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07/11/2021 – Market Update

July 12, 2021 Leave a comment

 

Watch Out Market Volatility

 

The stock market was choppy as the market volatility started to move last week. Readings of our Broad Market Instability Index had a large swing range around 100. Real Estate, Technology, and Energy ranked as the top three sectors with mostly strong technical strengths. Crude oil, the US dollar, and the 30-year US treasury bond also experienced a large range of price back-and-forth movements. The market volatility is about to return. The broad stock market is projected to be in a short-term bearish time-window until 8/3/2021.

 
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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 7 on Friday 7/9/2021 (up from 2 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 bearish time-window until 8/3/2021.

 

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: 8/3/2021
Broad Market Instability Index (BIX): 7, below the panic threshold (bullish)
Momentum Indicator: negative (bearish)

 

 
Sector Performance Ranking with Real Estate 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 Real Estate, Technology, and Energy. 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 is forming a 3-month rising wedge pattern. It is bullish as long as the price is 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 7-Week Rising Wedge Pattern


 

The India Bombay Stock Exchange 30 Sensex index is forming a 7-week rising wedge pattern. It is bullish as long as the price is above the lower boundary of the wedge. Now the price is testing the lower boundary of the wedge.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index is forming a 4-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 in 2-Month Ascending Broadening Wedge Pattern


 

The 30-year U.S. treasury bond index is forming a 2-month ascending broadening wedge pattern. It is bull as long as the price is above the lower boundary of the wedge.

 


 
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. This price target has been reached, and now it is in a consolidation.

 


 
Gold Broke below 3-Month Uptrend Channel Pattern


 

The gold index formed a 3-month uptrend channel pattern. The price has broken below the lower boundary of the channel. It is bearish with a downside price target projected at 1760. This price target has been reached, and now it is in a consolidation.

 

 
Silver Broke below 2-Month Ascending Broadening Wedge Pattern


 

The silver index formed a 2-month ascending broadening wedge pattern. The price has broke below the lower boundary of the wedge. It is bearish with a downside price target projected at 25.

 

 
Crude Oil Broke above 3.5-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. This price target has been reached.

 


 
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.