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02/21/2021 – Market Update

February 22, 2021 Leave a comment

 

Stock Market Weakens

 

The US stock market drifted lower with slightly increased volatility and negative momentum last week. Semiconductors, Oil Equipment, and Energy ranked as the top three sectors with mostly strong technical strengths. The S&P 500 index pulled back from the upper boundary of a 5-month rising wedge pattern, and the pattern suggests a potential reversal ahead. The 30-year US treasury bond moved sharply lower and the US dollar was weakening last week. The broad stock market is projected to be in a short-term bearish time-window until 3/11/2021.

 
Table of Contents


 

 

Broad Market in Short-Term Bearish Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 10 on Friday 2/19/2021 (up from 1 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 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 3/11/2021.

 

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: downward
Date of Next Cycle Low: 3/11/2021
Broad Market Instability Index (BIX): 10, below the panic threshold (bullish)
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, Oil Equipment, and Energy. Underperforming sectors are Precious Metals, Utilities, and Healthcare.

 

 

 
S&P 500 Index Ending 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. After primary flat wave [W] ended late March of 2020, primary upward wave [X] started. Primary upward wave [X] has developed intermediate (a)(b)(c) three-wave sequence. Primary upward wave [X] is most likely ending, and primary downward wave [Y] is starting. Primary downward wave [Y] is going to have intermediate (w)(x)(y) three-wave sequence. Right now it is in a transition to the first intermediate downward wave (w) of primary wave [Y].

 

Besides the 5-month butterfly pattern pattern, the S&P 500 index is also forming a 5.5-month rising wedge pattern. It is bullish as long as the price stays above the lower boundary of the wedge. But the rising wedge has a bearish bias suggesting a reversal ahead.

 


 
German DAX Index: Elliott Wave


 

In the following weekly chart, since early March of 2020 the German DAX index has been in primary upward wave [X] which developed an intermediate (a)(b)(c) three-wave sequence. Currently it is in a transition from primary upward wave [X] to primary downward wave [Y]. The next will be the first intermediate downward wave (w).

 


 
India Bombay Index in 5-month Ascending Broadening Wedge Pattern


 

The India Bombay Stock Exchange 30 Sensex index is forming a 5-month ascending broadening 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 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.

 

In the following weekly chart, the Shanghai Stock Exchange Composite index is forming a 1.5-year rising wedge pattern. It is bullish as long as the price is above the lower boundary of the wedge.

 


 
US Treasury Bond in 5.5-Month Descending Broadening Wedge Pattern


 

The 30-year U.S. treasury bond index is forming a 5.5-month descending broadening wedge pattern. It is bearish before the price breaks above the upper boundary of the wedge.

 


 
US Dollar in 7-Week Ascending Broadening Wedge Pattern


 

The U.S. dollar index is forming a 7-week ascending broadening wedge pattern. It is bullish as long as the price stays above the lower boundary of the wedge.

 


 
Gold in 8-Month Descending Triangle Pattern


 

The gold index is forming a 8-month descending triangle pattern. It is neutral before the price breaks out from the triangle.

 

 
Silver in 7-Month Trading Range Pattern


 

The silver index is forming a 7-month horizontal trading range pattern. It is neutral before the price breaks out from the range.

 

 
Crude Oil in 4-Month Uptrend Channe Pattern


 

The crude oil index is forming 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 Oil 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 oil is outperforming and the US treasury bond is underperforming.