09/27/2020 – Market Update
S&P 500 Index Held above 89-Day Moving Average
The stock market was volatile and choppy last week. The S&P 500 index maintained above the 89-day exponential moving average although readings of our Broad Market Instability index surged above the panic threshold level. Home Construction, Precious Metals, and Internet sectors ranked as the top three sectors with mostly strong technical strengths. Gold and silver weakened as the US dollar turned bullish with a breakout from a 2-month descending broadening wedge pattern. The US 30-year treasury bond is still neutral. The broad stock market is projected to be in a short-term bullish time-window until 10/13/2020.
Table of Contents
- Broad Market is in Short-Term Bullish 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 Broke below 6-Month Rising Wedge Pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- US Treasury Bond in 7-Month Ascending Triangle Pattern
- US Dollar Broke above 2-Month Descending Broadening Wedge Pattern
- Gold Forming 6-Month Ascending Broadening Wedge Pattern
- Crude Oil in 4-Month Uptrend Channel Pattern
- Asset Class Performance Ranking with Equity Leading
Broad Market in Short-Term Bullish Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 103 on Friday 9/25/2020 (up from 48 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 bullish time-window until 10/13/2020.
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: upward
Date of Next Cycle High: 10/13/2020
Broad Market Instability Index (BIX): 103, 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 Internet. Underperforming sectors are Oil Equipment, Energy, and Telecommunication.
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 ascending broadening wedge pattern. It is bullish as long as the price stays above the lower boundary of the wedge.
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 in upward intermediate wave (a). Downward intermediate wave (b) will be the next.
India Bombay Index Broke below 6-Month Rising Wedge Pattern
The India Bombay Stock Exchange 30 Sensex index formed a 6-month rising wedge pattern. The price broke below the lower boundary of the wedge last week. It is bearish with a downside price target projected at 34000.
Shanghai Composite Index: Intermediate-Term Pictures
The Shanghai Stock Exchange Composite index is forming a 3-month horizontal trading range between 3200 and 3450. It is neutral before the price breaks out from the range.
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 7-Month Ascending Triangle Pattern
The 30-year U.S. treasury bond index is forming a 7-month ascending triangle pattern. It is neutral before the price breaks out from the triangle.
US Dollar Broke above 2-Month Descending Broadening Wedge Pattern
The U.S. dollar index formed a 2-month 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 95.3.
Gold Forming 6-Month Ascending Broadening Wedge Pattern
The gold index is forming a 6-month ascending broadening wedge pattern. It is bullish as long as the price stays above the lower boundary of the wedge.
Silver Broke below 7-week Symmetrical Triangle Pattern
The silver index formed a 7-week symmetrical triangle pattern. The price broke below the lower boundary of the triangle last week. It is bearish with a downside price target projected at 23. This target has been fast reached.
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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