05/22/2022 – Market Update
Stocks Look to Rebound
The stock market continued to decline and it was still volatile last week. The S&P 500 index has lost over 18% from its all time high. We are in a bear market with a pattern of lower-highs and lower-lows. Stocks perform poorly even when they are in a bullish short-term cycle. We look for a short-term rebound to break a 7-week downtrend channel. Energy, Oil Equipment, and Utilities 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 6/2/2022.
Table of Contents
- Broad Market to be in Short-Term Bullish Time-Window
- Sector Performance Ranking with Energy Leading
- S&P 500 Index in Primary Corrective Wave A
- German DAX Index: Elliott Wave
- India Bombay Index in 7-Week Downtrend Channel Pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- US Treasury Bond Broke above 3-Month Falling Wedge Pattern
- US Dollar in 4-Week Ascending Triangle Pattern
- Gold in 6-Week Downtrend Channel Pattern
- Crude Oil in 7-Week Ascending Broadening Wedge Pattern
- Asset Class Performance Ranking with Oil Leading
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 126 on Friday 5/20/2022 (up from 20 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 near zero. 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 6/2/2022.
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: upward
Date of Next Cycle High: 06/02/2022
Broad Market Instability Index (BIX): 126, above the panic threshold (bearish)
Momentum Indicator: near zero (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, Oil Equipment, and Utilities. Underperforming sectors are Internet, Consumer Services, and Technology.
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 1–2–3–4–5 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 7-week downtrend channel pattern. It is bearish as long as the price is below the upper boundary of the channel.
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 7-Week Downtrend Channel Pattern
The India Bombay Stock Exchange 30 Sensex index is forming a 7-week downtrend channel pattern. It is bearish as long as the price is below the upper boundary of the channel.
Shanghai Composite Index: Intermediate-Term Pictures
The Shanghai Stock Exchange Composite index formed a 7-week descending broadening wedge pattern in the daily chart. The price has broken above the upper boundary of the wedge. It is bullish with an upside price target projected at 3275.
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 Broke above 3-Month Falling Wedge Pattern
The 30-year U.S. treasury bond index formed a 3-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 151.
US Dollar in 4-Week Ascending Triangle Pattern
The U.S. dollar index is forming a 4-week ascending triangle pattern. It is neutral before the price breaks out from the triangle.
Gold in 6-Week Downtrend Channel Pattern
The gold index is forming a 6-week downtrend channel pattern. It is bearish before the price breaks above the upper boundary of the channel.
Silver Broke above 5-Week Falling Wedge Pattern
The silver index formed a 5-week falling wedge pattern. The price broke above the upper boundary of the wedge last week. It is bullish with an upside price target projected at 24.
Crude Oil in 7-Week Ascending Broadening Wedge Pattern
The crude oil index is forming a 7-week ascending broadening wedge. It is bullish as long as the price is above the lower boundary of the wedge.
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 equity is underperforming.
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