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01/26/2020 – Market Update

January 27, 2020 Leave a comment Go to comments

 

Coronavirus Outbreak Triggers Market Volatility Rising

 

The US stock market pulled back sharply from its all time high peak last week as China’s coronavirus rapidly spreads. Readings of our Broad Market Instability Index jumped above the panic threshold level. An upward breakout from a multi-month falling wedge pattern turned the 30-year U.S. treasury bond bullish last week. Gold is forming a new ascending triangle pattern for next potential breakout to the upside. The broad stock market is projected to be in a short-term bearish time-window until 2/11/2020.

 
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Broad Market in Short-Term Bearish Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 65 on Friday 1/24/2020 (up from 21 the previous week) which is above the panic threshold level of 42 and indicates a bearish market. The Wilshire 5000 index is above the 89-day exponential moving average, and the momentum is negative. 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 2/11/2020.

 

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: downward
Date of Next Cycle Low: 2/11/2020
Broad Market Instability Index (BIX): 65, above the panic threshold (bearish)
Momentum Indicator: negative (bearish)

 

 
Sector Performance Ranking with Home Construction 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, Semiconductors, and Technology. 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 is forming a 9-month rising wedge pattern. It is neutral before the price breaks out from the wedge.

 

In the following weekly chart, the Shanghai Stock Exchange Composite index is forming a 1-year symmetrical triangle pattern. It is neutral before the price breaks out from the triangle.

 


 
US Treasury Bond Broke above 5.5-Month Falling Wedge Pattern


 

The 30-year U.S. treasury bond index formed a 5.5-month falling wedge pattern. The price broke above the upper boundary of the wedge last week. It is bullish with an upside price target projected at 165.

 


 
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 Broke below 3.5-Month Ascending Broadening Wedge Pattern


 

The crude oil index formed a 3.5-month ascending broadening wedge. The price sharply broke below the lower boundary of the wedge last week. It is bearish with a downside price target projected at 52.

 


 
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 oil is underperforming.

 

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