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10/13/2019 – Market Update

October 14, 2019 Leave a comment

 

Coiling Markets

 

The stock market rebounded last week and the market momentum went back into the positive territory after experiencing a two-week roller-coaster ride. The S&P 500 index has been swinging for over four months as price action coils with lower highs and higher lows in a triangle pattern. This coiling pattern suggests a potential strong move in one direction once triangle support or resistance is broken. The 30-year US treasury bond also is forming a symmetrical triangle pattern for the next breakout. The broad stock market is projected to be in a short-term bullish time-window until 10/28/2019.

 
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 5 on Friday 10/11/2019 (down from 25 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 10/28/2019.

 

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: upward
Date of Next Cycle High: 10/28/2019
Broad Market Instability Index (BIX): 5, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

 

 
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, Precious Metals, and Semiconductors. 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 October of last year, 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. 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. Currently it is in upward intermediate wave (X) which has a sub-wave a-b-c sequence. Now sub-wave c is forming a symmetrical triangle pattern with a mini-wave (a)-(b)-(c)-(d)-(e) sequence.

 

The S&P 500 index on daily chart is forming a 4.5-month symmetrical 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 still in upward intermediate wave (X).

 


 
India Bombay Index Forming 5-Month Downtrend Channel Pattern


 

The India Bombay Stock Exchange 30 Sensex index is forming a 5-month downtrend channel pattern with lower highs and lower lows. It is bearish as long as the price is below the upper boundary of the channel.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index is forming a 5-month 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 is forming a 2-year descending broadening wedge pattern. It is bearish as long as the price is below the upper boundary of the wedge.

 


 
US Treasury Bond Forming 2.5-Month Symmetrical Triangle Pattern


 

The 30-year U.S. treasury bond index is forming a 2.5-month symmetrical triangle pattern. It is neutral before the price breaks out from the triangle.

 


 
US Dollar Forming 2.5-Month Ascending Triangle Pattern


 

The U.S. dollar index is forming a 2.5-month ascending triangle pattern. It is bullish as long as the price is above the lower boundary of the triangle.

 


 
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.

 

 
Silver Forming 7-Week Descending Triangle Pattern


 

The silver index is forming a 7-week descending triangle pattern. It is neutral before the price breaks out from the triangle.

 

 
Crude Oil Forming 5-Month Descending Triangle Pattern


 

The crude oil index is forming a 5-month descending triangle pattern. It is neutral before the price breaks out from the wedge.

 


 
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 US treasury bond is outperforming and crude oil is underperforming.