9/6/2011

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9/6/2011

September 6, 2011 Leave a comment Go to comments

Table of Contents

Status of Key Market Parameters
Broad Market Instability Index Remains Very Low
Broad Market Forming a 4-Week Sloping Rectangle Pattern
S&P 500 Index is in “Basement” Phase
Gold is in “Roof” Phase
Gold Forming a “Bump-and-Run” Pattern
Silver Still in “Bump-and-Run” Pattern
US Dollar is in a 4-Month Horizontal Channel
Asset Class Performance Ranking with Gold Leading
Sector Performance Ranking with Precious Metals Sector Leading
BRIC Stock Market Performance Ranking with Chinese 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)

Broad Market Instability Index Remains Very Low

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, close at 6 on Friday. This reading is below the panic threshold level of 45, and indicates the market is bullish. The BIX is plotted in the following chart as compared with the Wilshire 5000 index.

Broad Stock Market Forming a 4-Week Sloping Rectangle

The Dow Jones Wilshire 5000 index, as an average or a benchmark of the total equity market, has transformed from a 3-week symmetrical triangle pattern to a 4-week sloping rectangle pattern. The sloping rectangle can be interpreted either as a short-term uptrend channel or a flag for a short-term bearish continuation. Currently the market is below the 89-day moving average and it is in the choppy zone of the sloping rectangle 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 about one week in a bullish time-window is left for the broad equity market by 9/8/2011.

S&P 500 Index Making “Basement”

The S&P 500 index could be in a progress to potentially form a “Three-Peaks and a Domed House” pattern as shown in the chart below. Currently it looks like in the “Basement” phase (bear trap) which is typically a choppy period with up and down waves 11-14.

Gold is in the “Roof” Phase

The gold index now is in the “Roof” phase (bull trap) of the “Three-Peaks and a Domed House” pattern and faces a potential risk of the “Plunge” phase sooner or later. Recently the gold index has re-established an inverse relationship with the S&P 500 index. As the inverse relationship between the two, currently gold reaches the “Roof” phase (bull trap) while the S&P 500 index gets into the “Basement” phase (bear trap).

Gold Index is Forming an 18-Month “Bump-and-Run Reversal Top” Pattern

The gold index is forming an 18-month “Bump-and-Run Reversal Top” pattern in the daily chart, as shown in the chart below. Watch prices against the “Sell Line” at 1845. If prices move below the “Sell Line”, the downside supports are 1) 1800 at the dotted pink line, 2) 1650 at the “warning Line”, or 3) 1500 at the “Lead-in Trend Line”.

Silver Index is Still in Bump-and-Run Pattern

The silver index is in a “Bump-and-Run” pattern. The downside supports for silver are: 1) 39 at the “Lead-in Trend Line”, or 2) 34 at the “Target Line”

U.S. Dollar is in a 4-Month Horizontal Channel

The US dollar index is in a bottom process of a 4-month horizontal channel with the upper boundary of 76 and the lower boundary of 73. Waiting to see which side it will break out.

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 treasury bond are outperforming. Oil and the equity market are underperforming.

Sector Performance Ranking with Precious Metals 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 7.15% below the EMA89. Outperforming sectors are Precious Metals (5.46%), Utilities (0.35%), and Pharmaceuticals (-2.10%). Underperforming sectors are Banks (-16.32%), Financials (-11.64%), and Semiconductors (-10.95%). The NASDAQ 100 (-4.05%) is outperforming the market, and the Russell 2000 Small-cap (-10.95%) is underperforming.

BRIC Stock Market Performance Ranking with Chinese 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, Indian, and Brazilian markets are underperforming the U.S. market.