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7/3/2011

Table of Contents
  • Status of Key Market Parameters
  • Silver Index is Locked in “Bump-and-Run” Pattern
  • Gold Index is in “Three-Peaks and Domed House” Pattern
  • US Dollar is above the Upper Boundary of 13-Month “Falling Wedge” Pattern
  • Broad Stock Market Bullish Breakout from 8-Week “Descending Broadening Wedge” Pattern
  • Market Volatility is below the Panic Threshold
  • Asset Class Performance Ranking with Equity Market Leading
  • Sector Performance Ranking with Biotech Sector Leading
  • BRIC Stock Market Performance Ranking with all BRIC Markets Lagging

Current Status of the LWX (Leading Wave Index)

The LWX Indicator in Last Four Weeks (Past)

The LWX Indicator in Next Four Weeks (Forecast)


Silver Index is Locked in Bump-and-Run Pattern

The “Bump and Run Reversal Top” pattern (see here) was found on the silver index in my market weekly update of 5/1/2011 (see here). As shown in the chart below, the silver index has completed the “Bump” phase and has moved under the lead-in trendline.  The downhill “Run” phase just started.  Now the lead-in trendline becomes a resistant line.  The next downside price target is projected at around $29/oz by the target line which is parallel to the lead-in trendline and is distant from the lead-in trendline with the same lead-in height. The move of the silver index of last several weeks can also be characterized in the progress of a “Dead-Cat Bounce” pattern (see here) currently in the post-bounce decline phase.


Gold Index is in a 9-Month “Three-Peaks and Domed-House” Pattern

A possible intermediate-term “Three Peaks and a Domed House” pattern was found on the gold index in my market weekly update of 4/23/2011 (see here).  My modified version of George Lindsay’s basic model divides “Three Peaks and a Domed House” pattern into five major phases as: 1) Three Peaks, 2) Basement, 3) First Floor, 4) Roof, and 5) Plunge. This modified version uses a macro or “phase-counting” approach which is different from Lindsay’s classical micro approach of “number-counting” from 1 to 28 (see here).

The gold index now is in the “Plunge” phase. The current move could be wave 26 of George Lindsay’s “Three-Peaks and Domed House” basic model.


U.S. Dollar is above the upper boundary of 13-Month Falling Wedge Pattern
The US dollar index is above the upper boundary of the 13-month “Falling Wedge” (see here) pattern which is a bullish reversal pattern.  Now the upper boundary of the falling wedge becomes a support line.


Broad Stock Market Has Bullish Breakout from 8-Week Broadening Wedge
The Dow Jones Wilshire 5000 index, as an average or a benchmark of the total equity market, had a bullish breakout from the upper boundary of the 8-week “Descending Broadening Wedge” (see here) pattern last week. Currently the market is above the 89-day moving average and it is in the uptrend zone of the broadening wedge with positive readings of both the trend and momentum. The Leading Wave Index (LWX) indicator, color coded in the price bars of the following daily chart of the Wilshire 5000 index, closed in bullish on Friday. The LWX forecasts that next four weeks should be in a bullish time-window for the broad equity market.


Broad Market Volatility is below the Panic Threshold
The Broad Market Volatility (BIX), measured from over 8000 U.S. stocks, closed at 6 on Friday, and it is below the panic threshold level of 45. The BIX below the panic threshold indicates that the current market is bullish. The major volatility spike in June is behind us. The BIX is plotted in the following chart as compared with the Wilshire 5000 index.
 

Asset Class Performance Ranking with Equity Market Leading
The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently the equity market is outperforming. Oil, the US dollar, food, and bond are underperforming.


Sector Performance Ranking with Biotech 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 2.95% above the EMA89. Outperforming sectors are Biotech (+4.97%), Healthcare (+4.51%), and Consumer Services (+4.43%). Underperforming sectors are Precious Metals (-2.27%), Banks (-1.46%), and Semiconductors (+0.62%). The S&P 400 Mid-cap (+3.62%) is outperforming the market, and the S&P 500 (+2.79%) is underperforming.
 

BRIC Stock Market Performance Ranking with All BRIC Markets Lagging
The table below is the percentage change of the BRIC stock market indexes against the 89-day exponential moving average (EMA89). The Chinese, Brazilian, India and Russian markets all are underperforming the U.S. market.
 
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