04/15/2012 – Market Update | Market Weekly Update

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04/15/2012 – Market Update

April 15, 2012 Leave a comment Go to comments

Volatility has been Rising

The broad stock market has changed from the 4-month rising wedge pattern to a new ascending broadening formation with rising volatility. The earliest time to end the current bearish time-window could be 4/16/2012 followed by a potential 3-week bullish time-window.

Table of Contents

Status of Key Market Parameters
Broad Stock Market is Emerging to Ascending Broadening Formation
Broad Market Instability Index is above the Panic Threshold
Gold is Emerging to the “Run” Phase
Silver is Forming a Big Falling Wedge
US Dollar is Still in Ascending Triangle Pattern
30-Year US Treasury Bond is Still in a Trading Range
Asset Class Performance Ranking with Equity Market Leading
Sector Performance Ranking with Technology Sector Leading
BRIC Stock Market Performance Ranking with Indian Market Lagging

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 Emerging to Ascending Broadening Formation

The Dow Jones Wilshire 5000 index, as an average or a benchmark of the total equity market, finally resolved its 4-month Rising Wedge pattern last week. Now it is emerging to a 2-month “Ascending Broadening Formation” (see here) that is a widening pattern confined by an upper rising resistance line and a lower support line. Within this formation, price movement typically becomes volatile as swings get bigger and bigger. Currently the Wilshire 5000 index is above the 89-day moving average and it is in the choppy zone of the broadening pattern 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 bearish on Friday (see the 2nd table above). Based on the forecast from the LWX (see the 3rd table above), the current bearish time-window should end on 4/16/2012, and it could be followed by a 3-week bullish time-window.

Broad Market Instability Index is above the Panic Threshold

The Broad Market Instability Index (BIX), measured from over 8000 U.S. stocks, closed at 114. This high BIX reading is above the panic threshold of 44 and it indicates the broad market is bearish. The BIX is plotted in the following chart as compared with the Wilshire 5000 index.

Gold is Emerging into the “Run” Phase

The gold index has been in an intermediate-term “Bump-and-Run Reversal Top” pattern (see here). Currently it is re-testing the 20-month “Lead-in Trendline” and it is in a transition from the “Bump” phase to the “Run” phase. The typical characteristics of the “Run” phase is a downhill run for price movement. The downside price target could be around 1500 for support from the first target line.

Silver is Forming a Big Falling Wedge

Since last April, the silver index has been in a “Falling Wedge” formation (see here) for almost a year. Although the falling wedge typically has a bullish bias, this bullish bias cannot be realized until an upper boundary breakout.

US Dollar is Still in an Ascending Triangle

The US dollar index is forming a 16-month “Ascending Triangle” pattern (see here). The partial decline defined at 78.27 could be a bullish sign for the dollar to re-test the upper horizontal boundary of the ascending triangle.

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. Currently prices are in the middle of the trading range.

Asset Class Performance Ranking with Equity Market 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 market and the U.S. Treasury Bond are outperforming. Food and gold are underperforming.

Sector Performance Ranking with Technology 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 2.06% above the EMA89. Outperforming sectors are Technology (5.21%), Banks (5.03%), and Consumer Services (4.42%). Underperforming sectors are Precious Metals (-10.70%), Energy (-3.92%), and Utilities (-1.31%). The NASDAQ 100 (5.15%) is outperforming the market, and the Russell 2000 Small-cap (0.03%) is underperforming.

BRIC Stock Market Performance Ranking with the Indian Market Lagging

The table below is the percentage change of the BRIC stock market indexes against the 89-day exponential moving average (EMA89). All BRIC markets are underperforming, especially with the Indian market lagging.