Home > News > 03/01/2020 – Market Update

03/01/2020 – Market Update

 

Spread of Coronavirus Puts Pressure on Stock Market

 

The stock market plunged more than 10% over coronavirus fears last week. Readings of our Broad Market Instability Index surged up to 1035 which is far above the panic threshold level and is 14-month high since December 2019 stock market correction. The 30-year US treasury bond continued advancing and reached the short-term upside price target 165. Gold also reached the short-term upside price target 1680 early last week then reversed immediately. The crude oil index broke below a multi-week horizontal trading range, and quickly reached a downside price target 44.5. The S&P 500 index broke down from a multi-month rising wedge pattern, and it is very bearish with the nearest downside price target projected at 2850 and a dead-cat bounce likely after. The broad stock market is projected to be in a short-term bearish time-window until 3/10/2020.

 
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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 1035 on Friday 2/28/2020 (up from 43 the previous week) which is far above the panic threshold level of 42 and indicates a very bearish market. The Wilshire 5000 index is below the 89-day exponential moving average, and the momentum is very 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): 1035, far above the panic threshold (bearish)
Momentum Indicator: very negative (bearish)

 

 
Sector Performance Ranking with Semiconductors 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 Semiconductors, Biotech, 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. Intermediate expanded wave (X) has completed a sub-wave a-b-c-d-e sequence. Now it is in intermediate downward wave (Y).

The SPX formed a 14-month ascending broadening wedge pattern on the weekly chart. The price broke below the lower boundary of the wedge last week. It is bearish with a downside price target projected at 2600.

 

The S&P 500 index on daily chart formed a 6.5-month rising wedge pattern. The price broke below the lower boundary of the wedge last week. It is bearish with a downside price target projected at 2850. Last week’s sharp plunge has made the price very close to the price target, and a bounce is expected next. But it is likely to be a dead-cat bounce pattern.

 


 
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) ended, and downward intermediate wave (Y) started.

 


 
India Bombay Broke Below 3-Month Symmetrical Triangle Pattern


 

The India Bombay Stock Exchange 30 Sensex index formed a 3.5-month broadening symmetrical triangle pattern. The price broke below the lower boundary of the triangle. It is bearish with a downside price target projected at 37500.

 


 
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. This price target was reached last week.

 


 
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. It is neutral before the price breaks out from the triangle.

 


 
Gold Reached Price Target and Reversed


 

The gold index formed a 6-week ascending triangle pattern on the daily chart. After the price broke above the upper boundary of the triangle, the price reached the upside price target 1680 early last week. Then the price reversed and plunged last Friday.

 

 
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. Currently the price is testing the lower boundary of the range.

 

 
Crude Oil Broke Below 4-Week Trading Range


 

The crude oil index formed a 4-week horizontal trading range between 49.5 and 54. The price broke below the lower boundary of the range last week. It is bearish with a downside price target projected at 44.5. This price target was quickly reached last week.

 


 
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 Oil is underperforming.

 

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