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05/08/2022 – Market Update

May 9, 2022 Leave a comment

 

Stock Market Roller Coaster

 

The stock market was on a roller coaster ride last week. The market was very volatile as readings of our Broad Market Instability index stayed far above the panic threshold. Based on Elliott wave analysis, the S&P 500 index is in the late part of the first short-term downward wave inside the third intermediate downward wave. A short-term rebound wave will be the next. Energy, Oil Equipment, and Consumer Goods are ranked as the top three sectors with mostly strong technical strengths. The broad stock market is projected to be in a short-term bullish time-window until 6/1/2022.

 
Table of Contents


 

 

Broad Market to be in Short-Term Bullish Time-Window


 

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 197 on Friday 5/6/2022 (up from 169 the previous week) which is above the panic threshold level of 42 and indicates a bearish market. The Wilshire 5000 index is 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 bullish time-window until 6/1/2022.

 

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: trough
Date of Next Cycle High: 06/01/2022
Broad Market Instability Index (BIX): 197, 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 Consumer Goods. Underperforming sectors are Internet, Biotech, and Consumer Services.

 

 

 
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, it is in intermediate downward wave (3). Typically the third wave has a significant move, and it will contains 12345 minor waves. Right now it is in the late part of minor downward wave 1. Minor upward wave 2 will be the next.

 

The S&P 500 index is forming a 6-week descending broadening wedge pattern. It is bearish as long as the price is below the upper 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 [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, it is in intermediate downward wave (3).

 


 
India Bombay Index in 6-Week Falling Wedge Pattern


 

The India Bombay Stock Exchange 30 Sensex index is forming a 6-week falling wedge pattern. It is bearish as long as the price is below the upper boundary of the wedge.

 


 
Shanghai Composite Index: Intermediate-Term Pictures


 

The Shanghai Stock Exchange Composite index is forming a 6-week descending broadening wedge pattern in the daily chart. It is bearish before the price breaks above the upper boundary of the wedge.

 

In the following weekly chart, the Shanghai Stock Exchange Composite index formed a 8-month falling wedge pattern. It is bearish as long as the price is below the upper boundary of the wedge.

 


 
US Treasury Bond in 3-Month Falling Wedge Pattern


 

The 30-year U.S. treasury bond index is forming a 3-month falling wedge pattern. It is bearish before the price breaks above the upper boundary of the wedge.

 


 
US Dollar in 2-Week Horizontal Trading Range Pattern


 

The U.S. dollar index is forming a 2-week horizontal trading range pattern between 102.25 and 104. It is neutral before the price breaks out from the range.

 


 
Gold Broke Below 2-Month Symmetrical Triangle Pattern


 

The gold index formed a 2-month symmetrical triangle pattern. The price broke below the lower boundary of the triangle last week. It is bearish with a downside price target projected at 1875. This price target has been quickly reached.

 

 
Silver Broke below 2-Month Descending Triangle Pattern


 

The silver index formed a 2-month descending triangle pattern. The price broke below the lower boundary of the triangle. It is bearish with a downside price target projected at 22.85. This price target has been reached.

 

 
Crude Oil Broke above 2-Month Descending Triangle Pattern


 

The crude oil index formed a 2-month descending triangle pattern. The price has broken above the upper boundary of the triangle. It is bullish with an upside price target projected at 120.

 


 
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.