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7/25/2011

Table of Contents
  • Status of Key Market Parameters
  • Silver Index is Still in “Bump-and-Run” Pattern
  • Gold Index is in “Three-Peaks and Domed House” Pattern
  • US Dollar is above the Upper Boundary of 14-Month “Falling Wedge” Pattern
  • Broad Stock Market is Waiting for a Big Move
  • Market Volatility is below the Panic Threshold
  • Asset Class Performance Ranking with Gold Leading
  • Sector Performance Ranking with Energy Sector Leading
  • BRIC Stock Market Performance Ranking with Russian Market Leading

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 Still in Bump-and-Run Pattern

The silver index has a pullback in the “Run” phase.  We will see if it returns to the Lead-in Trendline in next ten days.  The downside price target is projected at around $32/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.


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

The gold index actually finished a “Second Floor” formation and now could be re-characterized in the “Roof” phase. 


U.S. Dollar is above the upper boundary of 14-Month Falling Wedge Pattern
The US dollar index is above the upper boundary of the 14-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 is Waiting for a Big Move
The Dow Jones Wilshire 5000 index, as an average or a benchmark of the total equity market, has formed a 7-month horizontal channel (i.e. a trading range). Currently the market is above the 89-day moving average and it is in the choppy zone of the horizontal channel 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.  The final debt crisis solution could reset the market either above or below the 7-month trading range. This completely depends on if the U.S. can avoid default or not.


Broad Market Volatility is below the Panic Threshold
The Broad Market Volatility (BIX), measured from over 8000 U.S. stocks, closed at 13 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 Gold Leading
The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently gold and the equity market are outperforming. The US dollar and oil are underperforming.


Sector Performance Ranking with Internet 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 2.77% above the EMA89. Outperforming sectors are Energy (+6.48%), Precious Metals (+5.53%), and Real Estate (+4.59%). Underperforming sectors are Banks (-2.13%), Financials (-0.30%), and Telecommunication (+-0.08%). The NASDAQ 100 (+4.86%) is outperforming the market, and the S&P 400 Mid-cap (+2.54%) is underperforming.
 

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