11/6/2011
Table of Contents
- Status of Key Market Parameters
- Broad Stock Market is Forming a “Symmetrical Triangle” Pattern
- Broad Market Instability Index is below the Panic Threshold
- S&P 500 Index is in Progress to Form a “Three-Peaks and a Domed House”
- Gold is in the “Plunge” Phase
- Gold Forming a “Bump-and-Run” Pattern
- Silver is in the “Run” Phase with “Dead-Cat Bounce”
- US Dollar is Forming a “Symmetrical Triangle” Pattern
- 30-Year US Treasury Bond is Forming a “Descending Triangle” Pattern
- Asset Class Performance Ranking with Treasury Bond Leading
- Sector Performance Ranking with Semiconductors Sector Leading
- BRIC Stock Market Performance Ranking with Brazilian 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 Stock Market is Forming a Short-Term “Symmetrical Triangle” Pattern
After it broke to the downside of the 4-week “Rising Wedge” pattern last week, the Dow Jones Wilshire 5000 index, as an average or a benchmark of the total equity market, is forming a 2-week “Symmetrical Triangle” pattern (see here). The price trend can be any direction leading to this pattern depending on which side to break out. The Wilshire 5000 index now is above the 89-day moving average and it is in the choppy zone of the triangle 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 the next seven sessions will be in a neutral time-window by 11/15/2011.
Broad Market Instability Index is below the Panic Threshold
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 7 on Friday. This reading is far below the panic threshold level of 46, and it indicates that the current market is bullish. The next minor instability spike is expected to be 60 trading days away measured from October 4, which will occur on December 29. This projection could give the broad equity market a near three-month “instability-quiet” period with relative low volatility. The BIX is plotted in the following chart as compared with the Wilshire 5000 index.
S&P 500 Index is in Progress to Form a “Three-Peaks and a Domed House” Pattern
The S&P 500 index is in the progress of potentially forming a “Three-Peaks and a Domed House” pattern as shown in the chart below. Currently the S&P 500 index is in a phase transition from the “Basement” phase (bear trap) to the “First Floor” phase with a sharp advance wave from point 14 toward point 15 according to George Lindsay’s original model (click the graph to see a larger image). The “First Floor” phase is projected around 1360 for the S&P 500 index. The current pattern tracking with model stands true until proven otherwise.
Gold is in the “Plunge” Phase
The gold index is still in the “Plunge” phase of the “Three-Peaks and a Domed House” pattern. According to George Lindsay’s original model, the “Plunge” phase typically comprises two powerful down-waves. The first down-wave from point 25 to point 26 has finished. Now gold could be still near point 27 right before the second powerful, also most severe, down-wave from point 27 toward point 28. The price target is projected at 1300 which is the lowest price of the entire pattern (click the chart to see a larger image).
Gold is in “Bump-and-Run Reversal Top” Pattern
The gold index is forming an intermediate-term “Bump-and-Run Reversal Top” pattern and it now is in the “Bump” phase. The next target prices: 1) 1530 at the Lead-in Trend Line, and 2) 1370 at the Target Line.
Silver is in the “Run” Phase with “Dead-Cat Bounce”
The silver index is still in the “Run” phase of the “Bump-and-Run Reversal Top” pattern. After a “Dead-Cat Bounce”, silver should be in a post-bounce decline driving prices gradually lower. The last price target is project at 22 on the third target line, which is close to the price level when this pattern originally started on the left side of the following chart.
U.S. Dollar is Forming a “Symmetrical Triangle” Pattern
The US dollar index is forming a 11-month “Symmetrical Triangle” pattern (see here). Prices should be choppy inside the triangle.
U.S. Treasury Bond is Forming a “Descending Triangle” Pattern
The 30-Year US Treasury Bond index is forming a 6-week “Descending Triangle” pattern (see here). The price trend can be any direction leading to this pattern depending on which side to break out.
Asset Class Performance Ranking with Treasury Bond Leading
The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently the treasury bond and oil are outperforming. Food and the US dollar are underperforming.
Sector Performance Ranking with Semiconductors 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 2.56% above the EMA89. Outperforming sectors are Semiconductors (5.48%), Technology (4.82%), and Precious Metals (4.28%). Underperforming sectors are Banks (-3.29%), Biotech (-0.69%), and Telecommunication (-0.48%). The NASDAQ 100 (3.51%) is outperforming the market, and the S&P 500 (2.45%) is underperforming.
BRIC Stock Market Performance Ranking with Brazilian Market Lagging
The table below is the percentage change of the BRIC stock market indexes against the 89-day exponential moving average (EMA89). The Brazilian market is outperforming the US market, and the Russian and Chinese markets are underperforming the US market
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