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01/02/2022 – Market Update

January 3, 2022 Leave a comment

 

Flat Stock Market Heading into the New Year

 

The stock market was almost flat last week. Home Construction, Semiconductors, and Real Estate ranked as the top three sectors with mostly strong technical strengths. The S&P 500 index broke above the resistance level of 4725 from a descending broadening triangle pattern. We have no upside price target projected for this breakout due to a high rate of throwback/pullback on the pattern. The broad stock market is projected to be in a short-term neutral time-window until 1/6/2022.

 
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Broad Market in Short-Term Neutral Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 7 on Friday 12/31/2021 (down from 10 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 neutral time-window until 1/6/2022.

 

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: 01/28/2022
Broad Market Instability Index (BIX): 7, below the panic threshold (bullish)
Momentum Indicator: positive (bullish)

 

 
Sector Performance Ranking with Home Construction 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 Home Construction, Semiconductors, and Real Estate. Underperforming sectors are Oil Equipment, Internet, and Biotech.

 

 

 
S&P 500 Index Ending Primary Upward Wave 5


 

As shown in the weekly chart below, since March of 2020, the SPX has been in a primary upward wave [5], and it has developed intermediate (1)(2)(3)(4)(5) five-wave sequence. Primary upward wave [5] is due to end, and primary downward wave [A] will be the next. Primary downward wave [A] is going to have intermediate (1)(2)(3)(4)(5) five-wave sequence.

 

The S&P 500 index formed a 2-month descending broadening triangle pattern. The price broke above the upper boundary of the triangle last week. According to Bulkowski’s analysis on this type of chart patterns, the throwback/pullback rate is high with a forward breakout, and it is not a chart pattern you’ll want to curl up with at night and dream about. Now watch out a pullback.

 


 
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 [5] which developed an intermediate (1)(2)(3)(4)(5) five-wave sequence. Currently it is in a transition from primary upward wave [5] to primary corrective wave [A]. The next will be the first intermediate downward wave (1).

 


 
India Bombay Index in 2-Month Descending Broadening Wedge Pattern


 

The India Bombay Stock Exchange 30 Sensex index is forming a 2-month descending broadening wedge pattern. It is bearish before the price breaks above the upper boundary of the wedge.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index formed a 2-month ascending broadening wedge pattern. It is bullish as long as the price stays above the lower boundary of the wedge.

 

In the following weekly chart, the Shanghai Stock Exchange Composite index is forming a 1-year ascending triangle pattern. It is neutral before the price breaks out from the triangle.

 


 
US Treasury Bond in 3-Month Ascending Broadening Wedge Pattern


 

The 30-year U.S. treasury bond index is forming a 3-month ascending broadening wedge pattern. It is bullish before the price breaks below the lower boundary of the wedge.

 


 
US Dollar Broke Below 1-Month Symmetrical Triangle Pattern


 

The U.S. dollar index formed a 1-month symmetrical triangle pattern. The price broke below the lower boundary of the triangle. It is bearish with a downside price target projected at 95.6. This target has been reached quickly.

 


 
Gold in 3-Month Horizontal Trading Range Pattern


 

The gold index is forming a 3-month horizontal trading range between 1760 and 1870. It is neutral before the price breaks out from the range.

 

 
Silver Broke above 2-Month Falling Wedge Pattern


 

The silver index formed 2-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 24.7.

 

 
Crude Oil Broke above 2-Month Descending Broadening Wedge Pattern


 

The crude oil index formed a 2-month descending broadening wedge pattern. The price has broken above the upper boundary of the wedge. It is bullish with an upside price projected at 94.6.

 


 
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.