Archive

Archive for October 21, 2019

10/20/2019 – Market Update

October 21, 2019 Leave a comment

 

Triangle Patterns Appear on Major Market Indexes

 

The stock market slowly climbed last week, and will likely hit new records this coming week before the projected short-term bullish time-window closes. As US-China trade talks ramp up and the October Fed meeting is near, symmetrical triangle patterns appear on the S&P 500 index, the Shanghai Stock Exchange Composite index, and the 30-year U.S. treasury bond index. Upcoming valid breakouts from those triangle patterns will determine the direction of the next major move which is either a continuation or a reversal. 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 22 on Friday 10/18/2019 (up from 5 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): 22, 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 Real Estate. Underperforming sectors are Oil Equipment, Energy, and Internet.

 

 

 
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 5.5-Month Downtrend Channel Pattern


 

The India Bombay Stock Exchange 30 Sensex index is forming a 5.5-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 6-week symmetrical 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 10-month symmetrical triangle pattern. It is neutral before the price breaks out from the triangle.

 


 
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 Broke Below 2.5-Month Ascending Triangle Pattern


 

The U.S. dollar index formed a 2.5-month ascending triangle pattern. The price broke below the lower boundary last week. It is bearish with a downside price target projected at 97.12. This price target was quickly reached last week.

 


 
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 broken above the upper boundary of the triangle. It is bullish with an upside price target projected at 1570.

 

 
Silver Forming 8-Week Descending Triangle Pattern


 

The silver index is forming a 8-week descending triangle pattern. It is neutral before the price breaks out from the triangle.

 

 
Crude Oil Forming 5.5-Month Descending Triangle Pattern


 

The crude oil index is forming a 5.5-month descending triangle pattern. It is neutral before the price breaks out from the wedge.

 


 
Asset Class Performance Ranking with Gold 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 gold is outperforming and crude oil is underperforming.