04/12/2020 – Market Update
Stock Market Extended Bounce
The general stock market continued its strong rally last week, and the S&P 500 index is now up about 27% from its COVID-19 crisis sell-off low. Also, gold and silver prices had bullish breakouts on safe-haven demand. Precious metals, biotech, and healthcare sectors ranked as the top three sectors with mostly strong technical strengths. The US dollar, 30-year US treasury bond, and crude oil pulled back from their previous week rally. The S&P 500 index is in a process of a short-term a–b–c three-wave sequence, and now it is at the bounce high of short-term upward wave b. A postbounce decline with downward wave c will be the next. The broad stock market is projected to be in a short-term bullish time-window until 4/13/2020.
Table of Contents
- Broad Market in Short-Term Bullish Time-Window
- Sector Performance Ranking with Precious Metals Leading
- S&P 500 Index in Primary Corrective Wave W
- German DAX Index: Elliott Wave
- India Bombay Index Forming 4-Week Ascending Triangle Pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- US Treasury Bond Forming 3-Month Ascending Broadening Triangle Pattern
- US Dollar Formed a High Wave Pattern
- Gold Forming 5-Month Ascending Triangle Pattern
- Crude Oil Forming Potential Bump and Run Reversal Bottom Pattern
- Asset Class Performance Ranking with US Treasury Bond Leading
Broad Market in Short-Term Bullish Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 0 on Thursday 4/9/2020 (down from 13 the previous week) which is below the panic threshold level of 42 and indicates a bullish market. The Wilshire 5000 index is below the 89-day exponential moving average, and the momentum is positive. 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 4/13/2020.
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: peak
Date of Next Cycle High: 4/13/2020
Broad Market Instability Index (BIX): 0, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)
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 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 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. Currently it is in intermediate downward wave (Y) having a short-term a–b–c wave sequence. After a 30% drop in downward wave a, upward wave b rose about 27% that is likely to be a dead-cat bounce. Once the bounce completes, the price will resume declining with downward wave c.
The S&P 500 index on daily chart is forming a dead-cat bounce pattern with intermediate downward wave (Y) going to have a short-term a–b–c three-wave sequence. After a 30% drop in downward wave a, upward wave b rose about 27%. Now it is at the bounce high, and a postbounce decline with downward wave c will be the 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 has an intermediate (W)–(X)–(Y) three-wave sequence progressively to the downside. Now it is in downward intermediate wave (Y) going to have a short-term a–b–c three-wave sequence. So far downward short-term Downward short-term wave c will be the next.
India Bombay Index Forming 4-Week Ascending Triangle Pattern
The India Bombay Stock Exchange 30 Sensex index is forming a 4-week ascending 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 11-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 downtrend channel pattern. It is bearish before the price breaks above the upper boundary of the channel.
US Treasury Bond Forming 3-Month Ascending Broadening Triangle Pattern
The 30-year U.S. treasury bond index formed a 3-month ascending broadening triangle pattern. It is bullish as long as the price stays above the lower boundary of the triangle.
US Dollar Formed a High Wave Pattern
The U.S. dollar index recently has formed a high wave pattern with the price stretched sharply in both directions about 4.5% around a pivot level of 99.5. It is neutral within this range.
Gold Forming 5-Month Ascending Triangle Pattern
The gold index is forming a 5-month ascending triangle pattern. It is bullish as long as the price stays above the lower boundary of the triangle.
Silver Broke above 6-week Descending Broadening Wedge pattern
The silver index formed a 6-week descending broadening wedge pattern. The price broke above the upper boundary of the wedge last week. It is bullish with an upside price target projected at 19.
Crude Oil Forming Potential Bump and Run Reversal Bottom Pattern
The crude oil index is forming a potential Bump and Run Reversal Bottom pattern. Since the index broke below the first downtrend channel, prices have declined sharply along a steep bump trendline as excessive speculation drove prices down. The price has recently broke above the bump trendline with a bullish reversal. The next upside price target is projected at 31 near the first parallel line.
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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