Stimulated by the news of the agreement between the US and China to resume trade talks, the stock market hit record highs last week. The excitement will eventually fade after stock fireworks. The Elliott wave analysis suggests that the S&P 500 index is in the late part of intermediate upward wave, and intermediate downward wave will be the next. Stay cautious with a potential bull trap in play. The broad stock market is projected to be in a short-term bearish time-window until 7/12/2019.

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 2 on Friday 7/5/2019 (no change from 2 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 bearish time-window until 7/12/2019 (see the second table below).

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:

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, Technology, and Semiconductors. Underperforming sectors are Oil Equipment, Energy, and Biotech.

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. Last week record highs made by the index degraded the wave count from intermediate wave (Y) to intermediate wave (X). Now it is in the late part of upward sub-wave c of intermediate wave (X). 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 the sub-wave a-b-c sequence of intermediate wave (X). It is neutral before the price breaks out from the wedge.

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 still in upward intermediate wave (X). Downward intermediate wave (Y) will be the next.

The India Bombay Stock Exchange 30 Sensex index is forming a 3-month rising wedge pattern. It is neutral before the price breaks out from the wedge. Now the price is testing the lower boundary of the wedge. If the price breaks below the lower boundary, a downside price target would be projected at 38460.

The Shanghai Stock Exchange Composite index formed a 2-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.

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.

The U.S. dollar index is forming a 2-month descending broadening wedge pattern. It is neutral before the price breaks out from the wedge. Now the price is testing the upper boundary of the wedge. If the price breaks above the upper boundary, an upside price target would be projected at 98.1.

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.

The silver index formed a 2-month ascending broadening wedge pattern. The price broke below the lower boundary of the wedge last Friday. It is bearish with a downside price target projected at 14.35.

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

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 the US dollar is underperforming.