11/01/2020 – Market Update
Stocks Declined Sharply Before Presidential Election
The stock market declined sharply last week. Readings of our Broad Market Instability Index surged above the panic threshold level. Semiconductors, Home Construction, and Internet sectors ranked as the top three sectors with mostly strong technical strengths. The S&P 500 index has breached the first support level of 3300. The US dollar turned bullish with a breakout from a multi-week descending broadening wedge pattern. Crude oil had a bearish breakdown from a 2-month horizontal trading range. The broad stock market is projected to be in a short-term bearish time-window until 11/4/2020.
Table of Contents
- Broad Market to be in Short-Term Bearish Time-Window
- Sector Performance Ranking with Semiconductors 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 3-Month Falling Wedge Pattern
- US Dollar Broke above from a 5-Week Descending Broadening Wedge Pattern
- Gold Forming 3.5-Month Symmetrical Triangle Pattern
- Crude Oil Broke below 2-Month Trading Range Pattern
- Asset Class Performance Ranking with Equity Leading
Broad Market to be in Short-Term Bearish Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 124 on Friday 10/30/2020 (up from 6 the previous week) which is above the panic threshold level of 42 and indicates a bearish market. The Wilshire 5000 index is below 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 bearish time-window until 11/4/2020.
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: 11/4/2020
Broad Market Instability Index (BIX): 124, above the panic threshold (bearish)
Momentum Indicator: negative (bearish)
Sector Performance Ranking with Semiconductors 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 Semiconductors, Home Construction, 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. Currently it is in downward intermediate wave (b).
The S&P 500 index on daily chart formed a 5-month ascending broadening wedge pattern with a bearish partial rising last month. The price is testing the lower boundary of the wedge. If it breaks below the lower boundary, then the next downside price target would be 2900.
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 downward intermediate wave (b).
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 3.5-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 3-Month Falling Wedge Pattern
The 30-year U.S. treasury bond index is forming a 3-month falling wedge pattern. It is neutral before the price breaks out from the wedge.
US Dollar Broke above from a 5-Week Descending Broadening Wedge Pattern
The U.S. dollar index formed a 5-week descending broadening wedge pattern. Last week the price broke above the upper boundary of the wedge. It is bullish with an upside price target projected at 95.
Gold Forming 3.5-Month Symmetrical Triangle Pattern
The gold index is forming a 3.5-month symmetrical triangle pattern. It is neutral before the price breaks out from the triangle.
Silver in 3-Month Descending Triangle Pattern
The silver index is forming a 3-month descending triangle pattern. It is neutral before the price breaks out from the triangle.
Crude Oil Broke below 2-Month Trading Range Pattern
The crude oil index formed a 2-month horizontal trading range between 37 and 41.5. The price broke below the lower boundary of the range last week. It is bearish with a downside price target projected at 34.5.
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 crude oil is underperforming.
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