09/20/2020 – Market Update
Critical Level for Stocks Mid-Term Trend Change
The stock market closed lower last week. The S&P 500 index reached the lower boundary of its 4-month uptrend channel, and it is critical to see if the price is able to hold above the lower boundary of the trend channel. Breaking below this level would be a trend change in the intermediate term. Home Construction, Precious Metals, and Materials sectors ranked as the top three sectors with mostly strong technical strengths. Gold maintained staying in a multi-month uptrend channel and the US 30-year treasury bond was neutral. The US dollar is bearish in a descending broadening wedge pattern. The broad stock market is projected to be in a short-term neutral time-window until 9/23/2020.
Table of Contents
- Broad Market is in Short-Term Neutral Time-Window
- Sector Performance Ranking with Home Construction Leading
- S&P 500 Index in Primary Upward Wave X
- German DAX Index: Elliott Wave
- India Bombay Index Forming 6-Month Rising Wedge Pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- US Treasury Bond in 6.5-Month Ascending Triangle Pattern
- US Dollar Forming 2-Month Descending Broadening Wedge Pattern
- Gold Forming 6-Month Uptrend Channel Pattern
- Crude Oil in 4-Month Uptrend Channel Pattern
- Asset Class Performance Ranking with Equity Leading
Broad Market in Short-Term Neutral Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 48 on Friday 9/18/2020 (down from 93 the previous week) which is above the panic threshold level of 42 and indicates a bearish market. The Wilshire 5000 index is above 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 neutral time-window until 9/23/2020.
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: 9/23/2020
Broad Market Instability Index (BIX): 48, above the panic threshold (bearish)
Momentum Indicator: negative (bearish)
Sector Performance Ranking with Home Construction 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 Home Construction, Precious Metals, and Materials. Underperforming sectors are Energy, Telecommunication, and Utilities.
S&P 500 Index in Primary Upward Wave X
As shown in the weekly chart below, since October of 2018, the SPX has been in a primary corrective wave [W]–[X]–[Y] sequence. Primary flat wave [W] ended late March, and primary upward wave [X] has started. Primary upward wave [X] is going to have intermediate (a)–(b)–(c) three-wave sequence. It has been in upward intermediate wave (a) of the (a)–(b)–(c) three-wave sequence. Downward intermediate wave (b) will be the next. The current pullback could be either a correction inside upward intermediate wave (a) or a start of downward intermediate wave (b).
The S&P 500 index on daily chart is forming a 4-month uptrend channel pattern. It is bullish as long as the price stays above the lower boundary of the channel.
German DAX Index: Elliott Wave
In the following weekly chart, since early March the German DAX index has been in primary upward wave [X] which will have an intermediate (a)–(b)–(c) three-wave sequence. Currently it is still in upward intermediate wave (a).
India Bombay Index Forming 6-Month Rising Wedge Pattern
The India Bombay Stock Exchange 30 Sensex index is forming a 6-month rising 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 2.5-month ascending triangle pattern. It is neutral before the price breaks out from the triangle.
In the following weekly chart, the Shanghai Stock Exchange Composite index formed a 1.5-year symmetrical triangle pattern. The price has broken above the upper boundary of the triangle with an upside price target projected at 3425. This price target has been reached. Now it is in a consolidation.
US Treasury Bond in 6.5-Month Ascending Triangle Pattern
The 30-year U.S. treasury bond index is forming a 6.5-month ascending triangle pattern. It is neutral before the price breaks out from the triangle.
US Dollar Forming 2-Month Descending Broadening Wedge Pattern
The U.S. dollar index is forming a 2-month descending broadening wedge pattern. It is bearish before the price breaks above the upper boundary of the wedge.
Gold Forming 6-Month Uptrend Channel Pattern
The gold index is forming a 6-month uptrend channel pattern. It is bullish as long as the price stays above the lower boundary of the channel.
Silver Forming 7-week Symmetrical Triangle Pattern
The silver index is forming a 7-week symmetrical triangle pattern. It is neutral before the price breaks out from the triangle.
Crude Oil in 4-Month Uptrend Channel Pattern
The crude oil index formed a 4-month uptrend channel pattern. It is bullish as long as the price stays above the lower boundary of the channel.
Asset Class Performance Ranking with Equity 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 equity is outperforming and oil is underperforming.
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