9/11/2011

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9/11/2011

September 11, 2011 Leave a comment Go to comments

Table of Contents

Status of Key Market Parameters
Broad Market Instability Index Has a Sign to Jump Up
Broad Market Forming a 5-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 Broke Out of 5-Month Horizontal Channel
Asset Class Performance Ranking with Gold Leading
Sector Performance Ranking with Precious Metals Sector Leading
BRIC Stock Market Performance Ranking with Indian 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 Has a Sign to Jump Up

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, close at 37 on Friday. This reading is below but not far away from the panic threshold level of 45. The BIX has a high probability of jumping again above the panic threshold in the coming week. The BIX is plotted in the following chart as compared with the Wilshire 5000 index.

Broad Stock Market Forming a 5-Week Sloping Rectangle

The Dow Jones Wilshire 5000 index, as an average or a benchmark of the total equity market, is in a 5-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. Watch for the lower boundary of the sloping rectangle. Currently the market is below the 89-day moving average and it is in the choppy zone of the sloping rectangle with negative 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 the coming week enters a bearish time-window for the broad equity market.

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 is in the “Basement” phase (bear trap) which is typically a very choppy period with up and down waves 11-14. It looks like it has unfinished business in wave 14 to the downside.

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. 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 1850. If prices move below the “Sell Line”, the downside supports are 1) 1820 at the dotted pink line, 2) 1660 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 Broke Out of 5-Month Horizontal Channel

The US dollar index finally broke out of its 5-month horizontal channel to the upside. 79 could be a short-term price target.

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 8.06% below the EMA89. Outperforming sectors are Precious Metals (5.22%), Utilities (-1.41%), and Pharmaceuticals (-2.80%). Underperforming sectors are Banks (-18.06%), Financials (-12.63%), and Materials (-9.53%). The NASDAQ 100 (-3.99%) is outperforming the market, and the Russell 2000 Small-cap (-11.41%) is underperforming.

BRIC Stock Market Performance Ranking with Indian Market Leading

The table below is the percentage change of the BRIC stock market indexes against the 89-day exponential moving average (EMA89). The Indian, Brazilian, and Chinese markets are outrperforming the U.S. market, and the Russian market is underperforming.