06/20/2021 – Market Update
Stocks Turned Volatile
Inflation fears triggered the stock market to take a tumble last week. The market volatility raised as readings of our Broad Market Instability Index jumped above the panic threshold level. The S&P 500 index breached the lower boundary of a 4-month uptrend channel. Gold also broke below its 3-month uptrend channel while the US dollar advanced sharply. The 30-year US treasury bond continued moving upward. Energy, Oil Equipment, and Real Estate ranked as the top three sectors with mostly strong technical strengths. The broad stock market is projected to be in a short-term bearish time-window until 7/2/2021.
Table of Contents
- Broad Market 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 4-Month Ascending Triangle Pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- US Treasury Bond Broke above 3-Month Horizontal Trading Range
- US Dollar Broke above 3-Month Falling Wedge Pattern
- Gold Broke Below 3-Month Uptrend Channel Pattern
- Crude Oil Broke above 3-Month Trading Range 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 94 on Friday 6/18/2021 (up from 7 the previous week) which is above 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 7/2/2021.
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: 7/2/2021
Broad Market Instability Index (BIX): 94, above the panic threshold (bearish)
Momentum Indicator: negative (bearish)
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 Real Estate. Underperforming sectors are Precious Metals, Utilities, and Consumer Goods.
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 formed a 4-month uptrend channel pattern. The price breached the lower boundary of the channel last week. It is bearish with a downside price target projected at 4100.
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-Month Ascending Triangle Pattern
The India Bombay Stock Exchange 30 Sensex index is forming a 4-month ascending triangle pattern. It is neutral before the price breaks out from the triangle.
Shanghai Composite Index: Intermediate-Term Pictures
The Shanghai Stock Exchange Composite index is forming a 3-month ascending broadening wedge pattern. It is bullish before the price breaks below the lower boundary of the wedge.
In the following weekly chart, the Shanghai Stock Exchange Composite index is forming a 1.5-year uptrend channel pattern. It is bullish as long as the price stays above the lower boundary of the channel.
US Treasury Bond Broke above 3-Month Horizontal Trading Range
The 30-year U.S. treasury bond index formed a 3-month horizontal trading range between 154 and 158. The price has broken above the upper boundary of the range. It is bull with an upside price target project at 162.
US Dollar Broke above 3-Month Falling Wedge Pattern
The U.S. dollar index formed a 3-month falling wedge pattern. The price has broken above the upper boundary of the wedge. It is bullish with an upside price target projected at 92.4
Gold Broke below 3-Month Uptrend Channel Pattern
The gold index formed a 3-month uptrend channel pattern. The price broke below the lower boundary of the channel last week. It is bearish with a downside price target projected at 1760.
Silver Broke below 2-Month Ascending Broadening Wedge Pattern
The silver index formed a 2-month ascending broadening wedge pattern. The price broke below the lower boundary of the wedge last week. It is bearish with a downside price target projected at 25.
Crude Oil Broke above 3-Month Trading Range Pattern
The crude oil index formed a 3.5-month horizontal trading range pattern. The price has broken above the upper boundary of the range. It is bullish with an upside price target projected at 72.
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 precious metal is underperforming.
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