05/11/2020 – Market Update
Markets are Waiting for Breakout from Triangle Patterns
For the last several weeks, the major financial markets have been moving in horizontal trading patterns as the US dollar and US 30-year treasury bond in symmetrical triangle, the S&P 500 index in ascending triangle, and gold in descending triangle. Because those triangle patterns can be either a continuation pattern or a powerful reversal pattern, the markets are looking for directions to break out. The crude oil price had a bullish breakout from its 2-month falling wedge pattern last week. The broad stock market is projected to be in a short-term bearish time-window until 5/15/2020.
Table of Contents
- Broad Market is in Short-Term Bearish 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 Broadening Wedge Pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- US Treasury Bond Forming 6-Week Symmetrical Triangle Pattern
- US Dollar in 6-Week Symmetrical Triangle Pattern
- Gold Forming 5-week Descending Triangle Pattern
- Crude Oil Broke above 2-month Falling Wedge Pattern
- Asset Class Performance Ranking with US Treasury Bond Leading
Broad Market is in Short-Term Bearish Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 3 on Friday 5/8/2020 (up from 2 the previous week) which is below the panic threshold level of 42 and indicates a bullish market. The Wilshire 5000 index is above 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 bearish time-window until 5/15/2020.
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: 6/5/2020
Broad Market Instability Index (BIX): 3, 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, Internet, and Biotech. Underperforming sectors are Oil Equipment, Energy, and Financials.
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. Waves a and b have been developed, and downward wave c will be the next.
The S&P 500 index on daily chart is forming a 4-week ascending triangle pattern. It is neutral before the price breaks out from the triangle.
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 waves a and b have been developed, and downward wave c will be the next.
India Bombay Index Forming 4-Week Ascending Broadening Wedge Pattern
The India Bombay Stock Exchange 30 Sensex index is forming a 4-week ascending broadening wedge pattern. It is neutral before the price breaks out from the wedge.
Shanghai Composite Index: Intermediate-Term Pictures
The Shanghai Stock Exchange Composite index is forming a 7-week rising wedge pattern. It is neutral before the price breaks out from the wedge.
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 6-Week Symmetrical Triangle Pattern
The 30-year U.S. treasury bond index is forming a 6-week symmetrical triangle pattern. It is neutral before the price breaks out from the triangle.
US Dollar in 6-Week Symmetrical Triangle Pattern
The U.S. dollar index is forming a 6-week symmetrical triangle pattern. It is neutral before the price breaks out from the triangle.
Gold Forming 5-week Descending Triangle Pattern
The gold index is forming a 4-week descending triangle pattern. It is neutral before the price breaks out from the triangle.
Silver in 5-week Symmetrical Triangle Pattern
The silver index formed a 5-week symmetrical triangle pattern. It is neutral before the price breaks out from the triangle.
Crude Oil Broke above 2-month Falling Wedge Pattern
The crude oil index formed a 2-month falling wedge pattern. The price broke above the upper boundary of the wedge. It is bullish with an upside price target projected at 44.
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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