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02/23/2020 – Market Update

February 24, 2020 Leave a comment

 

Gold Breakout

 

Gold decisively broke out from a 6-week ascending triangle pattern last week and advanced sharply towards a short-term price target projected at 1680. The 30-year US treasury bond also advanced towards a short-term price target projected at 165. The crude oil is neutral with the price confined in a trading range. The US stock market reversed from record highs last week. The broad stock market is projected to be in a short-term bearish time-window until 3/10/2020.

 
Table of Contents


 

 

Broad Market in Short-Term Bearish Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 43 on Friday 2/21/2020 (up from 28 the previous week) which is right 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 3/10/2020.

 

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: 3/10/2020
Broad Market Instability Index (BIX): 43, right 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, Technology, and Semiconductors. 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. Intermediate expanded wave (X) has completed a sub-wave a-b-c-d-e sequence.

 

The S&P 500 index on daily chart is forming a 6.5-month rising wedge pattern. It is bullish as long as the price stays above the lower boundary of the wedge.

 


 
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. Upward intermediate wave (X) was extended.

 


 
India Bombay Index Forming 3-Month Symmetrical Triangle Pattern


 

The India Bombay Stock Exchange 30 Sensex index is forming a 3.5-month symmetrical broadening triangle pattern. It is neutral before the price breaks out from the triangle.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index is forming a 9.5-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 is forming a 1-year descending 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 has broken above the upper boundary of the wedge. It is bullish with an upside price target projected at 165.

 


 
US Dollar Forming 6.5 Month Broadening Triangle Pattern


 

The U.S. dollar index is forming a 6.5 month broadening triangle pattern. The price reached the upper boundary of the triangle, and reversed last week. It is neutral before the price breaks out from the triangle.

 


 
Gold Broke above 6-Week Ascending Triangle Pattern


 

The gold index formed a 6-week ascending triangle pattern on the daily chart. The price sharply broke above the upper boundary of the triangle last week. It is bullish with an upside price target projected at 1680.

 

 
Silver Forming 5.5-Month Trading Range


 

The silver index is forming a 5.5-month trading range between 16.5 and 18.75. It is neutral before the price breaks out from the range.

 

 
Crude Oil Forming 4-Week Trading Range


 

The crude oil index is forming a 4-week horizontal trading range between 49.5 and 54. It is neutral before the price breaks out from the range.

 


 
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.