1/2/2011
Table of Contents
- Status of Key Market Parameter
- Broad Stock Market Drifting up in a Rising Wedge
- Market Volatility below the Panic Threshold
- Sector Ranking with Basic Materials Sector Leading
- Chinese Stock Market Testing the 17-Week Moving Average
Current Status of the LWX (Leading Wave Index)
The LWX Indicator in Last Four Weeks (Past)
The LWX Indicator in Next Four Weeks (Forecast)
Broad Stock Market Drifting up in a Rising Wedge
The Dow Jones Wilshire 5000 index, as an average or a benchmark of the total equity market, is drifting up in a 5-month Rising Wedge with positive readings of both the trend and momentum indicators last week. The market currently is in the choppy zone of the rising wedge. The Leading Wave Index (LWX) indicator, color coded in the price bars of the following daily chart of the Wilshire 5000 index, was bullish last week. Based on the forecast of the LWX indicator, the market is in a neutral time-window that could last weeks until higher market volatility is released.
Broad Market Volatility below the Panic Threshold
The Broad Market Volatility (BIX), measured from over 8000 U.S. stocks, closed at 1 on Friday and it is below the panic threshold level of 46. The volatility level of 1 is very low and it indicates that the current market is bullish. The BIX is plotted in the following chart as compared with the Wilshire 5000 index.
Sector Ranking with Basic Materials Sector Leading
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 index, as an average or a benchmark of the total market, is 6.19% above the EMA89. Outperforming sectors are Basic Materials (+11.15%), Energy (+10.30), and Precious Metals (+8.62%). Underperforming sectors are Pharmaceuticals (+0.68%), Utilities (+1.41%), and Biotech (+2.18%), The Russell 2000 (+8.50%) is outperforming the market, and the DJ-30 (+4.21%) is underperforming.
Chinese Stock Market Testing the 17-Week Moving Average
The chart below is a weekly chart of China’s Shanghai Stock Exchange Composite Index. The index is under the pressure of higher inflation and higher interest rates in China. Currently the Shanghai index is still testing the 17-week moving average (equivalent to the 89-day moving average).
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