Archive

Archive for January 10, 2022

01/09/2022 – Market Update

January 10, 2022 Leave a comment

 

Stocks Started Falling in the First Week of the Year

 

The stock market pulled back sharply last week. As expected, the S&P 500 index could not maintain its momentum for going higher after an upward breakout from a descending broadening triangle pattern. For the current pullback, it looks for the first support at the 89-day exponential moving average around 4600. Energy, Consumer Goods, and Financials 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 1/21/2022.

 
Table of Contents


 

 

Broad Market in Short-Term Bearish Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 26 on Friday 1/7/2022 (up from 7 the previous week) which is below the panic threshold level of 42 and indicates a bullish market. The Wilshire 5000 index is near the 89-day exponential moving average, and the momentum is slightly 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 1/21/2022.

 

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: downward
Date of Next Cycle Low: 01/21/2022
Broad Market Instability Index (BIX): 26, below the panic threshold (bullish)
Momentum Indicator: slightly positive (neutral)

 

 
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, Consumer Goods, and Financials. Underperforming sectors are Internet, Biotech, and Precious Metals.

 

 

 
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. After a breakout above the upper boundary of the triangle, the price could not maintain its momentum for going higher. As it was previously warned, the price completely pulled back. We look for the first support at the 89-day exponential moving average around 4600.

 


 
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 Broke above 2-Month Descending Broadening Wedge Pattern


 

The India Bombay Stock Exchange 30 Sensex index formed a 2-month descending broadening wedge pattern. The price broke above the upper boundary of the wedge last week. It is bullish with an upside price target projected at 62000.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite 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 3500.

 

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 Broke below 3-Month Ascending Broadening Wedge Pattern


 

The 30-year U.S. treasury bond index formed a 3-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 156..

 


 
US Dollar in 1.5-Month Descending Triangle Pattern


 

The U.S. dollar index is forming a 1.5-month descending triangle pattern. It is neutral before the price breaks out from the triangle.

 


 
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 1.5-Month Symmetrical Triangle Pattern


 

The silver index is forming a 1.5-month symmetrical triangle pattern. It is neutral before the price breaks out from the triangle.

 

 
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.