The US stock market had a bearish top reversal from all-time highs and declined sharply last week. Except Oil Equipment, Biotech, Pharmaceuticals, and Healthcare sectors, all other sectors had their StockCharts Technical Rank (SCTR) dropped on a weekly basis. Readings of our Broad Market Instability Index surged up to the panic threshold level. Based on the top reversal last week, the intermediate-term view on the S&P 500 index has been changed to bearish with starting the first downward intermediate wave, and downside price targets have been projected as detailed in this week report. The US dollar index is forming a multi-week inverse head-and-shoulders pattern for a potential bullish reversal. The 30-year US treasury bond remained bearish with a downtrend channel pattern. The broad stock market is projected to be in a short-term bearish time-window until 2/11/2021.

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 42 on Friday 1/29/2021 (up from 3 the previous week) which is right at 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 bearish time-window until 2/11/2021.

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:

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 Biotech. Underperforming sectors are Precious Metals, Utilities, and Real Estate.

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] most likely ended last week, and primary downward wave [Y] started. Primary downward wave [Y] is going to have intermediate (w)–(x)–(y) three-wave sequence. Right now it is just at the beginning of the first intermediate downward wave (w) of primary wave [Y].

The S&P 500 index on daily chart formed a 5-month butterfly pattern which is a bearish 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 to a 1.27 or 1.618 extension of the A-B leg. After it reached to 1.738 extension early last week, the S&P 500 index reversed at the all time high and declined sharply. Now this bearish butterfly pattern has completed with the point D price level at the end of the pattern. This D price level is commonly used to sell short seeing it as a good risk/reward ratio after the overbought move. The bearish butterfly pattern typically gives two downside price targets, the first one at 0.618 extension of the C-D leg, and the second one at 1.27 extension of the C-D leg. In our case of the S&P 500 index, we have two downside price targets, the first one at 3500, and the second one at 3100.

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. Now primary upward wave [X] should have ended, and primary downward wave [Y] starts with its first intermediate downward wave (w).

The India Bombay Stock Exchange 30 Sensex index formed a 3.5-month rising wedge pattern. The price breached the lower boundary of the wedge. It is bearish with a downside price target projected at 45500.

The Shanghai Stock Exchange Composite index is forming a 3-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.

The 30-year U.S. treasury bond index is forming a 7-month downtrend channel pattern. It is bearish before the price breaks above the upper boundary of the channel.

The U.S. dollar index is forming a 2-month inverse head-and-shoulders pattern. It will be a bullish signal once the price rises above the resistance of the neckline.

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

The silver index is forming a 6-month descending triangle pattern. It is neutral before the price breaks out from the triangle.

The crude oil 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.

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.