08/21/2022 – Market Update
Stocks Bearish Reversal
The stock market pulled back and the market momentum turned into the negative territory last week. The S&P 500 index became bearish as its price broke below the lower boundary of a multiweek rising wedge pattern. The US dollar resumed bullish upward move sharply. Precious Metals, Internet, and Telecommunication are ranked as the three worst sectors with mostly weak technical strengths. The broad stock market is projected to be in a short-term bearish time-window until 9/6/2022.
Table of Contents
- Broad Market in Short-Term Bearish 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 Rising Wedge Pattern
- Shanghai Composite Index: Intermediate-Term Pictures
- US Treasury Bond Broke below 2-Month Rising Wedge Pattern
- US Dollar Broke above 5-Week Falling Wedge Pattern
- Gold in 4-Month Descending Broadening Wedge Pattern
- Crude Oil in 2.5-Month Falling Wedge Pattern
- Asset Class Performance Ranking with US dollar Leading
Broad Market in Short-Term Bearish Time-Window
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 10 on Friday 8/19/2022 (unchanged 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 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 9/6/2022.
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: downward
Date of Next Cycle Low: 09/06/2022
Broad Market Instability Index (BIX): 10, below the panic threshold (bullish)
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, Utilities, and Consumer Goods. Underperforming sectors are Precious Metals, Internet, and Telecommunication.
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] has ended, and now it is in primary corrective wave [A]. Primary corrective wave [A] is going to have intermediate (1)–(2)–(3)–(4)–(5) five-wave sequence. Currently, intermediate upward wave (2) is ending, and intermediate downward wave (3) is the next.
The S&P 500 index formed a 7-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 4100.
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 Rising Wedge Pattern
The India Bombay Stock Exchange 30 Sensex index is forming a 7-week rising wedge pattern. It is bullish as long as the price is above the lower 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 on the daily chart. It is neutral before the price breaks out from the wedge.
In the following weekly chart, the Shanghai Stock Exchange Composite index formed a 2-month rising wedge pattern. The price has broken below the lower boundary of the wedge. It is bearish with a downside price target projected at 3000.
US Treasury Bond Broke below 2-Month Rising Wedge Pattern
The 30-year U.S. treasury bond index formed a 2-month rising wedge pattern. The price has broken below the lower boundary of the wedge. It is bearish with a downside price target projected at 137.
US Dollar Broke above 5-Week Falling Wedge Pattern
The U.S. dollar 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 108.5.
Gold in 4-Month Descending Broadening Wedge Pattern
The gold index is forming a 4-month descending broadening wedge pattern. It is bearish before the price breaks above the upper boundary of the wedge.
Silver in 4-Month Descending Broadening Wedge Pattern
The silver index is forming a 4-month descending broadening wedge pattern. It is bearish before the price breaks above the upper boundary of the wedge.
Crude Oil in 2.5-Month Falling Wedge Pattern
The crude oil index is forming a 2.5-month falling wedge pattern. It is bearish before the price breaks above the upper boundary of the wedge.
Asset Class Performance Ranking with US dollar 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 the US dollar is outperforming and the US treasury bond is underperforming.
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