Home > News > 03/08/2020 – Market Update

03/08/2020 – Market Update

 

Roller-Coaster Week of Volatile Financial Markets

 

The stock market took big swings up and down last week as the COVID-19 virus was spreading across the world. Gold and silver also had big swings back and forth in their short-term horizontal trading ranges. The crude oil price was very bearish with an intermediate downtrend channel. The 30-year US treasury bond index skyrocketed and made an all-time high. The market volatility was very high, indicated by readings of our Broad Market Instability Index far above the panic threshold level. The S&P 500 index currently has a key support level at 2850 to be tested. Breaking below this level could trigger further selloff. But it is likely to set up a dead-cat bounce soon. 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 766 on Friday 3/6/2020 (down from 1035 the previous week) which is above the panic threshold level of 42 and indicates a bearish market. The Wilshire 5000 index is below 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): 766, far above the panic threshold (bearish)
Momentum Indicator: very negative (bearish)

 

 
Sector Performance Ranking with Precious Metals 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 Precious Metals, Biotech, and Utilities. Underperforming sectors are Oil Equipment, Energy, and Banks.

 

 

 
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 has breached the lower boundary of the wedge. The price is likely to bounce and re-test the lower boundary of the wedge. A rebound could be a dead-cat-bounce for another potential decline after, 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 has sharply broken below the lower boundary of the wedge. It is bearish with a downside price target projected at 2850. The level of 2850 is a key support level. Breaking below this level could trigger further selloff. But it is likely to set up a dead-cat bounce soon.

 


 
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 now it is in downward intermediate wave (Y).

 


 
India Bombay Broke Below 4-Month Broadening Triangle Pattern


 

The India Bombay Stock Exchange 30 Sensex index formed a 4-month broadening triangle pattern. The price has broke below the lower boundary of the triangle. It is bearish with a downside price target projected at 37500. This price target was reached last week.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index is forming a 10-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, and the rally continued.

 


 
US Dollar Forming 7 Month Broadening Triangle Pattern


 

The U.S. dollar index is forming a 7 month broadening triangle pattern. Now the price is near the lower boundary of the triangle. It is neutral before the price breaks out from the triangle.

 


 
Gold Forming 3-Week Trading Range


 

The gold index is forming a 3-week horizontal trading range between 1570 and 1680. It is neutral before price breaks out from the range.

 

 
Silver Forming 6-Month Trading Range


 

The silver index is forming a 6-month horizontal trading range between 16.5 and 18.75. It is neutral before the price breaks out from the range.

 

 
Crude Oil Forming 2.5-Month Downtrend Channel


 

The crude oil index is forming a 2.5-month downtrend channel pattern. It is bearish as long as the price below the upper boundary of the channel.

 


 
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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