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07/28/2019 – Market Update

July 29, 2019 Leave a comment

 

Stocks Mixed ahead of Fed Meeting

 

The stock market finished mixed last week except the S&P 500 and Nasdaq 100 made new highs. Readings of our Broad Market Instability Index started to rise towards the panic threshold. Gold and silver held steady even the US dollar had a bullish breakout from a 2-Month descending broadening wedge pattern. Intermediate upward wave of the S&P 500 is ending, and downward intermediate wave will be the next. For the first time since the financial crisis, it is expected that the Fed will cut the key interest rate by at least 25 basis points at its this week’s meeting. The broad stock market is projected to be in a short-term neutral time-window until 8/12/2019.

 
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 Friday 7/26/2019 (up from 29 the previous week) which is near the panic threshold level of 42 and indicates a neutral market. The Wilshire 5000 index is above the 89-day exponential moving average, and the momentum is slightly positive. 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 8/12/2019.

 

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: 8/23/2019
Broad Market Instability Index (BIX): 34, near the panic threshold (neutral)
Momentum Indicator: slightly positive (neutral)

 

 
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, Semiconductors, and Technology. 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] ended 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 upward sub-wave c of a sub-wave a-b-c sequence in intermediate wave (X) is ending. Downward intermediate wave (Y) will be the next.

 

The S&P 500 index on daily chart below is forming a 7-month rising wedge pattern with a sub-wave a-b-c sequence of intermediate wave (X). It is neutral before the price breaks out from the wedge.

 


 
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 upward intermediate wave (X) nears end. Downward intermediate wave (Y) will be the next.

 


 
India Bombay Index Broke Below 3-Month Rising Wedge Pattern


 

The India Bombay Stock Exchange 30 Sensex index formed a 3-month rising wedge pattern. The price recently has broken below the lower boundary. It is bearish with a downside price target would be projected at 37000.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index formed a 3-month broadening 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 21-month descending broadening wedge pattern. It is neutral before the price breaks out from the triangle. Please note there is a partial decline formed in June. This partial decline inside the descending broadening wedge pattern is a bullish sign indicating the price is likely to break 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 Broke above 2-Month Descending Broadening Wedge Pattern


 

The U.S. dollar index formed a 2-month descending 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 98.1.

 


 
Gold Broke above 3.5-Year Ascending Triangle Pattern


 

The gold index formed a 3.5-year ascending triangle pattern on the weekly chart. The price has recently broken above the upper boundary of the triangle. It is bullish with an upside price target projected at 1570, as long as the price stays above the upper boundary of the triangle.

 

 
Silver Forming 2-Month Ascending Broadening Wedge Pattern


 

The silver index is forming a 2-month ascending broadening wedge pattern. It is neutral before the price breaks out from the wedge.

 

 
Crude Oil Forming 3-Month Descending Broadening Wedge Pattern


 

The crude oil index is forming a 3-month descending broadening 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 crude oil is underperforming.