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10/10/2010

October 10, 2010 Leave a comment Go to comments
Current Status of the LWX (Leading Wave Index)
 
The LWX Indicator in Last Four Weeks (Past)
 
The LWX Indicator in Next Four Weeks (Forecast)
  
The Broad Market Volatility is below the Panic Threshold
The BIX (Broad Market Volatility) closed at 1 on Friday and it is below the panic threshold level of 47. The volatility level of 1 is very low and it indicates that the current market is bullish.
 
Broad Stock Market Continues Rally
 
The Dow Jones Wilshire 5000 index, as an average or a benchmark of the total equity market, continues the rally that has been led by the internet sector and the basic materials sector by turns since September 1. The 6-month Inverted Roof or Complex Head-and-Shoulders Bottom pattern suggests there would be another 6-7% upside measured move from the current price to the target price of 13000. With the support from either the neckline of this pattern or the 89-day exponential moving average, the midterm election year bottom should be behind us.
 
The Leading Wave Index (LWX) indicator, color coded into the price bars of the following daily chart of the Wilshire 5000 index for easy reference, has been bullish since September 1. Based on the forecast of the LWX indicator, the bullish time-window for the market extends to the early of November that coincides with the time of the midterm elections. This bullish projection of the LWX is contradictory to the popular and widespread bearish opinions such as “Head-and-Shoulder“, “Hindenburg Omen“, and “September-October-Bearish–Season“.
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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 3.90% above the EMA89. Outperforming sectors are Precious Metal (+10.97%), Materials (+10.84%), and Internet (+8.50%). Underperforming sectors are Banks (-1.36%), Financials (+1.49%), and Semiconductors (+2.65%). The Russell 2000 small-cap (+6.79%) is outperforming the market, and the S&P 500 (+4.67%) is underperforming.  
 
 
Chinese Market Has a Golden-Cross Right After Golden Week Holidays
The following chart is a weekly chart of China’s Shanghai Stock Exchange Composite Index. Since the bearish dead cross in the beginning 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). The index has been depressed in a downtrend channel for 14 months. However, if the index successfully crosses over both of the 17-week moving average and the median line of the 14-month downtrend channel around 2650, it should be characterized as a Golden Cross to start a new uptrend. Last Friday, October 8, right after the “National Day Golden Week holidays”, the Chinese stock market had a 3% big jump, and decisively crossed over the 17-week moving average and the median line of the 14-month downtrend channel. This bullish crossover acts as a Golden Cross signal to kick off a new uptrend. An immediate target will be 3000 at the upper boundary of the 14-month downtrend channel, that projects a 9.5% upward move in the short-term.
  
  
Emerging “Three Peaks and Domed House” Pattern Suggests a Strong Uptrend in Chinese Stock Market
A special chart pattern, “Three Peaks and Domed House“, is emerging from China’s Shanghai Stock Exchange Composite Index. George Lindsay’s basic model of “Three Peaks and Domed House” can be characterized to five major phases: Three Peaks phase, Basement phase, First Floor phase, Roof phase, and Plunge phase. In the following chart, the Shanghai Index is plot as a red line against George Lindsay’s idealized model in a black line.  From June of 2009 to April of 2010, the Shanghai index developed the “Three Peaks” phase.  Then it had a sharp separating decline to reach the July 2010 low at 2320 and formed the “Basement” phase during this summer.  Now it should just start a rapid advance to build the “First Floor” of the Domed House, and it could reach the “First Floor” phase near 3300 with a 20% upward move by the end of this year.  The “Roof” phase of the Domed House is projected at 4200 and a total of 53% upward move from the current price is expected by the middle of next year,  Based on this projection, the Chinese stock market should be in a strong bullish uptrend for the next six months.

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To find previous weekly reports, click dates marked with blue color in the calendar on the right side, or just click the following link “Older Entries” :

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