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04/10/2022 – Market Update

April 11, 2022 Leave a comment

 

Bearish Outlook on Stocks

 

The stock market was weakening with increasing volatility last week. The S&P 500 index just ended intermediate upward wave (2) and started intermediate downward wave (3) which it is likely to have a significant move. Currently Energy, Oil Equipment, and Precious Metals ranked as the top three sectors with mostly strong technical strengths. The US dollar is bullish with a breakout from a 5-week descending triangle pattern. The broad stock market is projected to be in a short-term bearish time-window until 4/20/2022.

 
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Broad Market in Short-Term Bearish Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 75 on Friday 4/8/2022 (up from 17 the previous week) which is above the panic threshold level of 42 and indicates a bearish market. The Wilshire 5000 index is slightly below 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 4/20/2022.

 

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: 04/20/2022
Broad Market Instability Index (BIX): 75, 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 Precious Metals. Underperforming sectors are Home Construction, Internet, and Semiconductors.

 

 

 
S&P 500 Index in Primary Corrective Wave A


 

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 ending, and primary corrective wave [A] started. Primary corrective wave [A] is going to have intermediate (1)(2)(3)(4)(5) five-wave sequence. Currently, intermediate upward wave (2) has ended, and intermediate downward wave (3) has started. Typically the third wave has a significant move.

 

The S&P 500 index formed a 6-week rising wedge pattern. The price broke below the lower boundary of the wedge last week. It is bearish with a downside price target projected at 4175.

 


 
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. Primary upward wave [5] ended, and primary corrective wave [A] started. Primary corrective wave [A] is going to have intermediate (1)(2)(3)(4)(5) five-wave sequence. Currently, intermediate upward wave (2) has ended, and intermediate downward wave (3) has started.

 


 
India Bombay Index Broke below 6-Week Rising Wedge Pattern


 

The India Bombay Stock Exchange 30 Sensex index formed a 6-week rising wedge pattern. The price broke below the lower boundary of the wedge last week. It is bearish with a downside price target projected at 56500.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index is forming a 4-week ascending triangle pattern in the daily chart. It is neutral before the price breaks out from the triangle.

 

In the following weekly chart, the Shanghai Stock Exchange Composite index formed a 6-month falling wedge pattern. It is bearish as long as the price is below the upper boundary of the wedge.

 


 
US Treasury Bond in 4-Month Descending Broadening Wedge Pattern


 

The 30-year U.S. treasury bond index is forming a 4-month descending broadening wedge pattern. It is bearish before the price breaks above the upper boundary of the wedge.

 


 
US Dollar Broke above 5-Week Descending Triangle Pattern


 

The U.S. dollar index formed a 5-week descending triangle pattern. The price broke above the upper boundary of the triangle. It is bullish with an upside price target projected at 100.

 


 
Gold in 4-Week Symmetrical Triangle Pattern


 

The gold index is forming a 4-week symmetrical triangle pattern. It is neutral before the price breaks out from the triangle.

 

 
Silver in 5-Week Falling Wedge Pattern


 

The silver index is forming a 5-week falling wedge pattern. It is bearish as long as the price is below the upper boundary of the wedge.

 

 
Crude Oil in 6-Week Descending Triangle Pattern


 

The crude oil index is forming a 6-week descending triangle pattern. It is neutral before the price breaks out from the triangle.

 


 
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 the US treasury bond is underperforming.