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02/08/2021 – Market Update

February 9, 2021 Leave a comment

 

Stock Market Topping Again

 

The US stock market rebounded from the previous low and advanced to a new high. Semiconductors, Internet, and Oil Equipment sectors ranked as the top three sectors with mostly strong technical strengths. The S&P 500 index returned to the final upward leg of its multi-month butterfly pattern still heading towards a potential top reversal. The US dollar index broke above its inverse head-and-shoulders pattern for a potential bottom out. The 30-year US treasury bond remains bearish with a downtrend channel pattern, and the crude oil index is bullish in an uptrend channel pattern. The broad stock market is projected to be in a short-term neutral time-window until 2/12/2021.

 
Table of Contents


 

 

Broad Market in Short-Term Neutral Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 2 on Monday 2/8/2021 (up from 42 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 neutral time-window until 2/12/2021.

 

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: 2/19/2021
Broad Market Instability Index (BIX): 2, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

 

 
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, Internet, and Oil Equipment. Underperforming sectors are Precious Metals, Utilities, and Real Estate.

 

 

 
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].

 

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. The S&P 500 index resumed the C-D leg last week, and kept this bearish butterfly pattern alive. We are looking forward to another reversal, and keep two downside price targets, the first one at 3500, and the second one at 3100.

 


 
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 4.5-month Ascending Broadening Wedge Pattern


 

The India Bombay Stock Exchange 30 Sensex index is forming a 4.5-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 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.

 


 
US Treasury Bond in 7-Month Downtrend Channel Pattern


 

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.

 


 
US Dollar above 2-Month Inverse Head-and-Shoulders Pattern


 

The U.S. dollar index formed a 2-month inverse head-and-shoulders pattern. The price broke above the neckline last week. It is bullish with an upside price target projected at 91.75, as long as the price stays above the neckline.

 


 
Gold in 8-Month Symmetrical Triangle Pattern


 

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

 

 
Silver in 6-Month Trading Range Pattern


 

The silver index is forming a 6-month horizontal trading range pattern. It is neutral before the price breaks out from the range.

 

 
Crude Oil in 3.5-Month Uptrend Channe Pattern


 

The crude oil index is forming a 3.5-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.