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06/09/2019 – Market Update

June 9, 2019 Leave a comment

 

Stocks Rebound from Losses

 

The stock market rebounded last week after a broad range of stocks declined for a month. The S&P 500 index started a short-term upward wave which is characterized as wave b in the middle of a corrective a-b-c wave sequence in terms of Elliott Wave analysis, and this upward wave is likely to be setting up for a bull trap before the next decline with downward wave c. To compete with stocks, the 30-year U.S. treasury bond index, gold and silver are all in upward breakouts from their chart patterns. The broad stock market is projected to be in a short-term bullish time-window until 6/20/2019.

 
Table of Contents


 

 

Broad Market in Short-Term Bullish Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 20 on Friday 6/7/2019 (down from 295 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 positive. Based on the forecast of the Leading Wave Index (LWX), the broad stock market is projected to be in a short-term bullish time-window until 6/20/2019 (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: upward
Date of Next Cycle High: 6/20/2019
Broad Market Instability Index (BIX): 20, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

 

 
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, Home Construction, and Real Estate. 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. Downward sub-wave a just finished, and now it is in upward sub-wave b. Downward sub-wave c will be the next.

 

The S&P 500 index on daily chart below is forming a 4-month ascending broadening right-triangle pattern. It is neutral before the price breaks out from the triangle,

 


 
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. Recently the price has broken above the upper boundary of the triangle. Based on this breakout, an upside price target is projected at 41100, as long as the price stays above the upper boundary of the triangle.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index formed a 4-week descending triangle pattern. The price broke below the lower boundary of the triangle. It is short-term bearish with a downside price target projected at 2780.

 

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 has recently broken above the upper boundary of the wedge. 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 has recently broken above the upper boundary of the wedge. It is bullish with an upside price target projected at 1340. This price target was reached last week.

 

 
Silver Broke above 5-Month Falling Wedge Pattern


 

The silver index formed a 5-month falling wedge pattern. The price broke above the upper boundary of the wedge. It is bullish with an upside price target projected at 15.6.

 

 
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.