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03/22/2020 – Market Update

March 22, 2020 Leave a comment

 

US Dollar Skyrocketed but Stocks Extended Losses

 

The stock market extended loses last week. The S&P 500 index plunged further with downward wave (Y) in an intermediate expanded flat correction (W)–(X)–(Y) wave sequence. This downward wave has expanded below the low of December 2018, and the S&P 500 index now has had a near 30% lose from its all-time high without any sign for a dead-cat-bounce. After a powerful bullish breakout last week, the US dollar skyrocketed to challenge its 3-year high, and added a big pressure on gold, silver, and other currencies. The 30-year US treasury bond index now is in a consolidation as the federal funds rate is near zero. Crude oil extended loses along with its 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 352 on Friday 3/20/2020 (down from 647 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): 352, above the panic threshold (bearish)
Momentum Indicator: negative (bearish)

 

 
Sector Performance Ranking with Biotech 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 Biotech, Technology, and Healthcare. Underperforming sectors are Oil Equipment, Energy, and Home Construction.

 

 

 
S&P 500 Index in Primary Corrective Wave W


 

As shown in the weekly chart below, since October of 2018, the SPX has been in primary flat wave [W] which is the first primary flat wave of the primary corrective wave [W][X][Y] sequence. This flat wave [W] has developed an intermediate expanded flat correction (W)(X)(Y) three-wave sequence. Now it is in intermediate downward wave (Y), and has expanded below intermediate downward wave (W). 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. The price has quickly plunged far below this price target, and is likely to have a dead-cat-bounce 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 Broke above 7 Month Broadening Triangle Pattern


 

The U.S. dollar index formed a 7 month broadening triangle pattern. After it had bigger and bigger swings between two boundaries of the triangle, the price finally broke above the upper boundary last week. This bullish breakout has an upside price target projected at 103.5, and this price target has been quickly reached.

 


 
Gold Forming 4-Week Falling Wedge Pattern


 

The gold index is forming a 4-week falling wedge pattern. It is bearish before the price breaks above the upper boundary of the wedge.

 

 
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 has broken below the lower boundary of the range. It is bearish with a downside price target projected at 14.25. The price has sharply plunged far below this price target.

 

 
Crude Oil in Downtrend Channel


 

The crude oil index formed a 2.5-month downtrend channel pattern. The price broke below the second parallel channel line last week, and it is bearish in the third 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.