8/7/2010
The LWX in Last Four Weeks (Past)
The LWX in Next Four Weeks (Forecast)
The Broad Market Volatility is below the Panic Threshold
The BIX (Broad Market Volatility) closed at 23 on Friday and it is below the panic threshold level of 47. The volatility level of 23 is relative low and it indicates that the current market is bullish.
Market Waiting for a Breakout
The Dow Jones Wilshire 5000 (DWC) is in a short-term 5-week rising wedge (between tow blue lines). The index also reaches the upper boundary of the 3.5-month downtrend channel (between two pink lines). Now the market is above the 89-day moving average (the white dotted line), and is in the choppy zone of the rising wedge. The bulls and bears are in a standoff with each other in this confined choppy zone (no man’s land). The market is looking for either a breakout to the upside from the upper boundary of the 3.5-month downtrend channel or a breakout to the downside from the lower boundary of the 5-week rising wedge. Set guards at both boundaries. Based on the forecast of the LWX (Leading Wave Index), the market may still have another four weeks in the current bullish time window. The colors on the price bars represent the status of the LWX.
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Trend indicator: up
Momentum indicator: positive
Sector Ranking
The following table is the percentage change of sectors and major market indexes against the 89-day exponential moving average (EMA89). The Dow Jones Wilshire 5000, as an average or a benchmark of the total market, is up 1.35%. Outperforming sectors are Real Estate (up 4.92%), telecommunication (up 4.77%), and Internet (up 4.52%). Underperforming sectors are Banks (down 3.01%), Semiconductors (down 1.51%), and Financials (down 0.29%). The Dow Jones 30 (up 2.52%) is outperforming the market, and the Russell 2000 small-cap (up 0.08%) is underperforming.
The Chinese Market
The following chart is a weekly chart of the Shanghai Stock Exchange Composite Index. Since the bearish dead cross in the early of this year, the Chinese market has been in a downtrend by staying under the 17-week moving average (equivalent to 89-day moving average). It is currently in a 12-month downtrend channel (between two blue lines), and in the choppy zone of the channel between 2250 and 3000. However, if the index crosses over both of the 17-week moving average and the pink dotted median line of the 12-month downtrend channel around 2650 marked by a red circle, it should be characterized as a potential bullish golden cross. Currently the index is testing the 17-week moving average.
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