07/18/2021 – Market Update
Market Volatility Returning
The stock market pulled back as the market volatility started to return last week. Readings of our Broad Market Instability Index surged above the panic threshold level. Real Estate, Technology, and Financials ranked as the top three sectors with mostly strong technical strengths. The S&P 500 was forming a 3.5-month rising wedge pattern. If the price breaks below the lower boundary of the wedge, it would turn bearish with a downside price target projected at 4075. The broad stock market is projected to be in a short-term bearish time-window until 8/2/2021.
Table of Contents
- Broad Market to be in Short-Term Bearish Time-Window
- Sector Performance Ranking with Real Estate Leading
- S&P 500 Index Ending Primary Upward Wave X
- German DAX Index: Elliott Wave
- India Bombay Index in 8-Week Rising Wedge Pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- US Treasury Bond in 2-Month Ascending Broadening Wedge Pattern
- US Dollar in 4-Week Rising Wedge Pattern
- Gold in 8-Week Descending Broadening Wedge Pattern
- Crude Oil in 5-Week Horizontal 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 75 on Friday 7/16/2021 (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 8/2/2021.
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: 8/2/2021
Broad Market Instability Index (BIX): 75, above the panic threshold (bearish)
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 Financials. Underperforming sectors are Oil Equipment, Precious Metals, and Pharmaceuticals.
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 3.5-month rising wedge pattern. It is bullish as long as the price is above the lower boundary of the wedge. If the price breaks belowe the lower boundary, it would turn bearish with a downside price target projected at 4075.
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 8-Week Rising Wedge Pattern
The India Bombay Stock Exchange 30 Sensex index is forming a 8-week rising wedge pattern. It is bullish as long as the price is above 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 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 in 4-Week Rising Wedge Pattern
The U.S. dollar index is forming a 4-week rising wedge pattern. It is bullish as long as the price stays above the lower boundary of the wedge.
Gold in 8-Week Descending Broadening Wedge Pattern
The gold index is forming a 8-week descending broadening wedge. It is bearish as long as the price is below the upper boundary of the wedge.
Silver in 5-Week Descending Triangle Pattern
The silver index is forming a 5-week descending triangle pattern. It is neutral before the price breaks out from the triangle.
Crude Oil in 5-Week Horizontal Trading Range Pattern
The crude oil index is forming a 5-week horizontal trading range between 71 and 75.5. It is neutral before the price breaks out from the range.
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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