8/15/2010
The LWX in Last Four Weeks (Past)
The LWX in Next Four Weeks (Forecast)
The Broad Market Volatility is above the Panic Threshold
The BIX (Broad Market Volatility) closed at 73 on Friday and it is above the panic threshold level of 47. The volatility level of 73 is relative high and it indicates that the current market is bearish.
Market had a Breakout to the Downside
The Fed’s continuous low-interest rate policy announced last week interfered with the market negatively. It immediately triggered higher market volatility and helped the bears to send the market sharply lower. In the modern world’s economic history, it has no proven records that a “zero-interest rate” policy is an effective or automatic solution for economic recovery. The 20-year economic struggle journey of Japan under its zero-interest rate policy is a very big lesson. A growing concern is that the Federal Reserve’s easy-money stance could hurt the economy down the road (read more, click this link here). The Dow Jones Wilshire 5000 (DWC) had a downside breakout from the 5-week rising wedge. Currently the index is still confined in the 4-month downtrend channel (between two pink lines). The market could be in a short-term correction to possibly form a 6-week uptrend channel between the upper blue line and the lower blue line. Based on the forecast of the LWX (Leading Wave Index), the market may still have another three 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: down
Momentum indicator: negative
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 down 2.71%. Outperforming sectors are Telecommunication (up 4.20%), Utilities (up 1.96%), and Internet (up 1.19%). Underperforming sectors are Semiconductors (down 8.26%), Banks (down 8.01%), and Technology (down 4.94%). The Dow Jones 30 (down 0.93%) is outperforming the market, and the Russell 2000 small-cap (down 5.95%) 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 successfully 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 still testing the 17-week moving average.
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