.S. treasury bond index formed a 5-month ascending broadening wedge pattern. The price broke above the upper boundary of the wedge last week. It is bullish with an upside price target projected at 155.

 


 
US Dollar Forming 13-Month Rising Wedge Pattern


 

The U.S. dollar index is forming a 13-month rising wedge pattern. It is neutral before the price breaks out from the pattern.

 


 
Gold Broke above 4-Month Falling Wedge Pattern


 

The gold index formed a 4-month falling wedge pattern. The price broke above the upper boundary of the wedge last week. It is bullish with an upside price target projected at 1340.

 

 
Silver Forming 5-Month Falling Wedge Pattern


 

The silver index formed a 5-month falling wedge pattern. It is neutral before the price breaks out from the pattern.

 

 
Crude Oil Broke below 5-Month Ascending Broadening Wedge Pattern


 

The crude oil index formed a 5-month ascending broadening wedge pattern. Recently the price has broken below the lower boundary of the wedge. It is bearish with a downside price target projected at 50 which is the lowest valley of the wedge pattern.

 


 
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.