03/21/2021 – Market Update
Market Momentum Turned Negative
The stock market pulled back from all-time high last week with negative momentum but very low volatility. Oil Equipment, Energy, and Banks ranked as the top three sectors with mostly strong technical strengths. The S&P 500 index is forming a short-term ascending broadening wedge pattern which has a bearish bias for a potential bearish reversal. Also crude oil is forming a topping pattern for a potential breakdown. The 30-year US treasury is forming a bump-and-run pattern for a potential bullish reversal. The broad stock market is projected to be in a short-term bullish time-window until 3/24/2021.
Table of Contents
- Broad Market in Short-Term Bullish Time-Window
- Sector Performance Ranking with Oil Equipment Leading
- S&P 500 Index Ending Primary Upward Wave X
- German DAX Index: Elliott Wave
- India Bombay Index Broke below 5.5-month Ascending Broadening Wedge Pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- US Treasury Bond in 6-Month Bump-and-Run Pattern
- US Dollar Forming a 2.5-Month Ascending Broadening Wedge Pattern
- Gold Broke Below 8-Month Descending Triangle Pattern
- Crude Oil in 6-Week Ascending Broadening Triangle Pattern
- Asset Class Performance Ranking with Oil Leading
Broad Market in Short-Term Bullish Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 2 on Friday 3/19/2021 (down 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 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 3/24/2021.
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: peak
Date of Next Cycle High: 3/24/2021
Broad Market Instability Index (BIX): 2, below the panic threshold (bullish)
Momentum Indicator: negative (bearish)
Sector Performance Ranking with Oil Equipment 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 Oil Equipment, Energy, and Banks. Underperforming sectors are Precious Metals, Pharmaceuticals, and Utilities.
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 is forming a 3.5-month ascending broadening wedge pattern. It is bullish as long as the price stays above the lower boundary of the wedge.
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 Broke below 5.5-month Ascending Broadening Wedge Pattern
The India Bombay Stock Exchange 30 Sensex index formed a 5.5-month ascending broadening wedge pattern. The price broke below the lower boundary of the wedge. It is bearish with a downside price target projected at 39500.
Shanghai Composite Index: Intermediate-Term Pictures
The Shanghai Stock Exchange Composite index formed a 4-month ascending broadening wedge pattern. The price breached the lower boundary of the wedge. It is bearish with a downside price target projected at 3225.
In the following weekly chart, the Shanghai Stock Exchange Composite index formed a 1.5-year rising wedge pattern. The price broke below the lower boundary of the wedge. It is bearish with a downside price target projected at 3150.
US Treasury Bond in 6-Month Bump-and-Run Pattern
The 30-year U.S. treasury bond index is forming a 6-month bump-and-run pattern. The price declined below the third parallel line. It is bearish until the price cross above the third parallel line.
US Dollar Forming a 2.5-Month Ascending Broadening Wedge Pattern
The U.S. dollar index is forming a 2.5-month ascending broadening wedge pattern. It is bullish as long as the price stays above the lower boundary of the wedge.
Gold Broke Below 8-Month Descending Triangle Pattern
The gold index formed a 8-month descending triangle pattern. The price has broken below the lower boundary of the triangle. It is bearish with a downside price target projected at 1600.
Silver in 7.5-Month Trading Range Pattern
The silver index is forming a 7.5-month horizontal trading range pattern. It is neutral before the price breaks out from the range.
Crude Oil in 6-Week Ascending Broadening Triangle Pattern
The crude oil index is forming a 6-week ascending broadening triangle pattern. It is neutral before the price breaks out from the triangle.
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 US treasury bond is underperforming.
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