1/22/2012
Buckle Up!
The broad equity market has been moving in a slow upward incline with low volatility for several weeks. It is building up a seven-week short-term rising wedge, and looks like ramping up on the lift hill of a roller coaster. Tomorrow, 1/23/2012, is the Chinese New Year, the launch of the Year of the Water Dragon. Happy riding.
Table of Contents
- Status of Key Market Parameters
- Broad Stock Market is Changing to a Rising Wedge Pattern
- Broad Market Instability Index is below the Panic Threshold
- Gold is in a Transition from the “Bump” Phase to the “Run” Phase
- Silver is Still in the “Run” Phase
- US Dollar is Still in Ascending Triangle Pattern
- 30-Year US Treasury Bond is Still in a Trading Range
- Asset Class Performance Ranking with U.S. Equity Leading
- Sector Performance Ranking with Biotech 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 Changing to a 7-Week Rising Wedge Pattern
The Dow Jones Wilshire 5000 index, as an average or a benchmark of the total equity market, is changing to a 7-week “Rising Wedge” pattern (see here). Currently the Wilshire 5000 index is above the 89-day moving average and it is in the choppy zone of the rising 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. Based on the forecast from the LWX (see the 3rd table above), a bearish time-window will start this coming week.
Broad Market Instability Index is below the Panic Threshold
The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 8 on Friday. This reading is below the panic threshold level of 46, and it indicates that the current market is bullish. The BIX is plotted in the following chart as compared with the Wilshire 5000 index.
Gold is in a Transition from the “Bump” Phase to the “Run” Phase
The gold index is still in an intermediate-term “Bump-and-Run Reversal Top” pattern and it is in a major transition from the “Bump” phase to the “Run” phase. During this transition period, gold could test the Lead-in Trend line several times. If prices break below the Lead-in Trend Line, gold would be in the “Run” phase and the next price target is 1420 at the 1st Target Line.
Silver is in the “Run” Phase
The silver index is still in the “Run” phase of the “Bump-and-Run Reversal Top” pattern. Silver has been a dead cat already and the downside price target is project at 27 on the third target line.
US Dollar is Still in an Ascending Triangle
The US dollar index is forming a 13-month “Ascending Triangle” pattern (see here). The horizontal resistance at 81 could be a critical level to check dollar’s next move.
U.S. Treasury Bond is in a Trading Range
The 30-Year US Treasury Bond index is forming a horizontal channel pattern (trading range) between the upper boundary at 146 and the lower boundary at 135.
Asset Class Performance Ranking with U.S. equity Leading
The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently the U.S. equity and crude oil are outperforming. Food and gold 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 5.63% above the EMA89. Outperforming sectors are Biotech (11.81%), Semiconductors (9.90%), and Banks (9.40%). Underperforming sectors are Precious Metals (-3.01%), Utilities (0.84%), and Telecommunication (3.06%). The Russell 2000 Small-cap (6.52%) is outperforming the market, and the S&P 500 (5.55%) is underperforming.
BRIC Stock Market Performance Ranking with the Brazilian Market Leading
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 leading and the Chinese market is lagging.
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