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01/19/2020 – Market Update

January 21, 2020 Leave a comment Go to comments

 

Neutralizing at Stock Market Peak

 

The stock market extended rally and closed at record highs last week. The S&P 500 index is in a big ascending broadening wedge formation and the price is testing the upper boundary of the wedge. Gold, silver, and the 30-year U.S. treasury bond are in consolidations, and wait for their next breakouts. The broad stock market is projected to be in a short-term neutral time-window until 1/27/2020.

 
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Broad Market in Short-Term Neutral Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 21 on Friday 1/17/2020 (down from 28 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 neutral time-window until 1/27/2020.

 

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: peak
Date of Next Cycle Low: 2/14/2020
Broad Market Instability Index (BIX): 21, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

 

 
Sector Performance Ranking with Technology 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 Technology, Semiconductors, and Home Construction. Underperforming sectors are Oil Equipment, Energy, and Materials.

 

 

 
S&P 500 Index in Primary Corrective 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 flat 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 flat correction (W) and (X) waves have developed. Currently it is in intermediate expanded wave (X) which has a sub-wave a-b-c-d-e sequence.

 

The S&P 500 index on daily chart is forming a 12-month ascending broadening wedge pattern. As the price reaches the upper boundary of the pattern, a risk for a potential sharp pullback is increasing.

 


 
German DAX Index: Elliott Wave


 

In the following weekly chart, since early 2018 the German DAX index has been in primary flat 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 upward intermediate wave (X).

 


 
India Bombay Index Forming 2.5-Month Ascending Broadening Wedge Pattern


 

The India Bombay Stock Exchange 30 Sensex index is forming a 2.5-month ascending broadening wedge pattern. It is neutral before the price breaks out from the wedge.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index formed a 8-month inverse head-and-shoulders pattern. The price has broken above the neckline. It is bullish with an upside price target projected at 3260.

 

In the following weekly chart, the Shanghai Stock Exchange Composite index formed a 11-month symmetrical triangle pattern. The price has broken above the upper boundary of the triangle. It is bullish with an upside price target projected at 3400.

 


 
US Treasury Bond Forming 5.5-Month Falling Wedge Pattern


 

The 30-year U.S. treasury bond index is forming a 5.5-month falling wedge pattern. It is neutral before the price breaks out from the wedge.

 


 
US Dollar Forming 4.5-Month Downtrend Channel Pattern


 

The U.S. dollar index is forming a 4.5-month downtrend channel pattern. It is bearish as long as the price is below the upper boundary of the channel.

 


 
Gold Forming 6.5-Month Ascending Triangle Pattern


 

The gold index is forming a 6.5-month ascending triangle pattern on the daily chart. It is neutral before the price breaks out from the triangle.

 

 
Silver Forming 4-Month Trading Range


 

The silver index is forming a 4-month trading range between 16.5 and 18.75. It is neutral before the price breaks out from the range.

 

 
Crude Oil Forming 3.5-Month Ascending Broadening Wedge Pattern


 

The crude oil index is forming a 3.5-month ascending broadening wedge. 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 oil is underperforming.

 

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