04/18/2021 – Market Update
Stocks Entered Overbought Territory
The US stock market slowly drifted higher last week. Energy, Oil Equipment, and Banks ranked as the top three sectors with mostly strong technical strengths. The S&P 500 index is overbought and is due for a pullback. Readings of our Broad Market Instability index started to rise. Gold and the 30-year US treasury bond jump up from their bottom process patterns. The broad stock market is projected to be in a short-term bearish time-window until 5/10/2021.
Table of Contents
- Broad Market to be in Short-Term Bearish Time-Window
- Sector Performance Ranking with Energy Leading
- S&P 500 Index Ending Primary Upward Wave X
- German DAX Index: Elliott Wave
- India Bombay Index in 2-Month Falling Wedge Pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- US Treasury Bond in 6-Month Bump-and-Run Pattern
- US Dollar Forming a 3.5-Month Ascending Broadening Wedge Pattern
- Gold Broke above 6-Week Trading Range Pattern
- Crude Oil in 5-Week Descending Triangle Pattern
- Asset Class Performance Ranking with Crude Oil Leading
Broad Market to be in Short-Term Bearish Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 18 on Friday 4/16/2021 (up from 3 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 bearish time-window until 5/10/2021.
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 Low: 5/10/2021
Broad Market Instability Index (BIX): 18, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)
Sector Performance Ranking with Energy 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 Energy, Oil Equipment, and Banks. Underperforming sectors are Precious Metals, Pharmaceuticals, and Biotech.
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 due to end, and primary downward wave [Y] will be the next. Primary downward wave [Y] is going to have intermediate (w)–(x)–(y) three-wave sequence.
The S&P 500 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.
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 2-Month Falling Wedge Pattern
The India Bombay Stock Exchange 30 Sensex index is forming a 2-month falling wedge pattern. It is bearish as long as the price is below the upper boundary of the wedge.
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 formed a 6-month bump-and-run pattern. The price bounced from the third parallel line. It is in a bottom reversal process.
US Dollar Forming a 3.5-Month Ascending Broadening Wedge Pattern
The U.S. dollar 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.
Gold Broke above 6-Week Trading Range Pattern
The gold index formed a 6-week trading range between 1680 and 1760. The price broke above the upper boundary last week. It is bullish with an upside price target projected at 1850.
Silver in 8-Month Trading Range Pattern
The silver index is forming a 8-month horizontal trading range pattern. It is neutral before the price breaks out from the range.
Crude Oil Broke above 5-Week Descending Triangle Pattern
The crude oil index formed a 5-week descending triangle pattern. The price broke above the upper boundary of the triangle. It is bullish with an upside price target projected at 65.5.
Asset Class Performance Ranking with Crude 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 crude oil is outperforming and US treasury bond is underperforming.
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