01/03/2021 – Market Update
Stock Market Hovered Near Record Highs
The stock market drifted higher at record highs last week with low volatility and low momentum. The S&P 500 index still slowly stretches the final upward leg of its multi-month butterfly pattern which has a bearish indication of approaching a top reversal. Semiconductors, Consumer Goods, and Banks sectors ranked as the top three sectors with mostly strong technical strengths. The US dollar and 30-year US treasury bond remained in their bearish downward patterns. The broad stock market is projected to be in a short-term bullish time-window until 1/13/2021.
Table of Contents
- Broad Market in Short-Term Bullish 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 in 3-month Rising Wedge Pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- US Treasury Bond in 5-Month Downtrend Channel Pattern
- US Dollar in 2-Month falling wedge Pattern
- Gold in 5-Month Downtrend Channel Pattern
- Crude Oil Broke above 2.5-Month symmetrical Triangle 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 8 on Thursday 12/31/2020 (up from 6 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 slightly 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 1/13/2021.
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: 1/13/2021
Broad Market Instability Index (BIX): 8, below the panic threshold (bullish)
Momentum Indicator: slightly negative (neutral)
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, Consumer Goods, and Banks. Underperforming sectors are Precious Metals, Energy, 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. Currently it is in intermediate upward wave (c) which is the last intermediate upward wave before the next primary downward wave [Y] starts.
The S&P 500 index on daily chart is forming a 4-month butterfly pattern which is a reversal pattern composed of four legs marked X-A, A-B, B-C and C-D. This pattern suggests that the stock market is heading for a major bearish reversal. The C-D leg is the final and most important part of the pattern. The C-D leg very often extends forming a 1.27 or 1.618 extension of the A-B leg. Currently the C-D leg on the SPX chart has 1.408 extension which is in the target range. The C-D leg still stretches, and the final D point needs to be confirmed by a reversal day.
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 intermediate upward wave (c).
India Bombay Index in 3-month Rising Wedge Pattern
The India Bombay Stock Exchange 30 Sensex index is forming a 3-month rising wedge pattern. It is bullish as long as the price stays above the lower boundary of the wedge.
Shanghai Composite Index: Intermediate-Term Pictures
The Shanghai Stock Exchange Composite index formed a 6-month horizontal trading range between 3200 and 3450. It is neutral before the price breaks out from the range. Now the price is testing the upper boundary of the range. It would turn bullish if the price breaks above the upper boundary.
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 5-Month Downtrend Channel Pattern
The 30-year U.S. treasury bond index is forming a 5-month downtrend channel pattern. It is bearish before the price breaks above the upper boundary of the channel.
US Dollar in 2-Month falling wedge Pattern
The U.S. dollar index is forming a 2-month falling wedge pattern. It is bearish before the price breaks above the upper boundary of the wedge.
Gold in 5-Month Downtrend Channel Pattern
The gold index is forming a 5-month downtrend channel pattern. It is bearish as long as the price is below the upper boundary of the channel.
Silver Broke above 4.5-Month Descending Triangle Pattern
The silver index formed a 4.5-month descending triangle pattern. The price broke above the upper boundary of the triangle. It is bullish with an upside price target projected at 28.6.
Crude Oil Broke above 2.5-Month symmetrical Triangle Pattern
The crude oil index formed a 2.5-month symmetrical triangle pattern. The price has broken above the upper boundary. It is bullish with an upside price target projected at 48. This price target has been reached, and now it is in a consolidation.
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 the US dollar is underperforming.
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