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03/15/2020 – Market Update

March 15, 2020 Leave a comment

 

Stocks Dropped into Bear Market Territory

 

The stock market plunged on coronavirus fears last week. The S&P 500 index broke below a key support level of 2850, and crashed into free fall. Measuring at the lowest point of last week, the S&P 500 index has dropped over 25% from its all-time high. The stock market has entered bear market territory, and the oversold market is setting up a dead-cat bounce. Both gold and the US dollar have been in bigger and bigger swings back and forth. After skyrocketed to an all-time high, the 30-year US treasury bond index reversed sharply. Crude oil continued bearish downtrend. The broad stock market is projected to be in a short-term bullish time-window until 4/2/2020.

 
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Broad Market Turning in Short-Term Bullish Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 647 on Friday 3/13/2020 (down from 766 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 bullish time-window until 4/2/2020.

 

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: valley
Date of Next Cycle High: 4/2/2020
Broad Market Instability Index (BIX): 647, above the panic threshold (bearish)
Momentum Indicator: negative (bearish)

 

 
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, Healthcare, and Biotech. Underperforming sectors are Oil Equipment, Energy, and Precious Metals.

 

 

 
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 broken below the lower boundary of the wedge. It is bearish with a downside price target projected at 2600. This price target was quickly reached last week. Now a dead-cat-bounce is expected next.

 

The S&P 500 index on daily chart formed a 7-month ascending triangle pattern. The price has sharply broken below the lower boundary of the triangle. It is bearish with a downside price target projected at 2600. This price target was quickly reached last week. Now a dead-cat-bounce is expected next.

 


 
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 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. The price has plunged far below this price target, and is likely to have a rebound next.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index is forming a 10.5-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 Forming 16-Month Ascending Broadening Triangle Pattern


 

The 30-year U.S. treasury bond index formed a 16-month ascending broadening triangle pattern. The price has reached the upper boundary of the triangle, and now is in a consolidation.

 


 
US Dollar Forming 7 Month Broadening Triangle Pattern


 

The U.S. dollar index is forming a 7 month broadening triangle pattern. The price has bigger and bigger swings between two boundaries of the triangle. It is neutral before the price breaks out from the triangle.

 


 
Gold Forming 2.5-Month Broadening Triangle Pattern


 

The gold index is forming a 2.5-month broadening triangle pattern. The price has bigger and bigger swings between two boundaries of the triangle. It is neutral before price breaks out from the triangle.

 

 
Silver Broke Below 6-Month Trading Range


 

The silver index formed a 6-month horizontal trading range between 16.5 and 18.75. The price broke below the lower boundary of the range last week. It is bearish with a downside price target projected at 14.25.

 

 
Crude Oil in Downtrend Channel


 

The crude oil index formed a 2.5-month downtrend channel pattern. The price broke below the lower boundary of the channel last week, and now it is bearish in the second downtrend 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.