10/11/2020 – Market Update
Sharp Rally in Stocks
The stock market had a strong advance last week. Home Construction, Semiconductors, and Internet sectors ranked as the top three sectors with mostly strong technical strengths. It will be a check point to see if the current rally is able to send the S&P 500 index above the 3600 level within the current short-term bullish window. Otherwise, a failure to make a higher high would be a bearish warning sign for moving to the downside. Gold and silver were still weak while the US dollar and the US 30-year treasury bond were 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 3-month broadening triangle Pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- US Treasury Bond in 7-Month Ascending Triangle Pattern
- US Dollar in a 2.5-month Symmetrical Triangle Pattern
- Gold Forming 6-Month Ascending Broadening Wedge Pattern
- Crude Oil in 6-Week Trading Range 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 1 on Friday 10/9/2020 (down from 26 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 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): 1, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)
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, Semiconductors, and Internet. Underperforming sectors are Energy, Oil Equipment, 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. A strong reversal to the upside last week will check if the index is able to make higher high to keep upward intermediate wave (a) alive. Otherwise, downward intermediate wave (b) will start.
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. However, it would be a bearish sign with a strong potential to break to the downside if the current advance has a failure to either reach the upper boundary of wedge or make a higher high.
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 3-month broadening triangle Pattern
The India Bombay Stock Exchange 30 Sensex index is forming a 3-month broadening 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 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 in a 2.5-month symmetrical triangle Pattern
The U.S. dollar index is forming a 2.5-month symmetrical triangle pattern. It is neutral before the price breaks out from the triangle.
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. However, it would be a bearish warning sign if a significant pullback without reaching the upper boundary of the wedge.
Silver in 2.5-month descending triangle Pattern
The silver index is forming a 2.5-month descending triangle pattern. It is neutral before the price breaks out from the triangle.
Crude Oil in 6-Week Trading Range Pattern
The crude oil index is forming a 6-week horizontal trading range between 37 and 41.5. It is neutral before the price breaks out from the range.
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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